Kenya Reinsurance registered a 12.4 per cent growth in net profit on the back of an increase in net premiums and higher investment income.
The company’s profit stood at Sh3.1 billion while its net earned premiums rose by 20.2 per cent, pointing to a robust operating year both in Kenya and elsewhere in Africa where it does business.
“This was as a result of overall insurance premiums growth in Kenya and the rest of Africa where the corporation derives the bulk of the revenues. The corporation earned new business shares and enjoyed tremendous support from cedants across the chosen markets,” said the company in a statement published in the dailies.
A cedant is an insurer who purchases reinsurance in order to limit their exposure. The reinsurer absorbs some of the losses and thereby reduces the amount of capital that the insurer needs to provide coverage.
The reinsurer provides risk mitigation to the cedant who in turn pays a premium for it.
The statement was signed by the firm’s principal officer Jadiah Mwarania, chairman Nelius Kariuki and Felix Okatch, a director. Investment income, which has been a major revenue earning arm of many insurers, increased by 14 per cent to Sh2.59 billion.
“The major drivers for the growth are earnings from fixed-income instruments and rental income,” said the company.
The company has proposed to pay a first and final dividend of 70 cents a share, which will bring the total payout to Sh490 million.
Net claims however grew by 26.1 per cent to Sh5.96 billion. “The growth in claims is largely explained by severity in claims experienced during the year,” said the company.
Kenya Re had to incur cost of acquiring cedants to pay them premiums. The costs incurred are in terms of exposure for the reinsurer.
“Cedant acquisition costs expenses grew by 21 per cent to Sh3.017 billion. This is in line with the growth in inward reinsurance business,” said the firm in the statement.
Management expenses also grew by eight per cent to hit Sh1.09 billion. “This translates to 9.4 per cent management expense ratio which is below the statutory requirement of 10 per cent,” said the company.
Total assets of the company grew by 16.5 per cent to Sh32.3 billion thanks to increased investment in properties that rose by over Sh700 million to Sh7.2 billion in 2014 compared to the previous year.
Investment in unquoted equity instruments also rose to Sh167 million from Sh59 million in 2013.
However, the amount of cash Kenya Re owed out of reinsurance arrangements fell to Sh452 million from Sh702 million in the previous year. This means that its liabilities fell, thereby boosting net assets of shareholders’ funds.
The investors’ funds rose by 18 per cent to about Sh20 billion in 2014.
Recently, the firm received a major boost when the government announced that it was extending the duration for the mandatory cessions by five years to 2020.
When the company floated its initial public offering in 2008, the cession were supposed to end in 2011, but were extended.
The cessions will be a fifth of the premiums received, up from 18 per cent that the insurers have been paying for more than two decades.
The cessions assure the firm a steady flow of income from local underwriters.