High provisions on investment losses coupled with adverse operating environments of associates and listed equities characterised Britam's 2020 financial performance.
This compounded an already tough operating environment brought about by Covid-19.
The firm reported a record net loss of Sh9.1 billion in the year ended December 2020 down from a net profit of Sh3.5 billion in 2019.
The performance saw the company suspend dividend payouts, having made a distribution of Sh630.8 million or Sh0.25 per share the year before.
The major dip in losses brought about by high loss provisions on investments comes as a 'dark turnaround' of sorts considering the firm's high profits in 2019 were on high investment gains.
Provision for investment losses stood at Sh5.2 billion to support Britam Wealth Management Fund LLP, a Fund managed by Britam Asset Managers which is a fully owned subsidiary of Britam Holdings Plc, greatly depressed the 2020 earnings.
Poor listed equities performance on the other hand contributed a fair value loss of Sh2.3 billion and property impairments of Sh2 billion.
The unfavorable operating environment brought about by the pandemic adversely impacted the firm's investment in associate – HF Group contributing to the Group results, a share of loss at Sh823 million and a reduction in the value of this investment by Sh603 million.
The Group’s total underlying operating costs also declined by 6.4 percent as a result of prudent cost control measures including rationalizing non-essential costs.
The disclosure of the losses at the fund came after the insurer rebuilt its executive and board, including the investment committee, giving it an opportunity to look at issues that may have been glossed over in the past.
Britam’s Group Managing Director, Tavaziva Madzinga said the company’s growth potential remains strong and expects Britam to return to profitability in 2021.
“The Group’s fundamentals remain strong and with a new transformative strategy being implemented, coupled with an improved operating environment, the Group’s performance is looking very positive for 2021,” said Madzinga.
Britam Holdings recently injected Sh1 billion into HF Group as part of a broader strategy for growth and cementing the groups full-service banking strategy.
Madzinga noted that the economic disruptions brought about by Covid-19 continue to drive uncertainty and it may take time to contain or mitigate the spread of the virus or address its impact on individuals, businesses and the economy.
He however noted that the pandemic has been a powerful accelerant to the company’s innovation efforts.
The insurer recorded a gross revenue of Sh28.8billion, representing a 4 per cent increase from Sh27.7billion reported in the prior year ended December 31 2019.
This increase was mainly supported by the continued revenue growth of the international insurance business.
The international division continued to increase its contribution to the Group’s performance accounting for 28 per cent of the Group’s gross earned premium and a profit of Shs 832 million up from Shs 38 million in 2019.
Outside Kenya, Britam operates in Uganda, Tanzania, Rwanda, South Sudan, Mozambique and Malawi.
The Kenya General Insurance business turnaround strategy delivered improved performance and the unit reported a profit before tax of 374 million from a loss before tax of Sh306 million in 2019.
The Group also delivered positive operating cash flows of Sh7.6 billion, and significantly growing its investments in fixed income return assets.
The total assets for the Group closed at Sh137billion, a 9 percent growth from 2019 with assets under management closing at Sh250billion.
The Life Assurance business continued to underwrite profitable new business with embedded value remaining resilient despite the tough operating environment.
The embedded value as of 31 December 2020 was Shs 16.3 billion, representing a marginal drop in annualized return of 0.60 per cent even as returns on the business listed equities and properties significantly dropped.
The dismal performance saw Britam's share price drop by Nairobi 3.68 per cent at the Nairobi bourse to trade at Sh6.80.