Sanlam Kenya issues profit warning for third straight year

Sanlam Kenya has issued a profit warning for the third year in a row as the investment environment got bleaker for the financial provider.

Sanlam, formerly Pan Africa Insurance Holdings, expects its profit after tax to fall by a quarter following a decline in premiums from its life business. The company also attributed the expected fall to marked-to-market fair value losses on equity investments and government securities coupled with lower income from property sales as well as a rise in expenses.

"The Board of Directors wishes to advise the shareholders and the general public that there will be material difference between the projected Sanlam Kenya's consolidated profit after tax for the year ending December 31, 2016 by more than 25 per cent of the level of profit earnings reported for the year ended December 31, 2015," said Sanlam's Board of Directors in a statement signed by Chairman Dr JPN Simba and CEO Mugo Kibati.

"The anticipated decline in profit is mainly attributable to marked-to-market fair value losses on equity investments and Government securities combined with a negative experience in the life book, lower income from property sales and an increase in expenses related to the implementation of the new Group strategy," read the statement.

The company expects to start reaping the benefits of this strategy in 2017 "with a marked improvement in overall growth and profitability."

According to the Standard Investment Bank, year-to-date, Sanlam share price is down 53.8 per cent and is the worst performing counter among the listed insurance companies. Sanlam is the second listed company this year to issue profit warning after Nairobi Securities Exchange saying that it expected its profits to drop by Sh76.4 million. The company attributed the decline to a drop in equity market prices as trading at the bourse shrunk.

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The stock market at the NSE has generally been bearish with the NSE 20-Share index ending at 3,243 points in the months between July and September. This is compared to a high of 4,173 points in the same quarter in 2015, according to figures from the Kenya National Bureau of Statistics.

During this period, the East African Portland, National Bank, NIC Bank, Standard Group, Nation Media, Co-operative Bank featured among the top 10 decliners at the Nairobi bourse, according to the Standard Investment Bank.

Other losers during this period included Athi-River Mining, Atlas Development, Britam and Housing Finance. Moreover, the national statistician found that the total value of shares traded during the third quarter of 2016 shrunk from Sh12.8 billion to Sh9.9 billion as investors continued to grapple with a bearish market.

"The subdued performance in the third quarter is a continuation of slow activity that has persisted from the beginning of 2016," said KNBS in its Quarterly Gross Domestic Product Report.