Britam braces for Sh7bn loss in wealth management wing


Britam Towers. FILE PHOTO | NMG

Insurance group Britam made additional provisions of Sh2 billion to absorb losses in its asset management business in the year ended December.

This adds to the initial Sh5.2 billion provisions the Nairobi Securities Exchange (NSE)-listed firm had made a year earlier.

The amounts are meant to protect investors in its subsidiary Wealth Management Fund LLP whose outflows are expected to be higher than can be met from the firm’s existing assets.

“The holding company [Britam] has made an additional provision of Sh2 billion (2020: Sh5.2 billion), bringing the total provision on investment loss to Sh7.2 billion,” the insurer says in its latest annual report.

The amount represents the estimated present obligation of financial support to resolve an asset-liability mismatch in the asset manager.

Britam said it is committed to supporting the fund to fulfill its obligations as they fall due through management oversight of its operations and the agreed recovery plan.

Wealth Management Fund LLP is managed by Britam Asset Managers (Kenya) Limited, which is a fully owned subsidiary of the NSE-listed firm. The size of the assets under management at the fund has not been disclosed.

Its investors are, however, expected to be shielded from losses as the insurer steps in to resolve the asset shortfalls.

The provisions for investment losses ate into the insurer’s losses in 2020 and last year, with the amounts accounted for as expenses and which raised its tax bill substantially.

Britam paid a higher-than-usual tax rate of 92.8 percent in the year ended December after it made provisions for the investment losses.

The provisions cannot be used to lower tax obligations, a move that saw the company pay taxes amounting to Sh939.3 million on the pre-tax earnings of Sh1 billion.

This means that the investment losses raised the company’s obligations beyond the normal 30 percent corporate income tax rate under which it would have paid only Sh303.3 million.

The insurer reported a net income of Sh72.1 million in the review period, reversing a net loss of Sh9.1 billion the year before.

Britam did not declare a dividend, the second year it has gone without making a cash distribution to shareholders. The insurer recorded improved performance in its insurance and investment operations.

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