Tough Times for Mutual Benefits Assurance

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High operating costs and other headwinds have depressed the profits of Mutual Benefits Assurances for half year ended June 30, 2016, writes Goddy Egene

Times are hard right now due to the challenging economic situation. Cost of living is getting higher as inflation continues to rise and has crossed 17 per cent. Corporate bodies and individuals are all feeling the pains. The impact of the economic headwinds manifested in the performances of many companies in the financial results for the half year (H1) ended June 30, 2016. While some of the companies posted positive H1 results, some ended the period with decline in bottom-lines. The worse hit posted losses.

Mutual Benefits Assurance Plc, which is one of the major insurance firms listed on the Nigerian Stock Exchange (NSE) fell into the category of companies that ended H1 2016 with a fall in profit.

The company had recorded a decline of over 70 per cent in profit for the 2015 full year and hoped that there may be an improvement in H1 of 2016, the company’s bottom-line dipped further. The company ended H1 with a fall of 85per cent profit after tax (PAT).

Corporate background
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 in 2001 and got listed on the NSE on 28 May 2002. Mutual Benefits Assurance is mainly involved in general and life insurance underwriting (under separate licences held by the company and its subsidiary respectively), risk management and provision of financial services. The company grown to become group with six constituent companies that include: Mutual Benefits Life Assurance Limited; Mutual Benefits Assurance Company, Liberia; Mutual Benefits Assurance Niger SA; Mutual Benefits Homes and Properties Limited and Mutual Benefits Microfinance Bank Limited. The Chairman of group is Akin Opeodu while Akin Ogunbiyi is group managing director. Olusegun Omosehin managing director. Other directors are: Gbenga Ogunko (executive); Femi Asenuga(executive) Soye Olatunji (non-executive); Festus Porbeni (non-executive); Michael Govan (non-executive); Eze Ebube(non-executive); Pat Utomi (non-executive-independent); Babatunde Dabiri (non-executive director-independent); Lamis Dikko(non-executive director) and Akinboye Oyewumi (non-executive).

The company’s vision is to be “a leading world class company offering superior financial services to the delight of all stakeholders,” while its mission is “transcending the expectations of our customers for the satisfaction of their wealth protection needs through the provision of qualitative insurance and risk management services thereby creating values for all stakeholders.”

Half year financial results
The company’s gross premium written for H1 of 2016 stood at N6.374billion, down from N10.87 billion, while gross premium income fell from N8.44billion in 2015 to N5.564billion. Fees and commission income was N78 million, down from N84.4 million in 2015. Net underwritten income fell marginally fromN5.962 billion to N5.642 billion. The company ended the period with net benefits and claims of N1.455 billion, from N1.613 billion. Underwritten expenses rose by 30 per cent to N1.234 billion, from N949 million in 2015.

Also, employee cost and other management expenses jumped significantly. For instance, employee expenses rose by 61 per cent from N485 million to N783 million, while other management expenses soared by 78 per cent from N1.343 billion to N2.386 billion.
A further analysis of the results showed that while expenses were rising, investment income fell by 82 per cent to N199 million from N1.122 billion.

A dip in investment income resulted from a loss income on loans and advances. Specifically, the company recorded a loss of N821 million on loans to staff. On the positive side, it realised N117 million interest income from treasury bills, up from N26.594 million and income of N341 million income from fixed term deposit, up from N238 million in 2015. Hence, profit before tax fell by 82 per cent to N493 million, from N2.747 billion, while PAT fell by 85 per cent to N387 million, from N2.662billion.

Need for insurance penetration
Generally, many insurance companies perform poorly due to the low patronage. This probably informed the call by the GMD of Mutual Benefits Assurance, Ogunbiyi for collaboration in the insurance industry to deepen penetration. Ogunbiyi, who made the call at a forum in Lagos, said it has become very important when you consider 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.

“Also, Insurance Institutional Monitoring Benefits provide valuable administrative services in business such as risk management and claims payment,” he said.
He added that insurance plays a positive and very significant role in employment generation, saying the machinery of insurance through its value-adding activities generates a sustained increase in decent employment and income.

The Mutual Benefits Assurance boss, however, expressed the regret that Africa’s share in the global insurance market is paltry 1.5 per cent with South Africa contributing nearly 74 per cent to this figure. “Insurance contributes close to 15 percent to South Africa’s Gross Domestic Product (GDP) while in Nigeria, we are still doing less than one per cent.”

He therefore, challenged stakeholders that in our determination as a country to grow the economy, we must do something that utilizes our strengths and delivers benefits to our teeming population.

“Let us cultivate the seeds of insurance, water them, feed them and they will blossom into wonderful achievements. If insurance penetration is the ratio between insurance premiums written and gross domestic product, then let us collaborate to grow these penetration ratios in order to bring them very close to expected values. In the on-going efforts to grow our economy and deliver democracy dividends to our teeming population, the insurance industry should be supported for it to fully achieve its growth enhancing potential. We should all join hands, government at all levels and the private sector should support the industry to play its highly indispensable role in galvanising the economy,” he said.

Mutual Benefits Assurance’s Contribution
Speaking on the contribution of the company to deepening insurance penetration, Ogunbiyi said Mutual Benefits Assurance Plc has introduced a pioneering entrepreneurial value-adding initiative.

“With little premium we are taking insurance to all the local government areas of Nigeria. We are guaranteeing personal well-being and comfort as well as investments that deliver and engender sustainable growth. In addition, through our marketing and development initiatives we have given employment to over 5,000 Nigerian youths and about 500 others in Liberia and Niger Republic where we also have full-fledged operations.

Our strategy is to give a fillip to corporate and individual efforts and make entrepreneurs as well as businessmen/women more productive and effective. We enhance and boost the wealth of the rich and at the same time help the hardworking poor to completely cast-off the chains of poverty and climb the progress ladder,” he said.