Kathmandu: Insurance companies in Nepal are declaring dividends to shareholders much earlier this year compared to previous years. Unlike in the past, when announcements were often delayed significantly, firms have begun revealing their payout plans as early as mid-November, based on distributable profits from the fiscal year ending mid-2024.
Several companies are swiftly proposing dividends from last year’s earnings while also preparing to announce updated bonus rates for policyholders, drawing from recent actuarial valuation reports. To date, at least half a dozen insurers have already publicized their dividend plans.
Although listed companies are legally required to hold their annual general meetings by the end of the third quarter of the current fiscal year to approve the previous year’s results, insurance firms have historically lagged behind. The mandatory actuarial valuations, which assess long-term liabilities, have often been cited as the reason for delays in finalizing financial statements, proposing dividends, and convening shareholder meetings.
In prior years, only a handful of insurers managed to schedule meetings within the deadline, while banks and finance companies typically complied more promptly. A key factor contributing to delays has been the limited availability of skilled actuaries within the country, sometimes requiring reports to be prepared abroad, which extended timelines.
This year, however, the landscape has shifted noticeably, with companies positioning themselves to complete annual general meetings well before the regulatory cutoff.
Purna Bahadur Thapa, information officer at the Nepal Insurance Authority, attributes the change to heightened enforcement. “Last year, the regulator imposed penalties on firms that failed to submit financial statements on time or comply with approval conditions,” he explained. “The fear of repeating those actions has prompted insurers to move faster this time.”
Under the previous leadership of the authority’s then-chairman, who emphasized transparency and compliance upon taking office, dozens of companies faced regulatory measures for delays and non-adherence to standards. This included warnings, fines, and other sanctions across life, non-life, micro-insurance, and reinsurance sectors.
Thapa noted that the prospect of similar repercussions has encouraged proactive compliance, aligning dividend declarations with plans for timely shareholder meetings.
Legal frameworks reinforce these timelines: public companies must hold their first annual meeting within a year of operations and subsequent ones within six months of the fiscal year-end. Extensions are possible but limited. Additionally, insurers require prior regulatory approval for dividends, contingent on thorough reviews of financial documents, with the authority empowered to approve, condition, or deny proposals.
Chirayu Bhandari, CEO of Guardian Micro Life Insurance, echoed that regulatory processes have become more efficient this year. “Actuarial reviews used to cause bottlenecks for both companies and the authority, but improvements in handling have sped things up overall,” he said.
The Insurance Act also grants the regulator broad powers to enforce compliance, ranging from warnings and asset controls to suspending operations or recommending license revocations for violations.
This strengthened oversight appears to have fostered greater discipline, resulting in the current wave of prompt dividend announcements.
Among the companies that have declared dividends:
IME Life Insurance proposed a 10.52 percent cash dividend, equivalent to approximately Rs 526 million including tax.
Siddhartha Premier Insurance announced a 25 percent cash dividend including tax.
Nepal Life Insurance plans a total 21.05 percent payout, comprising 5 percent bonus shares and 16.05 percent cash including tax.
IGI Prudential Insurance offered a 5 percent cash dividend including tax.
Citizen Life Insurance declared a 20 percent cash dividend including tax.
Meanwhile, Guardian Micro Life Insurance has scheduled its annual general meeting for late December, with a proposal to issue rights shares on a 1:1 basis rather than a cash or bonus dividend.
Comment Here