Britam absorbs Sh6 billion loss at fund manager


Shareholders at a past Britam Holdings annual general meeting at Safari Park Hotel in Nairobi. FILE PHOTO | NMG

Insurance group Britam Holdings has paid Sh6.3 billion to its asset management arm to absorb investment losses that occurred years earlier, and which were first disclosed in 2020.

The Nairobi Securities Exchange-listed company has been making provisions for the losses at Britam Wealth Management LLP and has now disbursed the funds to protect the interest of investors with portfolios at the asset manager.

The insurer has disclosed the cash outflow in its latest annual report for the year ended December 2022.

“The holdings company is committed to supporting the fund to fulfil its obligations as they fall due through management oversight of its operations and the agreed recovery plan,” said the insurer.

“During the year, Britam Holdings Plc paid up Sh6.3 billion of the provision to the LLP.”

The company has not provided details of what went wrong at the asset management unit.

Other asset managers including Amana Capital and Cytonn also suffered major losses from their portfolios of commercial paper (short-term corporate debt) and real estate respectively.

Britam Wealth Management LLP is a fund managed by Britam Asset Managers (Kenya) Limited, which is a fully-owned subsidiary of Britam Holdings.

The insurer had raised its provisions for losses at the fund to Sh7.2 billion in 2021. After the Sh6.3 billion payments last year, the provision dropped to Sh978 million.

The provisions, which eroded its earnings in earlier years, are an estimate of the expected future outflows from the fund.

Britam’s move to absorb the losses at the fund is seen as a move to prevent potential fallout from hurting its brand in various sectors where it is a major player.

The firm has property investments, general and long-term insurance operations. It is also the top shareholder of mortgage financier HF Group with a 48.2 percent stake.

Britam posted a Sh1.69 billion net profit for the year ending December 2022 on reduced costs, marking a recovery from Sh72.1 million earned in the previous year.

The rise in net profit was despite the diversified financial services firm posting a drop in its total income from Sh40.2 billion to Sh38.2 billion.

Britam’s bottom line was helped by a cut in expenses by 9.5 percent or Sh3.68 billion to Sh35.25 billion mainly on reduced operating costs which fell by 26 percent from Sh11.32 billion to Sh8.37 billion.

The insurer attributed the drop in operating expenses to efficiencies derived from cost containment measures under its changed operating model.

Shareholders, however, did not get dividends for the third consecutive year.

The last payment was in 2019 results when the board paid Sh631 million. Net earned premium grew from Sh25.7 billion to Sh26.33 billion as gross earned premium and fund management fees grew.

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