AM Best Revises AXA Mansard’s Outlook to Negative Amid Macroeconomic Pressures in Nigeria
AM Best, the global credit rating agency focused on the insurance industry, has revised the outlooks of AXA Mansard Insurance Plc, a leading Nigerian composite insurer, from stable to negative, citing increasing risks tied to economic volatility in the region. At the same time, the agency affirmed the Financial Strength Rating (FSR) of B+ (Good) and the Long-Term Issuer Credit Rating (ICR) of “bbb-” (Good) for the company.
These ratings reflect a balanced view of AXA Mansard’s operational and financial footing. According to AM Best, the company’s balance sheet strength is assessed as strong, supported by a combination of adequate operating performance, a moderately limited business profile, and effective enterprise risk management (ERM) practices. In addition, the ratings are enhanced by the company’s affiliation with its ultimate parent, AXA S.A., one of the world’s largest insurance and asset management groups headquartered in France.
Outlook Revision Driven by Economic Instability
The decision to revise AXA Mansard’s outlooks to negative stems from growing concerns about Nigeria’s macroeconomic conditions—particularly persistent inflation and a depreciating local currency, the Nigerian naira (NGN). These pressures, AM Best cautions, could negatively affect the insurer’s financial fundamentals over the near to medium term.
Throughout 2023 and into 2024, Nigeria faced a series of currency devaluations, driven in part by structural economic challenges and shifts in foreign exchange policy. These devaluations, which severely impacted financial markets and business operations across the country, had a direct effect on AXA Mansard’s investment portfolio and capital adequacy metrics.
Based on the insurer’s 2024 year-end financials, its risk-adjusted capitalisation, as measured by AM Best’s proprietary Best’s Capital Adequacy Ratio (BCAR), declined from a “very strong” level in 2023 to a “strong” level by the end of 2024. This drop reflects heightened exposure to asset risks and an increased concentration in certain investment types—most notably those denominated in foreign currencies, which surged in relative value against the naira.
While AM Best acknowledged signs of macroeconomic stabilisation in the first quarter of 2025, including tighter monetary policies and improved foreign exchange management, the rating agency stressed that conditions remain highly uncertain. Consequently, there is potential for additional strain on AXA Mansard’s capital buffers and investment risk profile if adverse conditions reemerge or persist.
Performance in a High-Inflation Environment
Despite the macroeconomic headwinds, AXA Mansard demonstrated resilient operating performance over the past two years, posting robust return on equity (ROE) figures—32% in 2023 and a notably stronger 55% in 2024. However, these headline returns must be contextualized within Nigeria’s persistently high inflation rate, which exceeded 30% during 2024. Adjusted for inflation, real returns were more modest.
The surge in nominal profitability was also significantly aided by foreign exchange (FX) gains. As the naira weakened, the value of AXA Mansard’s foreign currency-denominated assets increased, delivering non-operating earnings that buoyed overall profitability. This strategy has served the insurer well during periods of currency turbulence but also exposes it to currency risk, particularly if the naira were to unexpectedly recover or stabilise.
From a technical underwriting perspective, AXA Mansard’s performance has been more restrained. The company’s non-life combined ratios have typically hovered close to break-even, reflecting modest profitability in its core insurance operations. As a result, AXA Mansard has been somewhat dependent on investment income and other non-technical revenue streams to maintain positive earnings, a dynamic that could pose challenges if investment yields become more volatile or if regulatory constraints on FX asset holdings tighten.
A Strong Domestic Position Amid Limited Geographic Diversification
AXA Mansard’s business profile is characterized by both its strengths and its limitations. As a composite insurer, the company underwrites a broad mix of life, non-life, and health insurance products, offering a well-rounded risk portfolio within the Nigerian market. However, it remains entirely concentrated in Nigeria, making it vulnerable to domestic economic cycles, political risk, and regulatory changes.
Within its home market, AXA Mansard enjoys a solid market presence. It is ranked among the largest non-life insurers in the country and holds a leading position in the health insurance segment, a fast-growing area with rising demand across corporate and retail customer segments. Its affiliation with AXA S.A. further enhances its credibility, provides access to technical expertise, and supports capital and risk management practices.
Despite these competitive advantages, AM Best cautions that AXA Mansard’s lack of geographic diversification remains a limiting factor in its credit profile. Unlike some peers that operate across multiple African jurisdictions, AXA Mansard is solely exposed to the Nigerian market, heightening its sensitivity to local risks.
Enterprise Risk Management and Strategic Outlook
On the enterprise risk management (ERM) front, AXA Mansard maintains appropriate governance frameworks and risk controls, supported by AXA Group’s global risk management standards. These include policies around underwriting discipline, asset-liability management, and capital planning. However, in a high-volatility environment like Nigeria, ERM systems are constantly tested, especially as new stress factors—such as rapid FX shifts or inflation shocks—emerge.
Looking ahead, AM Best notes that AXA Mansard’s long-term growth prospects remain positive, provided it can navigate the short-term macroeconomic uncertainties. The company is well-positioned to capitalize on increasing insurance penetration in Nigeria, particularly within underdeveloped areas like health, SME protection, and digital distribution. Expansion through strategic partnerships, technology adoption, and product innovation could support further competitive gains.
However, future rating actions will hinge on several factors, including how effectively AXA Mansard responds to evolving macroeconomic pressures, maintains its capital adequacy, and preserves underwriting discipline.
