ARM woes sink Sanlam to first net loss in 15 years

Sanlam Kenya #ticker:PAFR has plunged into a Sh1.97 billion net loss, the first one in 15 years, majorly on account of writing off bond investments in three distressed firms including ARM Cement #ticker:ARM.

The Nairobi Securities Exchange (NSE)-listed insurer suffered impairment losses in the year ending December 2018 from debt notes and equity investments, further pushing it from a Sh53 million profit that had been booked in 2017.

This is the first time since 2003 for the Patrick Tumbo-led insurer to post a loss, extending investors’ wait for dividend amid falling share price on the NSE during the financial year under review.

“Several institutions in which the group’s long term insurer had invested came under financial distress which led to impairment of approximately Sh1.14 billion, primarily debt notes and equity in Kaluworks, Real People and Athi River Mining,” said the company on Tuesday.

Further, the firm said it had to revise its reserving basis to reflect a more prudent basis as prescribed by Insurance Regulatory Authority. This, it says, led to an additional Sh0.65 billion knock on earnings.

Reserves for a policy refers to the amount of money an insurer needs to set aside to pay future claims.

Though these events are non-recurrent in nature, their overall impacts led to a net group consolidated loss after tax.

During the period, net written premium fell marginally by 0.83 percent to Sh5.37 billion but total income plunged by 20 percent to Sh5.9 billion on fair value losses.

Operating expenses increased by 12.9 percent to Sh8 billion, further depressing the bottom-line.

On the back of this performance, shareholders are set for another year without dividends during the annual general meeting slated in May.

Based on un-audited half year results, Sanlam’s board had issued a profit warning blaming it on 100 per cent impairment of corporate bonds investments and slower economic growth.