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Sanlam to avoid corporate bonds over weak investor safeguards

Nairobi Securities Exchange
An investor at the Nairobi Securities Exchange. FILE PHOTO | NMG 

Sanlam Kenya #ticker:PAFR has ruled out investing in corporate bonds, which it considers risky, until laws protecting investors are strengthened.

The Nairobi Securities Exchange-listed insurer said on Friday during an investor briefing that it had taken the decision as part of a restructuring following a streak of write offs for the instruments. In the year to December 2018, which saw Sanlam post a Sh1.97 billion loss, the firm took a beating when it wrote off bonds owed by Kaluworks (Sh169 million), Sh574 million by Athi River Mining (ARM) Cement, and Sh398 million by Real People Kenya.

On Friday, the firm announced it had returned to profitability, having earned Sh114 million in the last financial year.

“We have reorganised our investment portfolio and got rid of all investments that put us into suffering in the recent past … most of our investments are now in government bonds,” said CEO Patrick Tumbo.

“In our investment portfolio we have moved out of the corporate bonds until the regulations offer more protection that are envisaged by the regulators … we have steered clear of investing in commercial instruments.”

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The Capital Markets Authority had said earlier that it was in talks with banks’ cash underwriter Kenya Deposit Insurance Corporation (KDIC) to address exposure of bondholders under the compensation laws.

CMA said the reduced momentum in the corporate bond market due to defaulted payment such as those of Chase and Imperial banks, require fixing of laws to protect investor interests.

The regulator had said it is engaging the KDIC on how best to interpret the clause on compensation without plunging investors into losses or longer period of waiting. Such a move would boost confidence in the bond market.

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