UAP Holdings has written off Sh597.9 million of its investment in its Tanzanian subsidiary, citing a deterioration of business conditions in that market.
The insurance group disclosed the impairment, which contributed to its loss in the year ended December, in its latest annual report.
The write-off was booked as an expense in the review period.
“Other expenses include an amount of Sh597.9 million relating to impairment of the investment in UAP Insurance Tanzania which is 60 percent owned by UAP Africa Limited (Mauritius),” the insurer said in the report.
“UAP Africa Limited (Mauritius) is a fully owned subsidiary of UAP Holdings Limited.”
The company runs a general insurance business in Tanzania which reported a net loss of Sh182 million in the year ended December, reversing a net profit of Sh116.9 million the year before.
The loss was caused by claims and expenses rising faster than income from investment and insurance covers.
The performance contributed to the parent company’s net loss of Sh517.8 million in the review period compared to a net profit of Sh607.5 million the year before.
UAP says the subsidiary suffered revenue shortfalls as a result of reduced spending by the government, a move that slowed down business activity in general.
The company also lost access to its deposits in Tanzania’s Bank M, which collapsed after failing to meet its short-term obligations.
“In addition, the collapse of Bank M during the year led to increased impairments for balances held with the bank at the time of its collapse,” UAP’s chief executive Peter Mwangi said in the report.
“I am, however, pleased to report that subsequent to year-end, the Bank of Tanzania has entered into an agreement with Azania Bank that will see Bank M depositors regaining access to their deposits.”
UAP says it has taken actions to re-engage the subsidiary’s customers and intermediaries to preserve its market share and position it for business for growth.
The insurer added that it is confident that the Tanzanian unit’s performance will be turned around this year.
UAP joins a list of Kenyan multinationals whose operations in Tanzania took a hit from deteriorating business conditions in that market. Kenyan banks including Equity Group have also reported a mix of losses and reduced earnings in Tanzania.