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From Britam to Sanlam, Kenya’s insurers lick their wounds

By Morris Kiruga, in Nairobi
Posted on Friday, 12 April 2019 11:18

Property-related investments proved a poor choice for Kenyan insurers. REUTERS/Siegfried Modola

At least four insurance and financial services firms in Kenya, including two that are listed, have reported massive losses for 2018.

Listed insurance firms Britam Holdings, Sanlam Kenya, and Kenya Re, blamed poor performance in the stock market and bad investments in cash-strapped firms and real estate for their losses last year.

  • Britam Holdings posted a KSh2.3bn ($22.8m) loss it blamed on a tough operating environment, compounded by investments in cash-strapped firms.
  • The conglomerate has interests in insurance, and asset and property management.

At the top of the struggling investments is listed mortgage lender Housing Finance, in which Britam owns a 48.82% stake after buying out Equity Bank in 2014.

On its website, Britam hints that the decision to buy the mortgage lender was spurred in part by “government plans to provide improved housing for citizens, the growth of the middle income class and improved economic activities”.

  • But the mortgage lender has been struggling, and its share price sank to a 15-year low, taking with it almost KSh4bn in paper wealth for Britam.

Britam itself has been investing heavily in real estate in the past decade to shield investors from the stock exchange market. It completed its 200m, 31-storey Britam Towers in 2017, a year when analysts noted an oversupply and dip in demand for commercial office space in Nairobi. It has other ongoing projects such as serviced apartments and mixed-use development, and is hoping that by the time they come to fruition the depressed property market will have recovered.

Sanlam Holdings posted a loss of KSh1.53bn after bad debts totalling KSh1.14bn issued to Kaluworks, Real People, Nakumatt and ARM Cement.

  • Sanlam’s CEO, Patrick Tumbo, said the firm is going to go after directors of the cash-strapped firms. Tumbo told a press briefing that Sanlam wants a stronger regulatory environment “…so that people who take money from the public and run away are severely punished.”

ARM Cement, which is currently under administration, also impacted on the bottom line of UAP Old Mutual.

UAP Old Mutual posted a KSh518m loss, its first in nearly a decade. The firm blamed bad investments, restructuring and regulatory changes for its 2018 performance.

  • For example, it lost KSh400m in bonds to ARM Cement, and deposits held in collapsed Tanzanian lender Bank M.
  • The firm also wrote-down valuations for its properties in Kenya and South Sudan, and retrenched 89 employees. “We have had to let go of accounts we couldn’t price properly and that has had an impact on the top line,” CEO Peter Mwangi told an investor briefing last week.
  • It is now embarking on a de-risking strategy and seeking to grow its life insurance portfolio. In July 2018, UAP Old Mutual lost an exclusive contract to provide life assurance for civil servants, after Britam, with whom it had been awarded the initial contract, went to court.

Investors are already getting queasy over investment firms, with South African firms choosing to play safe as Kenya’s property market slows down.

The write-down of UAP properties and its financial performance are probably the reason why its parent firm has put the brakes on a plan to increase its stake from 67% to 73.5% in a debt-for-equity swap.

Sanlam Group sold part of its stake in asset manager Sanlam Investments East Africa for KSh730m to its local partner, while Liberty Group has placed its Kenyan investment business Stanlib on the market.

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