General insurers’ net profit for the financial year ended December 2023 grew 35 percent to Sh13.33 billion as increased investment income helped offset the poor performance from the underwriting business in the review period.
The latest data from the Insurance Regulatory Authority (IRA) shows the net profit rose from Sh9.88 billion posted in the prior period, marking the third straight year of increasing profitability. Net profit had dropped by 45 percent to Sh4.9 billion in 2020 on the back of Covid-19 pandemic disruptions.
The review period saw investment income rise by 17.4 percent to Sh69.7 billion from Sh59.3 billion. The Sh10.4 billion rise in investment income helped grow the net earnings for the general insurers, despite underwriting losses having widened.
The increased returns from investments highlight the benefits of insurers’ decision to cut their stakes in equities in favour of government securities, which made up 59 percent of the Sh164 billion investment portfolio for general insurers.
General insurers’ trend of underwriting losses in their mainstay business of insurance. Underwriting losses in the review period widened by 33 percent to Sh4.96 billion from Sh3.72 billion as claims from commercial vehicles and hospital bills rose sharply.
The general insurers’ performance mirrored that of long-term insurers where net profit rose by 39 percent to Sh5.82 billion, helped by a 39 percent rise in investment income to Sh6.8 billion. Long-term insurers’ underwriting profit had dipped 57 percent to Sh591.7 million from Sh1.38 billion.
Underwriting losses—the difference between premiums collected and claims plus expenses paid—were highest in motor and medical business for the general insurers. Losses from underwriting private vehicles fell 35 percent to Sh2.6 billion while the loss from insuring commercial vehicles decreased 6.5 percent to Sh3.3 billion.
However, losses from medical insurance rose 2.5 times to Sh1.8 billion, leaving the industry with overall underwriting losses in general insurance.
Other classes of general insurance that returned underwriting losses include personal accident (Sh518.5 million), aviation (Sh70.4 million), and engineering (Sh122 million) loss.
The worsened underwriting loss came in the period when claims paid by the general insurers increased by 12.3 percent to Sh81.2 billion compared with Sh72.3 billion paid earlier. The bulk of the rise was in medical, where claims jumped by Sh5.6 billion to Sh37.1 billion.
Premiums collected rose by 13.3 percent to Sh191.3 billion, being a slower pace than that of the growth in claims paid out.
Direct expenses, including commissions, salaries and legal costs, rose to Sh45.7 billion from Sh40.4 billion, further hurting the underwriting results.
In terms of market share— measured by the amount of gross premium income underwritten in comparison with the industry’s total—APA took the lead at nine percent, overtaking Old Mutual, which closed at 8.7 percent.
APA and Old Mutual were followed by CIC General (8.4 percent), Britam General (8.2 percent) and GA Insurance (8.1 percent).
