Sanlam posts Sh171m loss on portfolio decline, taxes

Sanlam House on Kenyatta Avenue in Nairobi.  

Photo credit: File | Nation Media Group

Sanlam Kenya Plc has posted a larger net loss of Sh171.9 million in the six months to June, with results blamed on weaker performance in its investment portfolio and a higher tax bill.

The listed insurer had recorded a net loss of Sh9 million the year before. The company posted a loss of Sh180.9 million in its investments in the review period, reversing a gain of Sh631.5 million a year earlier.

Sanlam also paid a tax of Sh117.2 million on its pre-tax loss of Sh54.7 million, underlining the impact of the obligation to the Kenya Revenue Authority (KRA).

This represented a larger tax liability compared to the year before when the company paid KRA Sh122.2 million on pre-tax earnings Sh113.1 million.

Sanlam did not publish a breakdown of the components of the investment losses. The company, however, holds rental properties, government debt securities and listed equities.

The assets sometimes show paper losses in the case of falling share prices for equities and rising interest rates on Treasury bonds.

Interest rates on new auctions of bonds have been rising in recent months to nearly 17 percent, lowering the market value of securities bought earlier at lower coupons.

The stock market has also seen a downward trend led by major companies such as Safaricom whose stock has dropped in the wake of low earnings and high capital use in Ethiopia.

Other insurers with a major exposure to the bond and stock market are expected to report similar pressures.

Besides a higher tax burden and investment losses, the company also incurred larger finance costs.

Sanlam has started the implementation of the International Financial Reporting Standard (IFRS) 17 which requires a company to measure insurance contracts using updated estimates and assumptions that reflect the timing of cash flows and any uncertainty relating to insurance contracts.

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Note: The results are not exact but very close to the actual.