Kenyan insurers’ performance bitten by familiar bug

Top insurance firms have marked significant profit declines with some posting losses as their performance tumbles under the weight of declining returns from stocks and properties.

The slump in earnings for the underwriters is however an all too familiar pain for an industry which has left itself exposed to investments.

Since then, insurers have had to sober up to the new realities by revaluing their property holdings downwards resulting to impairment losses to the tune of billions of shillings.

Further, the sector’s appetite for equities has stung the firms as the domestic equities market represented by stocks listed on the Nairobi Securities Exchange (NSE)

The NSE has remained in bear territory for a second year running as the local market struggles to contain the bleeding from heavy foreign investor sell offs.

A review of top insurers’ half year performance through to June 30 reveals the grim picture to the industry- an image further complicated by shocks from the COVID-19 pandemic.

UAP

The regional based insurer which is perhaps the biggest property investor in the industry announced a Ksh.305 million half year loss from a Ksh.383 million profit last year.

The change in fortunes for the underwriter came on the back of the group’s investment income declining by 35 per cent to Ksh.1.3 billion as it booked a Ksh.771 million fair value loss from stock holdings following an equities market slump in the first half of 2020.

The firm was however spared blushes in its property investments having not impaired any more property valuations in the period from 2019.

Memories are however vivid on exposure to properties with the company having posted an extended Ksh.3.4 billion loss as its write-downs in property accelerated by 530 percent in the year to Ksh.3.2 billion from Ksh.604 million in 2018.

UAP recently installed Chief Executive Officer and former Chief Finance Officer Arthur Oginga however reckons the company can now navigate the volatility posed in the property investments.

“We believe we have a better grip on the property business now having taken significant impairments in the last two years. Rental incomes and occupancy are ups across all shareholder properties and our assessment at half year did not require us to make any further impairments,” he said.

Britam

The underwriter’s heavy exposure in the stock market was the large contributor to the firm’s Ksh.1.6 billion half year loss which reversed a previous Ksh.1.7 billion profit.

Britam impaired Ksh.3.1 billion from its equities investment portfolio which largely features shareholding in lenders Equity and Housing Finance.

“This reflects the significant adverse impact of COVID-19 on the operating environment particularly on the equities and property investments,” the insurer noted in a statement last month.

The company continues to mark swings in its investment exposure making for a nail biting time whenever the local operating environment hits a snag.

For instance, higher investment gains swung Britam into a notable Ksh.3.5 billion profit in 2019 reversing a Ksh.2.2 billion loss in 2018.

During the period, the company marked Ksh.4.8 billion in fair value gains from its financial assets.

Sanlam

Sanlam’s investment income plunged by 36.8 per cent in the half year period to Ksh.1.2 billion as it posted a Ksh.99.1 million loss reversing a Ksh.639.8 million profit from last year.

Other insurers to see an earnings slide have included Liberty Holdings which announced a 55 percent profit dip to Ksh.333 million with investment income declining by 21.9 per cent to Ksh.58.6 million.

Meanwhile, some insurers have avoided the earnings purge by sticking largely to core business.

Jubilee Holdings has for instance stuck largely to underwriting leaving its earnings largely untouched.

The Group posted a flat Ksh.1.8 billion half year profit following up a hold in earnings in its 2019 full year performance on higher premiums earned.

Swings in the performance of insurance firms have however becomes a near reflection of the Kenyan economy as the industry follows leaps and upheavals of the real operating environment.