Sanlam withdraws profit warning after review of liabilities
Listed insurer Sanlam Kenya had issued a profit warning as it projected a fall in net earnings by at least 25 per cent in 2016 compared to the previous year. It has now withdrawn the warning. FILE PHOTO | NATION MEDIA GROUP
What you need to know:
The insurer had forecast its profit to fall by at least 25 per cent for the year ending December 2016, based on higher reserving for its long-term insurance liabilities under the previous accounting system that it has now shelved.
Sanlam has adopted the gross premium valuation (GPV) method of valuing its long-term insurance business liabilities, changing from the previously applied net premium valuation (NPV) methodology.
The firm’s withdrawal of the profit warning has cut the number of publicly traded firms carrying such cautions for the 2016 financial year to nine.
Sanlam Kenya has withdrawn its profit warning that was issued at the end of last year, saying a fresh review of its liabilities has eased pressure on its bottom line.
The insurer had forecast its profit to fall by at least 25 per cent for the year ending December 2016, based on higher reserving for its long-term insurance liabilities under the previous accounting system that it has now shelved.
Sanlam has adopted the gross premium valuation (GPV) method of valuing its long-term insurance business liabilities, changing from the previously applied net premium valuation (NPV) methodology.
The new accounting standard increases the accuracy of providing for future claims, while the previous system led to higher reserving by overestimating insurance liabilities.
“As part of the year–end close process, the valuation of long term insurance liabilities and impairment reviews of the banking exposures have been performed in line with specific guidelines subsequently received from the regulatory authorities, resulting in a reduction in the level of actuarial reserving and impairment charges that were expected at the time of issuing the profit warning,” said Sanlam in a statement.
Earlier projections
“As such the company’s consolidated profits for the year ended December 31, 2016 are expected to be different from the (earlier) projections.
"The profit warning issued on December 30 is therefore no longer valid and is withdrawn.”
The firm’s withdrawal of the profit warning has cut the number of publicly traded firms carrying such cautions for the 2016 financial year to nine.
