Investors in Britam Holdings will not be receiving dividends just yet, despite the firm’s net profit rising for the fourth straight year to a record Sh5.03 billion in the financial year ended December 2024.
Britam Group chief executive officer Tom Gitogo said that a poor performance in 2020 pushed the company into an accumulated loss position, which it must first reverse before it is allowed to pay dividends.
“There is a technical challenge currently. We need to first wipe out some accumulated loss in our reserves because from a Company Act perspective, you cannot pay a dividend if you still have accumulated losses,” said Mr Gitogo.
An accumulated loss position in accounting refers to the total net losses a company has incurred over its lifetime, which are recorded as a debit balance on the balance sheet, usually under retained earnings.
“We are still looking at ways of growing our shareholders’ return and further giving them an opportunity to realise value in their investment even as we get into the last stretch of clearing that accumulated loss. We will clear it very soon going by the ongoing level of profitability,” the Britam boss said.
Britam Holdings closed December 2024 with accumulated losses of Sh1.79 billion on its balance sheet compared to Sh3.41 billion a year earlier.
However, the accumulated losses at the company level were higher, with a figure of Sh6.48 billion in 2023 from Sh5.95 billion in the prior year.
Britam fell into an accumulated loss position for the first time in 2020, when the record loss of Sh9.1 billion wiped out the entire Sh1.77 billion retained earnings it had in 2019.
The accumulated loss position means that Britam’s shareholders will have to wait longer for a break in the dividend drought. The industry has in general enjoyed a good performance for 2024, with the companies like Liberty paying both ordinary and special dividends, and CIC declaring ordinary shares and 10 bonus shares for one currently held.
Britam has been on a recovery path from the 2020 loss, posting a net profit of Sh72.1 million in 2021 and Sh1.69 billion in 2022.
The growth in net profit to Sh5.03 billion in 2024 from Sh3.28 billion a year earlier was lifted by increased insurance and investment income, especially in the long-term business.
Net insurance service result—the net amount of insurance revenue less insurance service expenses—rose by 35 percent to Sh5.07 billion on the back of increased premiums and reduced spending on reinsurance.
Net investment income, which is money received from investments such as government securities, fixed deposits and property, rose 2.6 times to Sh30.59 billion from Sh11.6 billion, making it the largest contributor to Britam’s growth in profit.
