Insurance firm, Mutual Benefits Assurance, late Friday released its financial statements for the year ended December 2017.
Gross premium written increased from N12.1 billion in 2016 to N14.1 billion in 2017. The company made a profit before tax of N1.3 billion, as against a loss before tax of N1 billion. Profit after tax was also positive at N1 billion as against a N1.3 billion loss incurred in the prior year.
Earnings per share was also positive at 13 kobo as against a loss of 17 kobo in 2016.
The company has also proposed a final dividend of 2 kobo, its first in nearly a decade, amounting to a payout ratio of 15.3% The company last month hinted at the possibility of a dividend payment.
Possible breach of rules?
Companies are barred from paying dividends while they have negative retained earnings or accumulated losses. At the group level, Mutual Benefits has accumulated losses of N1 billion, while at the company level, it also has accumulated losses of N2.2 billion.
We also rummaged through the interim report to see if there was any regulatory approval or court-ordered payment of dividends, we found none. There was also no cases of revenue from discontinued operations from which the company could pay dividends indicating that the dividend is not as a result of an extraordinary income.
There was also no court ordered set off of accumulated losses against share premium of the company, which could have paved the way for dividends.
One wonders why the shareholders of the company granted it approval to pay a dividend despite these losses. This singular act is a break from the rule.
Implications of the action
- While shareholders may be happy that the dividend drought is over, the dividend itself is minuscule for the average retail investor.
- However, other insurance companies in similar circumstances could also qualify for dividend payment.
- It will also be the first time we have seen a company declare dividends out of accumulated profits suggesting that NAICOM may not be as thorough as perceived in reviewing financial statements.
Mutual Benefits Assurance closed at N0.28 on Friday’s trading session on the NSE, down 3.45%. Year to date, the stock is down 44%.
About Mutual Benefits Assurance
Mutual Benefits Assurance Plc was incorporated on the 18th day of April 1995 under the name, Mutual Benefits Assurance Company Limited. The company was converted and re-registered as a public limited liability company on 24th May 2001. On 28th May 2002 the company became listed on the Nigerian Stock Exchange (NSE).
The group is mainly involved in general and life insurance underwriting (under separate licenses held by the company and its subsidiary respectively), risk management and provision of financial services.
The company has six subsidiary companies namely:
Mutual Benefits Life Assurance Limited, Mutual Benefits Assurance Co. Liberia, Mutual Benefits Assurance Niger SA, Mutual Benefits Homes and Properties Ltd and Mutual Benefits Microfinance Bank Limited.
