Listed reinsurer Kenya Re’s share of profits from its Pan-African associate Zep Re fell by 47.6 percent to Sh399.1 million in 2023, despite the external earnings enjoying an exchange gain due to the shilling’s weakening against the dollar last year.
Zep Re’s profit fell by 55.1 percent in 2023 to $14.2 million (Sh1.83 billion at today’s rate) last year, attributed to a significant decline in investment income and an increase in foreign exchange losses arising from the depreciation of major African currencies.
Despite the lower income from the associate, Kenya Re grew its net profit by 41.6 percent to Sh4.97 billion and is paying its shareholders a dividend of Sh0.30 per share and a bonus of one share for each share held.
Kenya Re’s decision to capitalise reserves worth Sh6.9 billion through the share issue points to potential investment activity in the near term. In 2019, the company capitalised Sh5.25 billion through a share bonus of three shares for each one held, utilising the funds to meet capital needs for regional expansion.
The Treasury, which owns 60 percent of Kenya Re, will be the biggest beneficiary of the bonus share issuance.
Disclosures in Kenya Re’s 2023 annual report also show that its share of Zep Re’s net assets grew by 33 percent to Sh10.41 billion, even though its shareholding fell slightly, reflecting additional share subscriptions by existing and new shareholders.
Kenya Re holds a 19.76 percent stake in Zep Re, making it the biggest shareholder in the Nairobi-based reinsurer, which underwrites life and non-life reinsurance risks in property, casualty, motor vehicle, marine, medical, and life. The stake, which is in the form of Class A shares, stood at 20.5 percent in 2022.
The firm is followed in shareholding by multilateral lender Trade and Development Bank, which, as of the end of December 2023, held a stake of 17.99 percent. Kenya’s Treasury holds a 1.74 percent stake in the form of Class A shares, while the government is also listed as a separate shareholder with a 0.82 percent stake.
The rise in valuation of Kenya Re’s holdings reflects the inflationary effect of the weakening of the shilling against the dollar, which is Zep Re’s presentation and functional currency.
The average conversion rate used by Kenya Re to value its assets and share of profit in Zep Re was Sh139.72 to the dollar in 2023, up from Sh117.84 in 2022.
Other than the interest in the associate, Enya Re operates three wholly owned regional subsidiaries known as Kenya Reinsurance Corporation Côte d'Ivoire, Kenya Reinsurance Corporation Zambia, and Kenya Reinsurance Corporation Uganda.
The Uganda unit was the latest to start operations, in January 2020.
