Sanlam Kenya has announced its plans to close three of its subsidiaries – Sanlam Investments Ltd (asset management), ChemiCemi Mineral Water Company (bottled water), and Mae Properties (property). This decision comes amidst years of mounting losses and a decade-long drought of dividend payouts for shareholders.
“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 stated in its latest annual report (2023).
Sanlam Kenya’s struggles stem from a combination of rising financing costs and declining returns on investments. The company’s net losses have steadily worsened, widening by over 50% in 2023 compared to the previous year. This marks the fourth consecutive year of losses, a stark contrast to the Sh114.4 million profit reported in 2019. The cumulative losses have reached a staggering Sh2.28 billion.
This has translated to a frustrating wait for shareholders, who haven’t received any dividends since 2013, when the company paid out Sh4.5 per share amounting to a total of Sh432 million as net earnings hit Sh1.25 billion.
Additionally, the company’s total loans exceeded Sh4.65 billion at the end of 2023, resulting in increased finance costs of Sh604.61 million compared to Sh455.34 million in 2022. To address a capital shortfall within its general insurance arm, Sanlam Emerging Markets, the intermediate parent company, had to extend a loan of Sh1.08 billion to Sanlam General Insurance Ltd. This loan has been extended for a further 18 months and will now mature on May 5, 2025.
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Furthermore, according to the loan agreement between Sanlam General Insurance Limited (the borrower) and Sanlam Emerging Markets (Pty) Ltd (the lender), payments must not commence or be sustained if they would cause the borrower’s capital adequacy ratio (CAR) to drop below 100 percent.
Despite the overall financial difficulties, Sanlam Kenya’s life and general insurance arms managed to turn profits in 2023, recording Sh534 million and Sh123 million respectively. These earnings contributed to Sanlam Kenya Plc’s ability to meet its financial commitments during the year.
Last year, Sanlam Kenya joined a growing list of companies issuing profit warnings to investors. The company cited higher financing costs and paper losses on government securities as key factors for its reduced earnings. The listed insurer also pointed to a tough operating environment.