Sanlam Kenya has posted a Sh78.2 million net loss for the year ended December 2020 down from Sh114.3 million profit in the previous year blaming it on the effects Covid-19 pandemic on the local economy.
The investment firm also says it was driven to losses by foreign exchange rates, which had an adverse impact on the valuation of the Group’s net assets.
Sanlam faced a sharper increase in claims and lower returns on investments pushing its performance into the red.
“With increased claims and lower investment returns, the firm closed the year on a Sh78 million after-tax loss representing a decline from the prior-year after-tax profit of Sh114 million,” the insurance firm said in a notice.
Sanlam’s gross premium income had increased by 24.4 per cent to Sh8.69 billion up from Sh6.99 billion posted the previous year due to growth in both the long and short-term insurance businesses.
The firm’s total income had accelerated to Sh9.42 billion up from Sh8.89 billion recorded in 2019, representing a 6 per cent jump.
However, claims increased to Sh6.5 billion from Sh5.5 billion in 2019 and a Sh706 million change in investment and contract liabilities pushed up costs significantly.
Total benefits, claims and other expenses for the year ending December 2020 stood at Sh9.3 billion up from Sh8.3 billion.
The company, however, said at the business operating level, its insurance subsidiaries — Sanlam Life and Sanlam General Insurance Ltd — generated Sh499 million and Sh138 million in after-tax profit.
Sanlam Kenya had issued a profit warning early this month, joining almost 15 firms at the Nairobi Securities Exchange to project a 25 per cent drop in net profits.
Sanlam said it will now try to cut costs and push innovation including development of new products, digitization of the organizations key business processes to cover lost ground.
“Based on our un-audited end of year financial results and information currently at the board’s disposal, we wish to report that our projected net earnings after tax for the period ended 31st December 2020 will reflect a decline compared to the prior year earnings due to the effects of Covid-19 pandemic on the local economy and foreign exchange rates which had an adverse impact on the valuation of the Group’s net assets,” Sanlam Board Chair, Dr John PN Simba said.
“In response to the challenging operating environment, the board of directors applied its focus on innovation and cost savings,” he said.
The coronavirus pandemic hit businesses hard reducing earnings due to limited hours of operation and wiping out customer spending power due to massive job losses and pay cuts.