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Kenya Re ranked most attractive insurance firm for investment

Cytonn Investments' Investment analyst Caleb Mugendi. FILE PHOTO | NMG
Cytonn Investments analyst Caleb Mugendi. FILE PHOTO | NMG 

Kenya Re #ticker:KNRE has been ranked as the most attractive listed underwriter on the Nairobi Securities Exchange (NSE) in the first half of 2017, as measured by franchise value and intrinsic scores, a new report shows.

According to a Cytonn Investments half-year 2017 insurance report released on Monday, Kenya Re maintained the top position in the composite score category supported by a strong franchise value score.

Liberty Holdings #ticker:CFCI was the most improved, rising two positions to position three owing to its higher potential return of 31.2 per cent and an improvement in its franchise value score.

The franchise score measures the broad and comprehensive business strength of the company and the intrinsic score measures the investment return potential.

“The analysis aims to give a view on which listed insurance firms are the most attractive for investment by evaluating which companies are the most stable and have the best future growth potential,” said Cytonn Investments analyst Caleb Mugendi.

Key factors

Mr Mugendi said technology and innovation is one of the key factors that are shaping the performance of the sector and thus they expect improved product innovation and operational efficiency to drive the growth of the sector amidst the heightened regulation.

“The growth on middle class, adoption of alternative distribution channels and regional expansion are also key contributors to the growth of the sector,” said Mr Mugendi.

Britam Holdings #ticker:BRIT dropped two places to position four due to a low intrinsic valuation and a low return on tangible common equity of 10.8 per cent, versus an industry average of 11.5 per cent which affected its franchise value ranking.

Sanlam Kenya #ticker:PAFR was ranked lowest in both franchise and intrinsic value score.

This was as a result of low return on tangible common equity, high loss ratio, low underwriting leverage and high reserve leverage.

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