Chase and Imperial bonds cost Sanlam

Kennedy Muriithi,CEO Sanlam Investments (from left) Stephen Kamanda,CEO Sanlam Life,Ian Kirk,Group Chief Executive,Sanlam,Mugo Kibati,Group CEO Sanlam Kenya and George Kuria,CEO Sanlam General Insurance during the media rebranding launch of the Sanlam Kenya from Pan Africa Insurance Holdings at the Sarova Stanley Hotel. Photo/Elvis Ogina (Nairobi) August 17th,2016. [File, Standard]

Wealth management firm Sanlam has warned investors of lower returns this year.

The investment firm has also warned of a fresh round of reorganisation after doubtful investments hit its books for the third year in a row.  

Sanlam yesterday issued a profit warning, predicting its profits to fall by more than 25 per cent compared to last year’s performance.

The company said in a notice it would put in place a turnaround plan to change its investment policy and reorganise management while also enhancing the use of technology.

SEE ALSO :Businessman arrested in Sh200m fraud act

“Consequently, the management in consultation with the board will put together a turnaround strategy geared at advancing the group’s performance,” said the Sanlam board chairman, John Simba, in the press notice.

Last year, Sanlam suffered the pain of writing off Sh1 billion after it became apparent that the Chase Bank and Imperial Bank bonds it had invested in were irredeemable.

Distressed enterprises

“The impaired amount recognised below relates to non-performing corporate bonds of Sh1,078,903,000 and Sh46,340,000 fixed deposit held as lien with a financial institution for ex-staff loans that are in payment arrears. The 2016 impairment related to non-performing financial instruments in the period,” said the firm in its annual report.

Sanlam said 100 per cent impairment of corporate bonds placed in presently distressed local enterprises may come back to haunt them again.

SEE ALSO :Man charged with attempted fraud

Currently, Athi River Mining has sunk into receivership while carrying a corporate bond and Real People has sought an extension to settle its debt from August 6, 2018 to January 6, 2019.

Sanlam Kenya Plc underwrites life and non-life insurance risks through its subsidiaries Sanlam Life Insurance and Sanlam General Insurance.

Its related company, Sanlam Investments East Africa Ltd (SIEAL), has seen profits for the half-year drop by 1.7 per cent.

For the six months to June this year, SIEAL posted a Sh71.6 million net profit, down from Sh72.9 million last year.

Operational expenses

Sanlam’s income rose from Sh264 million to Sh330 million, riding on fund management fees.

However, costs went up 42 per cent on increased operational and administrative expenses.

The board has been busy with emoluments, which rose nine-fold from Sh571,000 to Sh5.3 million, while employee costs increased from Sh130 million to Sh160 million.

We are undertaking a survey to help us improve our content for you. This will only take 1 minute of your time, please give us your feedback by clicking HERE. All responses will be confidential.

SanlamProfit WarningBad Bonds