Sanlam to wind up three units in Kenya after years of losses, dividend drought

The insurer, a subsidiary of South Africa’s financial services conglomerate Sanlam Ltd, says its three subsidiaries have remained inactive and the group is in the process of winding them up. PHOTO | SHUTTERSTOCK

By JAMES ANYANZWA

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Sanlam Kenya Plc is in the process of winding up its property, bottled mineral water and asset management businesses as the insurer struggles to prop up earnings after

years of losses and dividend drought for shareholders.

The insurer, a subsidiary of South Africa’s financial services conglomerate Sanlam Ltd, says its three subsidiaries have remained inactive and the group is in the process of winding them up.

“Other wholly owned subsidiaries are dormant and are in the process of being wound up and include Sanlam Investments Limited, ChemiCemi Mineral Water Company and Mae properties,” the company says through its latest annual report (2023).

Sanlam Kenya Plc, which is listed on the Nairobi Securities Exchange (NSE), is battling a financial crisis largely precipitated by surging finance costs and falling investment returns.

The group’s net losses widened by 53 percent to Ksh127 million ($992,187) in 2023, from Ksh83 million ($648,437) in 2022, marking the fourth straight loss in a row after reporting a net profit of Ksh114.4 million ($893,750) in 2019.

Read: New reporting standard raises capital costs for insurers in Kenya

Its cumulative losses rose by 14.57 percent to a Ksh2.28 billion ($17.81 million) from Ksh1.99 billion ($15.54 million) in the same period in 2022, subjecting shareholders to the tenth straight year of dividend drought.

The insurer’s last dividend payment to shareholders was in 2013 at Ksh4.5 ($0.03) per share, amounting to Ksh432 million ($3.37 million) as net earnings hit Ksh1.25 billion ($9.76 million).

Last year, the group’s life and general insurance businesses recorded net profit of Ksh534 million ($4.17 million) and Ksh123 million ($960,937) respectively, with part of these earnings being used by the parent company (Sanlam Kenya Plc) to settle its financial obligations during the year.

The group’s total loans as at December 31, 2023 stood at Ksh4.65 billion ($36.32 million), with total finance costs increasing to Ksh604.61 million ($4.72 million) from Ksh455.34 million ($3.55 million) in 2022.

Sanlam Emerging Markets, the intermediate parent company of Sanlam Kenya Plc, advanced a loan of Ksh1.08 billion($8.43 million) to Sanlam General Insurance Ltd to bridge the capital shortfall on May 5, 2022. The loan has been extended for a further 18 months and will now mature on May 5, 2025.

In addition, the loan agreement between Sanlam General Insurance Ltd and Sanlam Emerging Markets (Pty) Ltd provides that payment shall not be commenced or continued if it results in the capital adequacy ratio of the borrower falling below 100 percent.

As at December 31, 2023, the group also held a credit facility of Ksh3.5 billion ($27.34 million) with Stanbic Bank, which is set to mature in March 2025.

“Sanlam Kenya Plc has restructured the loan, temporarily resolving the liquidity challenge as the group isn’t expected to service the interest payments of the debt facility until the facility is due in March 2025,” the company said.

Sanlam Kenya Plc, on December 21, 2017 and on December 19, 2018, acquired loans from Sanlam Capital Markets Property Ltd of $10 million and $17 million respectively, for a period of two years, to settle intercompany balances with related parties, recapitalise the group’s insurance businesses and finance completion of the Sanlam Tower.

Read: Tax exemptions, incentives rob Kenya of growth in revenues

The group extended repayment to February 17, 2021 and refinanced the loan facilities with loan from Stanbic Bank of Ksh3 billion ($23.43 million) for a term of three years. The loan was restructured again in 2022 to a Ksh4 billion ($31.25 million) facility with the same bank for another two years, to March 2025, collateralised by a corporate guarantee issued by Sanlam Emerging Markets.

Sanlam Kenya Plc is a subsidiary of Sanlam Ltd, a diversified financial services company headquartered in South Africa and listed at the Johannesburg Stock Exchange (JSE).

Under the arrangement, MultiChoice retains a substantial 40 percent interest in NMSIS, and will have the same participation in the Africa-wide venture, allowing it to continue benefiting from the high-growth potential of this segment, while maximising value for its shareholders.

NMSIS, a registered South African composite micro-insurer and authorised financial services provider, is licensed to underwrite both non-life and life insurance products.

It has been writing insurance for the past 20 years under the DStv brand of MultiChoice, focusing on device, installation, funeral, subscription waiver and debt waiver insurance products.

Through this commercial arrangement, Sanlam and its affiliates have the opportunity to cross-sell financial services products to MultiChoice’s extensive and engaged subscriber base of 21 million households across 50 countries in Africa.

Sanlam will leverage MultiChoice’s engagement channels and integrated payment collection capabilities to deliver these broader offerings to MultiChoice’s subscribers.

“Opportunities outside of South Africa will be facilitated through Sanlam Allianz,” the statement said.

Sanlam Ltd announced in May 2022 that it would be creating a joint venture with Allianz SE.