…N36bn PAL income, investment earnings cushion insurer against N34.2bn insurance service loss
African Alliance Insurance Plc’s profit after tax rose 21.9 percent to N3.87 billion in 2025, even as insurance revenue plunged 91.1 percent and the company recorded a N34.18 billion loss from its insurance services, according to its full-year financial statement.
The insurer’s results reveal a growing disconnect between its core insurance operations and reported profitability, with investment income emerging as the principal driver of earnings during the year ended December 31, 2025.
The company reported investment income of N41.28 billion, up from N2.93 billion in 2024, helping it deliver a profit before tax of N5.52 billion, compared with N3.18 billion in the previous year.
However, insurance revenue fell to N911.83 million from N10.25 billion, while insurance service expenses surged to N35.09 billion from N993.96 million, pushing the insurance service result into a deficit of N34.18 billion from a surplus of N9.16 billion in 2024.
The figures suggest that the insurer’s improved bottom line was not accompanied by stronger reported insurance service performance, making the composition and sustainability of its investment earnings central to assessing its financial position.
The financial statements attribute N36 billion to PAL income within the investment income breakdown, alongside N3.84 billion in other interest income and N1.44 billion in dividend income. The cash flow statement separately records N36 billion in proceeds from the sale of PAL.
This transaction-related income formed the largest component of the year’s reported investment earnings, underscoring the importance of distinguishing income associated with asset disposals from recurring earnings generated by the insurance business.
Investment income cushions operating pressure
African Alliance’s investment income was sufficient to offset the negative insurance service result and other expenses, leaving the company with a positive net insurance and investment result of N7.10 billion.
After other expenses of N1.58 billion and income tax expenses of N1.66 billion, the insurer reported a profit after tax of N3.87 billion, compared with N3.17 billion in 2024.
The improvement in earnings came despite the deterioration in insurance service performance, highlighting the extent to which investment-related income influenced the annual result.
The cash flow statement also shows the scale of the pressure on the company’s insurance operations. Cash claims paid increased to N31.42 billion in 2025 from N5.10 billion in 2024, while cash premiums received declined to N911.83 million from N4.32 billion.
Consequently, net cash used in operating activities widened to N29.41 billion from N3.58 billion in the preceding year.
The company nevertheless ended 2025 with cash and cash equivalents of N8.73 billion, compared with N748.98 million a year earlier. Its investing activities generated net cash of N37.39 billion, including the reported N36 billion proceeds from the sale of PAL.
This indicates that the increase in year-end cash was supported substantially by investing cash flows rather than positive operating cash generation.
Balance sheet contracts as equity improves
African Alliance’s total assets declined 44.4 percent to N27.52 billion at the end of 2025 from N49.50 billion in 2024.
The contraction coincided with a reduction in insurance and investment contract liabilities to N12.76 billion from N40.26 billion. Total liabilities fell 58.4 percent to N18.41 billion from N44.26 billion.
The decline in assets was particularly pronounced in financial assets measured at fair value through other comprehensive income, which fell to N94.40 million from N29.85 billion. The financial statements show a N29.75 billion disposal of the investment in PAL Pension Limited within this category.
Shareholders’ equity, meanwhile, increased 73.7 percent to N9.11 billion from N5.24 billion, supported by the year’s profit.
Retained losses narrowed to N33.64 billion from N36.97 billion, although the company continued to carry a substantial accumulated deficit.
The balance-sheet changes point to a significant restructuring of the company’s asset composition, with the PAL disposal reflected in both the reduction in financial assets and the increase in investing cash flows.
Solvency disclosure raises capital questions
Despite its reported profit and higher equity, African Alliance’s solvency schedule disclosed a deficit of N3.51 billion against the applicable solvency requirement calculated in the statement.
The schedule put the company’s admissible assets at N16.81 billion against admissible liabilities of N18.32 billion, resulting in a negative solvency margin of approximately N1.51 billion before the additional minimum capital requirement.
After accounting for the stated minimum capital requirement of N2 billion, the reported solvency deficit stood at N3.51 billion. The schedule also reported gross and net solvency ratios of negative 75 percent and negative 175 percent, respectively.
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