Mutual Benefits Assurance Plc like most other insurance firms has continued to struggle. Chris Ugwu writes
The contribution of insurance sector is critical especially to the ability of emerging and transitional economies such as Nigeria to grow and develop, as well as provide a reliable cover for risk to the citizens. The sector is important because it deepens and broadens the domestic financial services and generates higher savings rates and greater economic development.
However, despite the recapitalisation of insurance firms in 2007, the sector still struggle with challenges such as under capitalisation of existing industry players, dearth of appropriate human capital and professional skills, poor returns on capital, existence of too many fringe players and poor asset quality.
Other challenges include prominence of unethical practices, significant corporate governance issues, insurance premium flight, poor business infrastructural facilities, especially in the area of ICT, lack of innovation in product development, lack of awareness on the part of consumers on the uses/suitability of insurance products, low gross domestic product, Gross Domestic Product (GDP), per capita figures and poor corporate governance structures.
Despite the daily threat from not only risks emanating from natural disasters such as floods, rainstorms but also that of man-made security risks such as the current threat of Boko Haram, kidnapping and other heinous crimes, which are more compelling reasons why insurance should grow, penetration still remained a huge challenge.
Some of these challenges have to do with the culture and the general mindset of people to insurance. This negative perception that trailed the sub-sector has retarded the growth of the industry leading to the inability of majority of the companies in the industry to pay dividend to shareholders for many years.
Market watchers attributed the inability of the sub- sector to rise above the nominal level to crisis of confidence. Mutual Benefit Assurance Plc is one of the companies that have got its fair share from the dwindling fortune of the sub-sector.
The company is among the insurance firms that have remained at nominal level in share price due to dwindling fortune in financials following investors’ low sentiments. The group had ended the financial year 2015 in the negative note, as the year saw a drop of 76 per cent in profit after tax.
Similarly, the insurance firm has witnessed considerable decline in its financials during the last two quarters of 2016. The underwriter featured among companies that were sanctioned for delay in timely disclosure of their audited annual financial performance.
Like most of its peers in the industry, Mutual Benefit’s share price on the Nigerian Stock Exchange (NSE) has remained stagnated 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 translated to a drop of 81 per cent over N4.980 billion recorded during the same period of 2014. Profit after tax 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 slump of 6 per cent. There also seems to be no respite for the investors of the underwritten firm, as it 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, indicating a drop of 18.35 per cent. In the same vein, 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 depicts 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 fell to N6.373 billion in 2016 as against N10.087 billion recorded a year earlier, indicating a drop of 36.82 per cent.
Sanctions for late filings
A total of 33 companies including Mutual Benefit, Great Nigerian Insurance (GNI), Daar Communication, DN Tyre, Vitafoam, Guinea Insurance, were slammed with a fine of N110, 200,000 by the Exchange over default in filing their annual reports among other offences. Checks from the NSE X-Compliance Report dated 15 April 2016, showed that the total value of penalty at N110, 200,000, ranged from N100,000 to about N17 million.
Great Nigeria Insurance Plc had the highest penalty of N16.9 million for default in filing its December 2013 and 2014 results as well as first, second and third quarter results for 2015. Daar Communication Plc was next with a penalty amounting to N13.5 million for default in filing its December 2013, 2014 results and first quarter 2015 results. DN Tyre & Rubber Plc followed with a fine totalling N12.8 million for defaults in filings it’s December 2014, first, second and third quarter 2015 results.
The report also featured companies that fell short of the minimum listing standards in terms of timely disclosure of their audited annual financial performance and are operating or operated below the Listing Standards (BLS) for Non-Rendition of Audited Financial Statements 2015.
Under this category was Mutual Benefit Assurance Plc, which got a N3.8 million penalty for default in filing December 2013 and 2014 as well as half year 2015 results, Vitafoam Nigeria Plc N3.2 million for second quarter and September 2014 results, Oando Plc N6.2 million for December 2014, first, second, third quarter 2015 results.
Mutual Benefits Assurance Plc had affirmed its delay to release its full year end 2015 results to the public. In a notice to the Exchange, the insurer said: “Please be informed that our regulators NAICOM (National Insurance Commission) approved our accounts on May 20, 2016 but we are unable to present the accounts to the public yet because we are still awaiting the approval of the accounts of a major subsidiary.”
The underwriter recently signed a Memorandum of Understanding (MoU) with Cool World, a subsidiary of PZ Cussons, to provide insurance cover for its products. The Group Managing Director, Mutual Benefits Assurance, Dr. Akin Ogunbiyi, said the partnership would expand its insurance service to more Nigerians.
“By this partnership, all products bought by customers of the firm in the country will be insured against losses such as household damage from fire, material damage and theft among others,” he said.Ogunbiyi said the company was taking this initiative to add value to the products sold by Cool World through insurance, adding that it hoped to extend this service to its customers in West African countries. The Managing Director, Mutual benefits General Insurance, Mr. Segun Omosehin, said that the partnership made insurance more beneficial to the public.
With collaboration, he said, Mutual Benefits would be able to take insurance to the grass roots. The Commercial Director, Cool World, Mr. Olugbenga Kolawole, said that the partnership would transform retail business in Nigeria. He said that customers of the company would not have to worry about any damage they might incur from buying its products because they were fully insured by a reliable insurance firm.
Owing to poor performance of insurance companies following the low patronage, Ogunbiyi at a forum recently called for collaboration in the insurance industry to deepen penetration. He said it had become very important considering that there is a significant relationship between insurance development and economic growth.
“Insurance provides vital support for emerging economies and helps in an indispensable manner to achieve growth targets, as a strong and competitive insurance industry not only enhances growth, it substantially mitigates critical challenges on the path of sustainable economic development,” he said.
He explained that through its risk transfer and indemnification services as well as the essentially value-adding financial intermediary services, insurance guarantees productivity improvement, production efficiency enhancement and increase investment opportunities.
Lack of 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.