UAP Holdings extends Sh6.5bn Old Mutual loan repayment period

uap towers

The UAP-Old Mutual Tower in Nairobi. PHOTO | COURTESY

UAP Holdings will further delay the payment of a Sh6.5 billion loan from its parent company Old Mutual to June next year, marking the latest restructuring of the credit facility.

The maturity date of the loan, which was due in January this year, has been postponed on multiple occasions to ease the financial burden on the insurer, which has been making losses.

“By mutual agreement with the directors of Old Mutual Holdings Limited, the maturity date of the loans maturing in January 2022 totalling Sh6.5 billion have been extended to June 2023 as the directors make arrangements to settle the loan,” UAP says in its latest annual report.

The insurer also restructured loans from other lenders while refinancing others.

On February 5, 2021, it took a three-year, Sh2.8 billion loan from Absa Bank to repay a short-term loan owed to Old Mutual Holdings Limited, which had been used to repay $27 million (Sh3.1 billion) owed to Nedbank in 2020.

On the same date, UAP rolled over an existing bridge facility of Sh2.2 billion owed to Stanbic Bank to a Sh3 billion loan.

UAP’s borrowings rose to Sh13.5 billion in the year ended December from Sh13 billion a year earlier while interest expenses over the period increased to Sh1.2 billion from Sh1 billion.

The insurer has a standby agreement that allows it to access up to Sh8 billion from Stanbic Bank in case it needs liquidity support. The facility will be available until the end of the year.

Increased claims

The insurer made a net loss of Sh1 billion in the review period, narrowing it from Sh1.3 billion in 2020.

“The loss in 2021 is largely attributable to increased claims, especially in the medical business and fair value losses on investment properties,” UAP said.

“As the negative impacts of Covid reduce and the markets recover, the directors expect that these losses will be recouped.”

Its life business was particularly impacted by increased claims as the Covid-19 pandemic claimed more lives. Other insurers have also suffered higher claims due to the pandemic.

Losses in its property and life business have cancelled out the profits made in the general insurance division over the past two years.

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