Sanlam Kenya shareholders have unanimously approved the Board of Directors’ proposal to strengthen the insurer’s balance sheet through a rights issue program. The initiative aims to raise up to KSh 3.25 billion, which will be used to enhance financial stability and drive operational growth.
The proceeds from the rights issue will primarily facilitate the early repayment of an existing loan facility from Stanbic Bank Kenya, significantly reducing the Group’s long-term debt levels. Additionally, part of the funds will serve as working capital, offering the flexibility and resources needed to support the company’s growth trajectory and improve profitability.
Increased Share Capital
To implement the rights issue, shareholders approved an increase in share capital at an Extraordinary General Meeting (EGM). According to Sanlam Kenya Chairman John Simba, the company’s share capital will rise by a maximum of KSh 3.72 billion, up from the current KSh 2 billion. This increase will be achieved through the creation of 400 million additional ordinary shares, each with a nominal value of KSh 5.
“For purposes of undertaking the rights issue, the company has secured shareholder approvals to increase its share capital. This decision marks a critical step in reinforcing our balance sheet,” Chairman Simba stated.
Financial Performance Challenges
Sanlam Kenya’s recapitalisation strategy comes on the heels of challenging financial results. The Group reported a net loss of KSh 127 million for the year ended December 31, 2023, compared to a KSh 83 million net loss in the previous year. The General Insurance subsidiary recorded a net loss of KSh 126.6 million, up from KSh 82.9 million in 2022, alongside a decline in insurance revenue from KSh 8.3 billion in 2022 to KSh 6.9 billion in 2023. This reflects a tough operating environment exacerbated by inflation and reduced incomes for policyholders.
Loss per share for the General Insurance subsidiary also deepened, falling from KSh 0.50 per share in 2022 to KSh 1.12 per share in 2023.
Strategic Debt Reduction
Group CEO Dr. Nyamemba Tumbo highlighted that the early repayment of the Stanbic Bank loan will help reduce interest expenses, improving the Group’s financial health.
“We have authorised the Board to carry out the rights issue and issue up to 1 billion ordinary shares, each with a nominal value of KSh 5, to current shareholders. This move is part of a broader strategy to streamline our debt portfolio, optimise capital, and improve shareholder returns,” Dr. Tumbo said.
Focus on Core Business
Sanlam Kenya has been actively restructuring its operations to focus on its core insurance business. This includes retiring and restructuring debt, divesting from non-core real estate investments, and winding up dormant subsidiaries. These measures are designed to enhance operational efficiency and deliver sustainable returns to shareholders.
Market Outlook
Sanlam’s recapitalisation plan underscores its commitment to navigating economic challenges and leveraging growth opportunities. By strengthening its balance sheet, the Group aims to create a more resilient financial foundation, driving long-term value for its shareholders.
