Insurers now change tack as returns on equities drop
What you need to know:
- Company managing director Jadiah Mwarania said its gross premiums rose by 14 per cent to Sh7 billion as the company booked more business from its regional operations with Kenya contributing 48 per cent of the premiums.
- Insurance penetration in Kenya remains below four per cent of the Gross Domestic Product at a time other financial services have been taken up by wananchi.
Insurers are weighing their options in a bid to grow their premiums following the poor run at the equities market. While some are turning to government bonds, others are placing their bets on regional markets to remain profitable.
A majority, however, reported increased business albeit marginally over the first half of this year thanks to aggressive local and regional expansion and adjustment of their investment portfolios.
Jubilee Holdings posted a 7.5 per cent growth in net profit in the half year ended June, helped by a rise in premiums with a net profit in the period standing at Sh1.5 billion compared to Sh1.4 billion a year earlier.
The Insurance firm’s gross premiums rose 6.8 per cent to Sh17.1 billion with chairman Nizar Juma announcing a specialist (or referral) model in bancassurance through partnerships with several banks, a move that is expected to boost its life insurance business segment in the second half of the financial year.
“Over the past five years, Jubilee had a planned policy to diversify its portfolio out of equity holdings into the bond market. This is currently paying off in the wake of the collapsing equity market,” the company said in a statement last week.
The insurer which targets to cover 5.5 million customers over the next five years, is intensifying its investment diversification plans to further cut its exposure in the stock market while eyeing the wider region through presence in Ethiopia and the Democratic Republic of Congo, with its medical scheme.
Kenya Re which reported an after-tax profit of Sh1.56 billion compared to Sh1.5 billion in a similar period last year, has also slashed its investment in shares by 8 per cent from Sh2.5 billion to Sh2.3 billion.
Gross premium
Company managing director Jadiah Mwarania said its gross premiums rose by 14 per cent to Sh7 billion as the company booked more business from its regional operations with Kenya contributing 48 per cent of the premiums.
He said new capital requirements in the insurance industry had increased the ability of insurers to retain more risk reducing the amount of business passed on to reinsurers.
Britam Holdings, which runs an insurance, asset management and property development businesses saw its profits rise 184 per cent from Sh624 million up to Sh1.77 billion. The firm cut its exposure at the bourse to focus on growing its other business.
Britam sold some shares and pumped in more cash in government securities and fixed deposit accounts.
“The shift in investments that made us lower our share of equities cushioned us from the NSE bear run,” Britam Finance and Strategy Director Gladys Karuri said.
Sanlam Kenya, formerly Pan Africa Insurance Holdings which reported a Sh129 million loss says it has adopted a new five-year strategy that involves, among other things rebranding and changes to its distribution channel in the life insurance business to mobile platform.
Sanlam Kenya is down 38.8 per cent year to date on the Nairobi All Share Index and is the worst performing counter among the listed insurance companies.
Insurance penetration in Kenya remains below four per cent of the Gross Domestic Product at a time other financial services have been taken up by wananchi.
Pressure to survive the tough market will perhaps push the sector to be more creative in finding new models to push policies to more clients.
The sector is, however, facing a great test from the regulator, the Insurance Regulatory Authority (IRA) through a Bill proposing to cut the claim settlement period to 30 days.
At present insurance companies have 90 days to settle demands after all documentation has been filed and a discharge voucher signed.
Although the insurance lobby, the Association of Kenya Insurers (AKI), has termed the one-month period unrealistic saying they needed time to investigate a claim before payment is made, some analysts say insurancecan only take off in Kenya if customers have trust that the underwriters will pay up, and in time.
The sectors brokerage distribution channel is also in trouble after the Kenya Revenue Authority sent demand letters to the more than 200 insurance brokers claiming Sh2.39 billion in unpaid taxes for the period between July 2013 and December 2015. Brokers were paid commissions amounting to Sh23.85 billion.
