CIC, Kenya Reinsurance undervalued, says Cytonn

Insurers Kenya Reinsurance Corporation (Kenya Re) and CIC Insurance Group are undervalued with upsides of 41.6 per cent and 14.4 per cent respectively, a new report by Cytonn Investments says.

Analysts at Cytonn back their claim by stating that Kenya Re’s net premium income is expected to grow by 11.9 per cent by 2020 with the underwriter’s core earnings a share projected to grow by 7.2 per cent.

Cytonn singles out Kenya Re for its offerings in the Islamic insurance segment that is an alternative for conventional insurance as a huge opportunity for its growth.

“It has enabled Kenya Re to capture the Muslim segment of the market,” says Cytonn.

CIC’s gross premium income, on the other hand, is expected to grow by a compounded annual rate of 14.3 per cent by 2020 while its net premium income is expected to grow by 14.3 per cent over the next three years.

This would grow the insurer’s core earnings per share by 6.9 per cent, according to Cytonn.

READ: Kenya Re firms grip on Zep-Re with Sh1.3bn stake acquisition

Cytonn cites CIC’s adoption of alternative channels, such as saccos distribution, mobile and Internet as well as what it terms CIC’s underwriting discipline as highlighted by a strong underwriting leverage as bound to derive value of the firm going forward.

The report at the same notes that with Kenya’s insurance penetration at three per cent compared to Africa’s average of 3.5 per cent, there is still a lot of room for growth.

“To further enhance the quality of returns in the sector, there is a lot of diversification of investments especially into real estate where the returns remain high and stable,” said Cytonn chief investment officer Elizabeth Nkukuu.