Insurance losses

Insurance firms take a beating

In Summary

• Out of 15 firms that issued profit warning for the 2018 results, four are from the insurance sector.

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Kenya’s Old Mutual Group CEO Peter Mwangi addresses the media in Nairobi on July 2 last year /ENOS TECHE
Kenya’s Old Mutual Group CEO Peter Mwangi addresses the media in Nairobi on July 2 last year /ENOS TECHE

Last year was depressing for Kenya's insurance sector, with almost all listed insurance firms reporting loss or drop in profit for the period ending December 2018.

Yesterday, UAP Old Mutual reported a loss of Sh518 million down from a Sh608 million profit in 2017, citing tough operating environment in Kenya and South Sudan.

The firm's chief executive Peter Mwangi attributed this to the bearish performance at Nairobi Securities Exchange that saw the headline NSE20 drop by more than 23.7 per cent, denting financial positions of most investors including UAP Old Mutual.

 

"This situation is not uniquely attached to UAP Old Mutual. The sector struggled last year but things have started to shape up,’’Mwangi said.

UAP Holdings shed Sh478 million in value while the one-off restructuring of 89 employees exerted Sh324 million on the firm’s books during the year under review.

The diversified financial firm also incurred Sh780 million in provision costs in line with IFRS9 accounting standard that took effect on January last year.

This is the fourth listed insurer to report a loss after Britam, Sanlam and Kenya Reinsurance.

Last week, Britam Holdings announced a loss amounting to Sh2.86 billion attributed to a tough operating environment with unrealized losses on equities increasing to Sh3.2 billion compared to a profit of Sh0.9 billion reported the previous year.

Britam’s results were heavily dented by losses from various investments in cash-strapped firms like HF Group which also reported an end year loss last week.

Just like UAP Old Mutual, Britam Holdings had issued profit warning in December.

 

The listed insurer attributed the expected decline to poor performance of the stock market which has led to reduced returns from equity investments.

Sanlam Holding’s annual financial report was also on a negative trend, posting a loss of Sh1.98 billion, a whopping 363 per cent drop compared to Sh53 million posted in 2017.

The firm’s total income dropped to Sh5.1 billion from Sh7.3 billion in 2017 on dwindling fortunes for its investments in Athi River Mining, Kaluworks and Real People.

The insurer was forced to write of Sh574 million in ARM cement, incurring a total impairment cost of Sh1.4 billion.

Although Kenya RE and Liberty Holdings registered positive earnings, there was a decline in comparison to the previous year.

Kenya RE reported a profit of Sh2.28 billion compared to Sh3.5 billion in 2017. The 36 per cent drop in profit was in line with the reinsurer’s earlier alert on its profit that anticipated at least 25 per cent drop.

The listed reinsurance firm attributed the Sh1 billion decline to increased claims, impairment of assets as well as currency devaluation in South Sudan.

Liberty Holdings on other hand declared a 9.8 per cent drop in profit to Sh 608.422 million from Sh 674.5 million in 2017. This was after the firm’s gross earned premium revenue dropped 10.2 billion to Sh674.5 million.

Out of 15 firms that issued profit warning for the 2018 results, four are from the insurance sector.