Old Mutual Holdings is moving to restructure its balance sheet to eliminate accumulated losses of Sh7.06 billion as of December 31, 2025. By utilizing its Sh4.66 billion share premium account, the regional insurer aims to bypass regulatory restrictions on dividend payments, allowing it to return value to shareholders while positioning the firm for long-term growth.
Why are insurers restructuring their balance sheets?
Financial institutions often initiate balance sheet restructuring to clear accumulated losses that effectively bar them from issuing dividends. According to the Company Act, an institution is prohibited from paying dividends if it carries such losses on its books. By applying share premium—the capital paid by investors above the assigned share value—to offset these losses, companies can clean up their financial statements. Old Mutual Holdings, a subsidiary of South Africa’s Old Mutual Limited, reported that its accumulated losses grew to Sh7.06 billion following the 2020 acquisition and subsequent merger of UAP Holdings into its Kenyan operations. According to Group Chief Executive Officer Arthur Oginga, this move is designed to “optimise the balance sheet, enhance financial flexibility and position the business for sustainable long-term growth.”
The proposed transaction by Old Mutual Holdings will have no cash or shareholding impact on investors, despite the significant accounting adjustments being made to the company’s books.
How does the Old Mutual restructuring compare to market peers?
Old Mutual is not acting in isolation; it is the second insurer this year to leverage share premium accounts to clean up its balance sheet. Britam Holdings is currently pursuing a near-identical strategy. Having received shareholder approval last month, Britam is using its share premium to address accumulated losses that reached Sh5.8 billion by the end of December 2025. While Old Mutual plans to reduce its Sh4.66 billion share premium account in its entirety, Britam is working to reduce its own Sh13.2 billion share premium account down to Sh7.3 billion. Unlike Old Mutual, which has been an operating entity, Britam has historically relied on dividend payouts from its own subsidiaries to slowly chip away at its accumulated losses over the last five years.
Investors should monitor the second phase of Old Mutual’s restructuring. While the company has confirmed the initial reduction of the share premium account, it has not yet disclosed the specific steps involved in the subsequent phase of its plan.
What is the expected outcome of these financial maneuvers?
If the court approves the first phase of the transaction, Old Mutual’s accumulated losses are expected to drop to Sh2.39 billion. The company has stated that this is only the first step in a phased approach, with additional actions planned to clear the remaining balance. Because the company’s shares are traded on the over-the-counter market, these structural changes are closely watched by minority shareholders seeking clarity on future dividend eligibility. By removing the accounting hurdle of accumulated losses, the insurer aims to transition toward a more favorable capital position.
Frequently Asked Questions
- Will this restructuring change my shareholding? No, the company has confirmed that the reduction of the share premium account will have no impact on existing shareholding or cash positions.
- Why can’t the company pay dividends now? Under the Company Act, institutions are barred from distributing dividends if they carry accumulated losses on their balance sheets.
- Is Old Mutual the only company doing this? No, Britam Holdings is also currently using its share premium account to clear accumulated losses following shareholder approval.
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