Sanlam Kenya is winding up its property, bottled mineral water, and asset management businesses as the insurer struggles to prop up earnings following years of losses and dividend drought for shareholders.
The company, a subsidiary of South Africa’s financial services conglomerate Sanlam Ltd, says— Sanlam Investments Ltd (asset managers), ChemiCemi Mineral Water Company (bottled water), and Mae properties (property)— have remained inactive and the group is winding them up.
“Other wholly-owned subsidiaries are dormant and are in the process of being wound up and include Sanlam Investments Limited, ChemiCemi Mineral Water Company, and Mae properties,” the company says in its latest annual report (2023).
Winding up (or liquidation) is the process by which a company’s existence is terminated by selling its assets to pay off its debts. Any monies remaining after all debts, expenses, and costs have been settled are distributed among the company’s shareholders.
Sanlam Kenya, which is listed on the Nairobi Securities Exchange (NSE) is battling a financial crisis largely precipitated by surging finance costs and dwindling investment returns.
The group’s net losses widened by 53 per cent to Sh127 million ($992,187.5) in 2023 from Sh83 million ($648,437.5) in 2022, marking the fourth straight loss in a row after reporting a net profit of Sh114.4 million ($893,750) in 2019.
Its cumulative losses rose by 14.57 per cent to Sh2.28 billion ($17.81 million) from Sh1.99 billion ($15.54 million) in the same period subjecting shareholders to a 10th straight year of dividend drought.
The insurer’s last dividend payment to shareholders came in 2013 at Sh4.5 ($0.03) per share amounting to a total of Sh432 million ($3.37 million) as net earnings hit Sh1.25 billion ($9.76 million).
Last year (2023) the group’s life and general insurance businesses recorded a net profit of Sh534 million ($4.17 million) and Sh123 million ($960,937.5) respectively, with part of these earnings being used by the parent company (Sanlam Kenya Plc) to settle its financial obligations during the year.
The group’s total loans as of December 31, 2023, stood at Sh4.65 billion ($36.32 million), with total finance costs increasing to Sh604.61 million ($4.72 million) from Sh455.34 million ($3.55 million) in 2022.
Sanlam Emerging Markets the intermediate parent company of Sanlam Kenya Plc advanced a loan of Sh1.08 billion ($8.43 million) to Sanlam General Insurance Ltd to bridge the capital shortfall on May 5, 2022. The loan has been extended for a further 18 months and will now mature on May 5, 2025.
In addition, the loan agreement between Sanlam General Insurance Limited (the borrower) and Sanlam Emerging Markets (Pty) Ltd (the lender) provides that payment shall not be commenced or continued if it results in the capital adequacy ratio (CAR) of the borrower falling below 100 percent
As of December 31, 2023, the Group also holds a credit facility of Sh 3.5 billion ($27.34 million) with Stanbic Bank which is set to mature in March 2025.
Sanlam Kenya Plc on December 21 2017 and on December 19, 2018, acquired loans from Sanlam Capital Markets Property of $ 10 million(Sh1.28billion) and $ 17 million(Sh2.18billion), respectively for two years to settle intercompany balances with related parties, recapitalise the Group’s insurance businesses and finance completion of the Sanlam Tower.
