Resolution Insurance CEO Peter Nduati. The company, which has attracted new investors, also recorded underwriting losses. PHOTO | FILE
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Administrative expenses grew at a faster pace than industry revenues driven mainly by higher commissions and management expenses.
IRA said commission paid to agents selling life insurance covers rose by half compared to a 27.4 per cent growth in premiums.
Commissions paid for short-term business increased by 33.5 per cent with premiums rising by 17 per cent.
Insurance companies recorded a 53.7 per cent drop in underwriting profits in the nine months to September as staff costs rose.
Data from Insurance Regulatory Authority shows the insurers recorded earnings of Sh1.1 billion from their core business, down from Sh2.5 billion last year.
Underwriting profits refer to premium collected less claims paid and administrative expenses paid. Administrative expenses grew at a faster pace than industry revenues driven mainly by higher commissions and management expenses.
“Underwriting expenses included business acquisition costs (commissions) and expenses of management. The commissions for the insurance companies by the end of September amounted to Sh7.4 billion compared to Sh5.2 billion reported during the same period in the previous year,” read a market report by IRA.
IRA said commission paid to agents selling life insurance covers rose by half compared to a 27.4 per cent growth in premiums. Commissions paid for short-term business increased by 33.5 per cent with premiums rising by 17 per cent.
Management expenses rose by a quarter to Sh21.6 billion compared to Sh17.3 billion reported in September last year. Insurers though queried the numbers arguing they were misleading.
“Commissions are controlled by the act so unless companies are paying beyond the limit something is erroneous,” said the chief executive, Association of Kenya Insurers (AKI) Tom Gichuhi.
Mr Gichuhi, however, noted the association compiles full-year data only from published financial statements unlike the regulator who was privy to electronic data submitted by companies periodically.
The IRA numbers showed 15 out of the 36 companies that insure short-term risks (mainly motor vehicle and medical) made underwriting losses.
Among the firms that posted losses include Gateway Insurance in which Pan Africa Insurance recently acquired a majority stake as it sought re-entry into the general business.
Resolution Insurance, which has also attracted new investors, recorded underwriting losses mainly attributable to claims from the medical business.
The firms, however, rode on improved performances from their investments especially in the Nairobi Securities Exchange to record operating profits. The insurers’ exposure in the equities market rose to 20 per cent of their portfolio from 16 per cent in June.
In the nine months the insurers’ investment income from long-term business stood at Sh21.3 billion compared to Sh17.4 billion in September last year. Investment income from general business was Sh3.4 billion.
Insurance stocks have performed well at the securities market as investors’ bank on improved full-year performances.
“There has been growing interest in the insurance sector and we expect it to continue especially when the full-year earnings are released in March,” said Ian Gachichio, a research analyst at Kestrel Capital.
Apart from anticipating better financials investors have also been attracted by corporate announcements by the insurers.
Britam announced plans to acquire a 24.7 per cent stake in Housing Finance held by Equity Bank while CIC Insurance issued a corporate bond to facilitate development of its real estate projects. Jubilee has declared intentions to acquire some of its rivals in the regional market.
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Note: The results are not exact but very close to the actual.
