Major insurance firms reported losses and impairments in 2018 due to poor performance in real estate and stock markets among other investments. Britam Holdings posted a KSh. 2.3bn loss last year which it has blamed on a tough operating environment, compounded by investments in cash-strapped firms.
Top of the list of Britam’s non-performing real estate investments is Housing Finance, the struggling listed mortgage lender, in which Britam has an invested stake of 48.82% acquired after buying out Equity Bank’s stake in 2014.
The investments conglomerate had bought the stake in the mortgage lender banking on “government plans to provide improved housing for citizens, the growth of the middle-income class and improved economic activities”.
However, the mortgage lender has struggled to make things work and its share price has since dropped to a 15-year low, leading the Britam to shed KSh. 4bn in paper gains.
The company has invested heavily in real estate over the past decade to diversify its portfolio and shield shareholders from stock market volatility. Last year Britam launched the landmark Britam Towers, a 200m commercial development in Nairobi’s Upper Hill, coming into an oversupplied market.
Britam has accumulated a fairly large real estate portfolio including residential, commercial and retail with some inventory in the market and in the pipeline.
Another insurer, UAP Old Mutual posted a KSh. 518m loss, the first first in almost a decade. The firm has attributed the loss to bad investments, restructuring and regulatory changes. UAP has had to write-down valuations for its properties in Kenya and South Sudan.
“We have had to let go of accounts we couldn’t price properly and that has had an impact on the top line,” CEO Peter Mwangi told an investor briefing last week.
The company also lost KSh. 400m in bonds to ARM Cement, and deposits held in collapsed Tanzanian lender Bank M. UAP’s parent company has had to halt debt for equity swap that would have seen it increase its stake from 67% to 73.5% as a result of UAP’s impaired financial performance and written-down properties.
Other insurance firms whose profits have taken a hit include Sanlam and Kenya Re.