Leave a comment and share
Chuks Udo Okonta
Life Insurance companies have retained negative reserves in three years running, Inspenonline can report.
According to a report obtained from the Nigerian Insurers Association (NIA) the firms posted negative reserves between 2014 to 2016. The NIA revealed that the firms posted -N9.99 billion in 2014; -N12.12 billion in 2015 and -N21.73 billion in 2016.
The report also stated that out of the 27 firms underwriting life business, 14 of them posted negative reserves in 2016, amounting to -N41.36 billion.
Chairman, Davisther Brokers Limited, Wale Onaolapo, said the problem of negative retained earnings cropped up in 2012, the year of adoption of International Financial Reporting Standards (IFRS) from the previous standard of GAAP, adding that the Five -Year (2007-2011) adjustments in the accounting standards produced huge write-downs that were transferred into reserves of all the companies.
He noted that the impact on the financials of the companies varied but was significant on companies that did not have very strong reserves at the time.
“If you examine “Five-years Financial Summary” of the Financial Statements of all the companies you referred to, you will see the trend from 2012 how they have been struggling with taking their companies out of the negative retained earnings position without which NAICOM will not allow them to pay dividend to shareholders even if they are making profits in subsequent years. Of course, some of them have not fared well from then as they continue to pile losses year after year hence the losses kept accumulating,” he said.