CIC writes off Sh900m uncollectible premiums

CIC Group chief executive officer Patrick Nyaga (right) with chief financial officer Philip Kimani during the release of the insurer's 2022 financial results on March 22, 2023. PHOTO | POOL

CIC Insurance Group has written off Sh900 million uncollectible premiums as it sought to clean from its books debts that had accumulated over the years, and with remote chances of being recovered.

The underwriter says about Sh650 million relates to unremitted insurance premiums of Sh10,000 and below, mainly in the hands of direct customers and agents.

CIC Group chief financial officer Philip Kimani said the write-offs were the reason behind the income tax expense paid in the financial year that ended December 2022 tripling to Sh936 million from Sh291 million the year before.

“These debts relate to insurance premiums that go back many years, some more than 10 years. They had been provided for over the years and so we had to do a full assessment of how collectable they are. So it was part of this clean-up exercise that the write-off happened,” said Mr Kimani.

“A lot of it was very small debt. Of the Sh900m, Sh650m were debts less than Sh10,000 from our direct customers and agents.”

CIC's pre-tax profit had more than doubled from Sh959.7 million to Sh2.03 million but the income tax expense tripled from Sh291 million to Sh936 million, leaving it with a net profit of Sh1.09 billion.

Mr Kimani explained that CIC had previously provisioned for the bad debt, leading to the creation of a deferred tax asset.

Writing off the debt that had been provisioned meant reversing the deferred tax asset into the current tax expense, leading to the jump in the taxes to an equivalent of 46 percent of the gross earnings from 30.3 percent in 2021.

“When you provision for debt, it creates deferred tax assets. When you write it off, you reverse the deferred tax asset to your current tax. There was no cash flow impact but an accounting reversal of what had been provided,” said Mr Kimani.

CIC had in 2020 made a Sh1.28 billion provision for impairments and carried the same figure into 2022. At the end of 2021, CIC disclosures showed Sh1.55 billion of the money was over four months old.

The underwriter has resumed dividend payout for the first time in four years as the net profit for the financial year ended December 2022 grew by 63 percent to Sh1.09 billion.

The growth in net earnings from Sh668.4 million returned CIC to the Sh1 billion and above net profit club for the first time in seven years.

The improved performance has seen the CIC board propose a payment of Sh0.13 per share dividend to shareholders, in a payout that will amount to Sh340 million.

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