Just like most insurance firms, Mutual Benefits Assurance Plc slipped into loss position in 2016. Chris Ugwu writes
Basically, a stable economy promotes the savings necessary to finance investments, which is a requirement for achieving a viable insurance industry that can help sustain economic growth.
Status of insurance in Nigeria
This is because insurance companies are sensitive to economic fundamentals and sometimes have to factor a lot of economic variables so as to make the right investment decisions.
However, some of these economic indices which include foreign exchange reserves, government debt, government deficits, inflation, interest and exchange rates have all suffered in recent years as a result of volatility in the economy.
Due to the stagnant growth of insurance industry, which has remained a key challenge in the country, the realities are that insurance firms will continue to struggle to find their feet as one of the major financial service sectors in Nigeria.
According to experts, what this means is that for the insurance industry to thrive and attain its potential, the government must be sincere in promoting a favourable environment that will allow the financial service industries thrive. This will help to increase the operational efficiency of the insurance industry.
Mutual Benefit Assurance Plc is one of the underwriting firms that has got fair share from the dislocation of the economy and the insurance sub-sector. The company is among the insurance firms that have remained at par value in share price due to dwindling fortunes in financials following investors’ low sentiments.
The group, which ended the financial year 2015 in the negative note as the year saw a drop of 76 per cent in profit after tax degenerated to loss position in 2016 financial year.
The underwriter also featured among companies that missed regulatory filling of their results to the Exchange as at when due in 2016.
Following the volatility in the economy, Mutual Benefit’s share price on the Nigerian Stock Exchange like most of its peers in the industry has remained stagnate at nominal value of 50 kobo year to date following negative sentiments that have enveloped the demand of most insurance stocks.
Mutual Benefits Assurance Plc ended the year 2015 on the downswing with a pre-tax profit of N1.195 billion for the financial year ended December 31, 2015.
The pre-tax profit accounted for a drop of 81 per cent over N4.980 billion recorded during the same period of 2014.
Profit after stood at N812.048 million in 2015 as against N4.980 billion reported a year earlier, representing a decline of 76 per cent.
The statement of financial position as at the period showed that gross premium written dropped to N14.598 billion in 2015 as against N15.451 billion recorded a year earlier, indicating a drop of 6 per cent.
There also seems to be no respite for the investors of the underwritten firm began the 2016 financial year with 18.35 per cent decline in profit after tax for the first quarter ended March 2016.
The group’s profit after tax during the first quarter stood at N320.508 million as against N392.529 million in 2015, accounting for a drop of 18.35 per cent.
Its profit before tax was down by 28.75 per cent, from N577.698 million in 2015 to N411.632 million during the period under review.
However, the group’s gross premium written grew by 21.96 per cent to N3.171 billion in Q1 2016 from N2.600 billion in 2015.
Mutual Benefit continued with the downward trend as it reported a profit after tax of N387.630 million for the half year ended June 30, 2016.
The PAT represents a drop of 85 per cent over N2.661 billion recorded during the same period of 2015.
Profit before tax stood at N493.865 million in 2016 as against N2.747 billion reported a year earlier, accounting for a decline of 82.02 per cent.
According to a notice from the NSE, the statement of financial position as at the period under review showed gross premium written also dropped to N6.373 billion in 2016 as against N10.087 billion recorded a year earlier, indicating a drop of 36.82 per cent.
Mutual Benefits recorded a loss after tax of N465.792 million for the third quarter ended September 30, 2016 as against profit after tax of N742.410 million in 2015.
Loss before tax stood at N310.656 million in 2016 as against pretax profit of N1.006 billion reported the previous year.
Gross premium written also fell to N9.812 billion in 2016 as against N12.096 billion recorded a year earlier, indicating a drop of 18.88 per cent.
The underwritten firm posted a profit after tax of N387.630 million for the half year ended June 30, 2016.
Mutual Benefits ended the financial year in the red as it posted a loss after tax of N1.068 billion for the full year ended December 31, 2016 as against profit after tax of N1.195 billion a year earlier.
Loss before tax stood at N1.346 billion in 2016 as against pretax profit of N812.048 million reported a year earlier.
According to a notice from the NSE, the statement of financial position as at the period under review showed gross premium written dropped to N12.143 billion in 2016 as against N14.598 billion recorded a year earlier, indicating a drop of 17 per cent.
Default in post-listing requirements
Mutual Benefits was among the 15 quoted companies across the sub-sectors that missed regulatory filling of their results to the Exchange as at when due in 2016.
According to reports, other companies that missed regulatory filling of their results to the Exchange for 2016 include Skye Bank Plc, Royal Exchange Plc, Afromedia Plc, Conoil Plc, Austin Laz & Company Plc, Equity Assurance Plc, Fortis Microfinance Bank Plc, Guinea Insurance Plc and Linkage Assurance Plc. Also included are Mutual Benefit Assurance Plc, Premier Paints Plc, Resort Savings & Loans, Sovereign Trust Insurance Plc, Standard Trust Assurance Plc and Standard Alliance Insurance Plc.
Quoted companies on the Exchange are required to file their quarterly and annual accounts within 30 days and 90 days respectively after the end of the quarter and end year respectively in accordance with the listing rules of the NSE.
Mutual benefits Assurance Plc is strategically focusing on developing innovative customer-centric products, increasing market share and concentration on core insurance business.
Chairman of the company, Mr. Akin Ogunbiyi, who disclosed this to shareholders at the company’s 20th annual general meeting (AGM) in Lagos, said that gradual divestment from non-core insurance businesses allowed the company to grow its businesses, manage profitability in a difficult business environment and advance key strategic initiatives.
He said, “To re-position the Group for further opportunities and challenges, in Q2 of 2016 the board directed an analysis of the company’s strategy and structure, incorporating the best insight from within the Group, KPMG consultants, as well as invaluable contribution from the Board of Directors.
“The result is a new strategic roadmap to be implemented from Q4 2016. The themes of strategic thrust are to deepen market penetration / customer acquisition; embed customer and service delivery excellence; transform people and culture; and drive operational effectiveness.”
He said that the bedrock of this strategic direction is the leverage on disruptive technology – use of electronic decision tools across all businesses, adding broader datasets, and embedding analytics.
Inadequate awareness on the part of people about the benefits of insurance and the inability of insurers to introduce innovative and market-driven products has remained the major impediments to the growth of insurance business in Nigeria.
However, insurance companies must also find ways to sensitise the populace about the use of insurance. Government also has a role to play in this by making relevant laws that will help make certain insurance policies compulsory and harsh sanctions for non-compliance of same.