Taxes eat up 93pc of Britam’s Sh1bn profit

Insurance group Britam Holdings #ticker:BRIT paid a higher-than-usual tax rate of 92.8 percent in the year ended December after it made provisions for investment losses of Sh5.2 billion.

The provisions cannot be used to lower tax obligations, a move that saw the company pay taxes amounting to Sh939.3 million on the pre-tax earnings of Sh1 billion.

This means that the investment losses raised the company’s obligations beyond the normal 30 percent corporate income tax rate under which it would have paid only Sh303.3 million.

“The [2021] year tax expense is significantly higher compared to the profit before tax due to significant one-off expenses in the holdings company that are tax disallowable,” said Catherine Karita, Britam’s director for strategy and investor relations.

“These expenses have caused the holding company to report a loss before tax however with no tax credit.”

She clarified that the exceptional expenses are the provisions for the investment losses, most of which occurred in the insurer’s asset management unit Wealth Fund Management Fund LLP.

The investment losses were first disclosed in the year ended December 2020. The company has not given details of what went wrong at the asset management unit. It earlier, however, said that it was willing to absorb some of the losses to protect clients who invested in the fund.

The insurer reported a net income of Sh72.1 million in the review period, reversing a net loss of Sh9.1 billion the year before.

Britam did not declare a dividend, the second year it has gone without making a cash distribution to shareholders. The insurer recorded improved performance in its insurance and investment operations.

Net premiums rose to Sh25.7 billion from Sh23.7 billion while interest and dividend income increased to Sh10.8 billion from Sh9.3 billion.

Britam also booked a gain of Sh1.7 billion on its stock market investments, reversing the previous year’s loss of Sh2.5 billion on the securities.The insurer has significant stakes in Equity Group #ticker:EQTY and HF Group #ticker:HFCK whose stocks trade on the Nairobi Securities Exchange #ticker:NSE .“The group registered significant growth in interest and dividend income as it continues with the re-allocation of its investment portfolio to grow yields,” the company said in a statement.The insurer, which operates in multiple markets, says it is seeking opportunities for further regional expansion. It will also continue to lower costs including through the use of technology.

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