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Mutual Benefits: Earnings shrink

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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.

Financials
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.

Financials
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.

Looking ahead
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.

Last line
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.

 

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Stock market opens week bearish

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Trading activities on the floor of the Nigerian Stock Exchange (NSE) market yesterday opened this week on  the negative territory as the overall performance measures, NSE ASI and market capitalisation, both fell by 1.53 per cent.

 

The downswing according to market watchers, was due to profit taking by investors after recent bullish rally.

 

Consequently, the All-Share Index dropped by 651.09 basis points or 1.53 per cent from 42,638.83 index points last Friday to close at 41,987.74, while the market capitalisation of equities depreciated by N234 billion or 1.53 per cent to close at N15.067 trillion from N15.301 trillion.

 

Further analysis of the day’s trading showed that Linkage Assurance Plc topped the day’s gainers’ table with 9.09 per cent to close at 96 kobo per share, while Livestock Feeds Plc followed with five per cent to close at N1.05 per share. Fidson Healthcare Plc added 4.92 per cent to close at N4.69 per share.

 

On the flip side, PZ Cussons Nigeria Plc led the losers’ chart with a dip of 8 per cent to close at N23.00 per share. Lasaco Insurance Plc shed 6.06 per cent to close at 31 kobo per share. Enamelwa Nigeria Plc followed with 4.95 per cent to close at 22 kobo per share.

 

Market turnover closed negative as volume moved down by -64.80 per cent as against +32.62 per cent uptick recorded in the previous session. Skye Bank Plc, Diamond Bank Plc and FCMB Plc were the most active stocks that boosted market turnover while Zenith Bank Plc and Guinness Nigeria Plc topped market value list.

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Nigeria mulls 700,000 barrels daily oil output surge

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…envisages 250,000 barrels from local producers

 

Nigeria is planning an increase of 700,000 barrels a day in her oil production. Data from the Ministry of Petroleum Resources sighted by New Telegraph showed that indigenous producers from the country aim to pump almost 250,000 barrels per day additional crude by 2020 as part of a wider plan for the nation to lift output to 2.5 million a day.

“We are on course,” Minister of State for Petroleum Resources, Dr. Ibe Kachikwu, who confirmed the data, said in Abuja last weekend, just as he intimated newsmen of the goal to pump 2.5 million barrels a day by 2020. “Capacity-wise, the volumes are there. Infrastructure-wise we suffer a little bit in terms of being able to deliver.”

There are at least a dozen small to mid-sized Nigerian producers pumping between 5,000 and 100,000 barrels each day. Together, they plan to add incremental supply of at least 150,000 barrels a day this year. Aiteo E & P Ltd., Nigeria’s largest independent, didn’t immediately comment about its expansion plans. Shoreline Group, the third-biggest independent, the data showed, wants to double output by December with Seplat Petroleum Development Company, the second-largest, also intending to produce more.

” In all, the country’s total planned increase, a report adapted from the data showed, is 700,000 barrels a day. “Just over a third will come from the state-run Nigeria Petroleum Development Co., a third from independents, and the remainder from oil majors.

The expansion depends, among other things, on peace being maintained in the Niger Delta. A militant group said last month it would attack oil and gas facilities,” the data adapted by Bloomberg showed. “One probability is at least some of the extra Nigerian supply will end up feeding the Dangote oil refinery, the continent’s largest, which is due to start operating next year. While doing that would help rid Nigeria of its dependence on fuels produced overseas, it wouldn’t extricate the country from its commitments to OPEC.

“Back in 2016, Shoreline had to cancel a planned $500 million Eurobond. With oil prices rallying, the company is making a comeback. It agreed a $530 million deal with financiers led by Vitol Group, the world’s biggest independent oil trader, as it seeks to double crude output to 100,000 barrels a day by year end.

“It represents a massive vote of confidence in the future growth of our operations and of Nigerian upstream producers,” Kola Karim, chief executive officer of Shoreline, said in an interview.

“Shoreline’s progress mirrors that of other Nigerian independents.Seplat, said to be among companies bidding for Petroleo Brasileiro SA’s African oilfields, expects to ramp up drilling this year after output recovered from militant attacks and low prices, according to company statements,” the report said. Half a decade ago, these producers were hailed as the future of Nigeria’s production because of their potential to pump 40 percent of the OPEC member’s output. They had bought oilfields that hold at least a third of the West African nation’s 37.5 billion barrels of crude reserves from companies including Royal Dutch Shell Plc, Total SA, and Eni SpA. Their day may still come.

The OPEC deal is currently in place until the end of this year and global demand is rising fast. The International Energy Agency this month revised up its growth estimate for world oil consumption by 100,000 barrels a day, taking it up to 1.4 million.

“As the oil market rebalances in the years ahead, OPEC will have to lift its production cap,” Pabina Yinkere, an energy analyst at Lagos-based Vetiva Capital Management, said by phone, adding that a lot of extra Nigerian crude could be used to feed the Dangote refinery.

“Moves to raise production are in view of expected demand growth.” The oil producers in Nigeria are planning to add barrels at the same time as Nigeria participates in a global pact to restrict oil supply that’s being led by the Organization of Petroleum Exporting Countries and non-member nations including Russia. If any one country relents – and similar internal pressures are bubbling up elsewhere – then the entire deal could come under strain.

“If they can pump more in Nigeria, I don’t see why they wouldn’t,” Warren Patterson, a commodity strategist at ING Bank NV, said. “If you get Nigeria exceeding the cap, then you’re going to get others who pump a little bit more. The longer the deal goes on for, the more likely it’s going to fall apart.”

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2018: Experts predict vibrant real estate

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As oil prices stabilise at 17 per cent higher than 2017 average and direct foreign investment increases, experts see surge in real estate activities in 2018. DAYO AYEYEMI reports

 

Following improvement in the economy, things are beginning to look up in Nigeria’s real estate sector with market operators getting set to tap into the opportunities, which exist in various segments of the market.

They were, however, particular about the low and middle income residential, millennial and student accommodation sections. Apparently equipped with the dynamism of happenings in the economy, they stated that investors (both local and foreign) were prepared to launch into pockets of opportunities in real estate market. Investors’ hope has been further boosted by the latest Bismack Rewane-led Financial Derivative Company (FDC)’s report on review of third quarter of 2017, which showed that Foreign Capital Inflows (FCI) to Nigeria increased by 148 per cent to $4.15 billion.

This positive trend, analysts said, happened as a result of renewed investor confidence in the economy. Also, the experts noted that oil prices had climbed to 17 per cent higher than 2017 average, expressing confidence that if the situation persists, oil revenues might help mitigate consequences of capital flight.

Current development

This newspaper gathered that while some developers are entering into Joint Ventures (JV) with the government to provide affordable housing units for citizens, others are currently repackaging their products to attract financiers and buyers.

In exclusive neighbourhoods such as Ikoyi, Victoria Island and Lekki, where landlords can no longer wait without getting tenants and buyers for their dormant properties, they have been converting their vacant houses to smaller apartments such as one-bedroom, studio and condos to attract people in need of smaller accommodation. This innovation by landlords, according to experts, has caught the attention of working-class singles who want to live very close to their workplaces.

Experts’ view

Taking a look at what 2018 holds for the sector, experts, which comprised developers, institutional investors, mortgage providers, media practitioners, property consultants and brokers at Fine and Country West Africa’s investors series, agreed that the outlook was bright and promising for real estate, hinging their prediction on improved economic climate. According to them, the economy has started looking up with pockets of opportunities emerging in the residential segment of the market.

They observed that low to middle income market remained strong all through the recession period while the upper market struggled. “But developers are adopting creative ways of dealing with the persisting challenge with a view to stimulating demand and sustaining their business,” they said.

Setting the pace, Sales Consultant, Fine and Country in Lagos, Mr. David Mba, said that he saw a more vibrant residential market coming as a result of an improved economy in 2018, adding that what were considered challenges in the past have become opportunities. According to him, developers in their bid to share risk and also raise more capital were going into joint ventures, citing Brains and Hammers Limited’s example.

“Only recently, Brains and Hammers Limited, one of Nigeria’s leading real estate and infrastructure development companies, entered into a joint venture agreement with Lagos State Government,” he said. This move, he explained, is believed to be the company’s response to pressing demands from its clients who wanted to acquire property in Lagos.

He said: “The move will see the company developing 750 housing units, comprising 132-tower units and 618 units that will be part of the Jubilee Estate development in Iganmu area of Lagos.

“The Phase 1 of the project comprises 129 units made up of 12 units of 2-bedrooms, 24 units of 4-bedrooms terrace and 93 other units. There are also twin towers made up of 132 units, comprising 60 units of one bedroom, 24 units of two bedroom, and 24 units of 3-bedroom maisonette.”

Other market trends, Mba said, included increase in demand for good value three or four bedroom apartments in Ikoyi precincts, selling within the range of N120 million to N150 million; increase in demand for houses including terraces, semi and fully detached units. Publisher/CEO, BusinessDay, Frank Aigbogun, is of the view that improvement in the economy means increased business activities that will in turn trigger more demand for real estate products such as commercial office, retail and residential buildings.

Fine & Country’s CEO/Vice Chair, Udo Okonjo, stated that the sector’s positive outlook would come with opportunities for only investors who are ready to understand that the market had changed.

From market survey, she stated that there would be opportunities across various segments of the real estate’s market including residential, commercial office and retail. “Lifestyle communities are the new face of residential real estate.

These communities have the advantages of economies of scale and security,” the Fine and Country’s CEO said. She hinted that opportunity currently existed in millennial and student housing, adding that many investors were tapping into these areas.

Dean, Faculty of Environmental Sciences, University of Lagos, Professor Timothy Nubi, confirmed that many investors had already taken position around the university campus and were delivering one-bedroom self-contained apartments for N500,000 per annum.

In a bid to maximise the value of their property, a recent Northcourt Real Estate report 2018 outlook, noted that land owners looked more favourable to joint ventures with developers.

This newspaper also discovered that many developers and investors have been taking advantage of the ongoing construction of Dangote Refinery in Ibeju-Lekki, Lagos to acquire more lands in the axis for housing estate development.

Last line

As the business investment climate gets betters, necessary actions must be taken by the government to improve ease of doing business in the country.

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