Insurance firms announce financial results amid losses, profit decline

NAIROBI, KENYA: It has been a very busy month for the financial sector with most of the listed firms announcing their end year financial results.

The insurance sector has witnessed numerous releases eliciting numerous reactions on their industry in general.

Starting off, Britam Holdings have announced a loss amounting to Sh2.86 billion for the year ended  December 31, 2018. The Sh2.7 billion decline in income has been attributed to a tough operating environment with unrealized losses on equities increasing to Sh3.2 billion compared to the Sh0.9 billion gain reported the previous year. Consequently, returns from the property investments were also on a downward trend due to low uptake of completed units.

With 23 per cent of her total income coming from financial investments, IFRS 9 provisions have dealt a major blow to the insurer as they have to be reported on a fair value basis thus, the Sh3.2 billion loss on equities recognition for the period.

Focusing on their main business segment, insurance, and the business recorded a 4 per cent increase in premiums and commissions with the life assurance segment recording a 6 per cent surge in premium growth. Their assets also increased by sh4.6 billion being attributed to a 5 per cent increase in investment assets. For this reason, the loss per share was sh0.92 down from a 0.26 gain the previous period. From the poor performance, the board of directors has not recommended any dividends.

Earlier this week, Sanlam’s annual financial report was also on a downward trend having reported a sh1.98 billion loss citing a challenging operating environment. This saw some of the companies (Athi River mining, Kaluworks, and Real People) they invested in going into financial distress (a condition where a firm has trouble in meeting her obligations to creditors) thereby, defaulting in the payment of a 1.14bn debt advanced.

On the positive side, Kenya Re and Liberty Holdings registered positive earnings even though, a decline in comparison to the previous period.  

After issuing a profit warning in accordance with the capital markets authority, Kenya RE, the largest reinsurer in Kenya braved the tough economy to post a profit amounting to Sh2.278 billion for the period ended December 2018, a 36 per cent decline from Sh3.5 billion in 2017. The Sh1 billion decline was attributed to increased claims, impairment of assets as well as currency devaluation in one of their markets.

From their results, they registered flat growth in premiums with claims increasing from 8.1 billion to 9.4 billion. Investment income grew by 6 per cent to 3.39 billion while their asset value increased by 1.63 billion to 44.36 billion.

The operational costs also increased by 18 per cent from 1.7 billion to 2.02 billion resulting from forex losses, amortization of a new reinsurance system and the impairment of assets held for sale.

In this regard, the shareholders will receive a final dividend of sh0.45 per share.

Liberty Kenya holdings posted a profit of sh608million, a 9 per cent decline from the previous period citing a challenging operating environment.  The group reported flat premiums with investment income declining from 2.4 billion to 125million. The insurance claims were also down by 12 per cent on account of lower policy terminations. The group reported a 2 billion increase in assets with operating expenses declining by 137million to sh3 billion.  

The board of directors recommends a dividend which shall be announced and approved during the AGM to be held on June, 6^th 2019.

Going forward, insurance companies have to re-evaluate their asset management segments to minimize portfolio losses so as to return to profitability since the IFRS policies present impact heavily on their assets.