- The austerity measure will only affect those at the Britam life and general sections
- The firm expect to save close to Sh200 million from this exercise
Listed financial and insurance firm Sanlam Kenya Plc yesterday gave its staff a week to apply for voluntary early retirement as part of its cost cutting measures.
This makes it the fifth prominent company in Kenya to announce lay-off plan on diminishing returns while others embrace technology to cut on operation costs.
Telkom Kenya, Stanbic, East Africa Portland Cement, and Diageo, the parent company of East African Breweries have already issued layoff warnings with some of the retrenchments already underway.
Addressing journalist, Sanlam Group chief executive Patrick Tumbo said the voluntary plan is open for every one in Life and general insurance departments with priority given to those aged above 50 years.
''The decision is informed by rising cost of running business amid stagnated revenues. We expect to save close to Sh200 million from this exercise,' Tumbo said.
Although he declined to give the amount set aside for the austerity exercise, he said those selected will be offered full month salary for every three years worked.
Sanlam Kenya will also cover 30 per cent of loan owed by affected staff, pay salaries for accrued leave days and retain medical cover for one year.
The firm’s costs have been growing over the last four years from Sh1.4 billion in 2015 to the current Sh2 billion in 2018 representing eight per cent compounded annual growth rate while revenue remained flat over the same period.
Staff costs at Sanlam Kenya stood at Sh943 million in 2018 up from Sh746 million incurred the previous year representing a 26 per cent growth.
“The VER scheme is one of the strategies we are deploying as part of our efforts to trim our total operating costs while gearing the company for enhanced operational efficiencies and agility,” Tumbo said.
The ajob cuts will only affect those at the life and general sections but no affect Sanlam Investment East Africa.
Sanlam Kenya, recently bounced back to profitability in its half year trading results, posting Sh639.7 million after tax compared to a loss of Sh1.5 billion the previous year on bad investment decisions.
The two affected segments continue to shrink as the insurance penetration in the country continues to drop.
The latest report from the Association of Kenya Insurers (AKI) shows penetration rate went down to 2.43 per cent last year, with 80 per cent of paid premiums originating from Nairobi.
To change the sector’s tide, Tumbo said it is high time insurers ride on technology to penetrate the virgin informal sector and upcountry market.
The company was forced to write off Sh1.15 billion mainly related to bond investments in firms in financial distress, plunging it into losses from a Sh90.53 million net profit in the same period last year.
Some of the impaired assets include Sh574 million it had with troubled ARM Group (under administration) and Sh398 million in Real People Kenya – a credit-only micro-finance firm with links in South Africa.
Insurance sector in the country has been struggling, with the bear run at the Nairobi Securities Exchange (NSE) taking toll on the industry.