General insurers record 91 per cent decline in profits

General insurers recorded a 91 per cent drop in underwriting profits in the first three months of the year attributed to a jump in claims.

Data from the Insurance Regulatory Authority shows the insurers recorded earnings of Sh92 million from their core business in the quarter ended March down from a billion shillings in a similar period last year.

The drop followed a 27.3 per cent jump in insurance claims accompanied by a slower growth in premiums at 14.7 per cent to Sh34.2 billion.

“Claims incurred under the general insurance business were Sh12.39 billion during the period under appraisal which was a 27.3 per cent increase from 2014 Sh9.73 billion. The change in claims experience was consistent with the industry business volume expansion,” said IRA in its quarterly report.

Underwriting profits refer to premium collected less claims paid and administrative expenses incurred. “It is indicative of trouble if the comparison is on quarter on quarter basis. There is definitely some problem somewhere which is hard to tell because the economy grew over the same period” said insurance expert Isaac Ngaru.

He noted that the first quarter is usually slow due to bulk January renewals but comparison with a similar period catered for any cyclical factors.

Re-insurance companies also reported underwriting losses of Sh157 million which was however an improvement from losses of Sh329 million posted in March last year.

Insurance cover for private motorists recorded the largest losses of Sh1 billion indicative of a rise in accidents and the number of cars. Other loss-making insurance categories included theft, fire and engineering.

Medical, which has been a headache for insurers, returned an underwriting profit of Sh375 million in the three months. The general insurers recorded an operating profit of Sh1.2 billion largely attributable to investment income.

Insurers have a leeway of investing excess cash before any claims are made earning them an investment return.

Insurance companies do general (short term) or life business. The Kenyan insurance market is largely general business with covers being two thirds of the total sector.

Investor appetite

The sector has seen increased investor appetite as more players look to reap from insuring the nascent oil, gas and mining sector and increased uptake of social security packages by a growing middle class.

Premium from life insurance covers increased by 20 per cent to Sh15.9 billion compared to March last year. Data from the industry regulator shows that most recently acquired companies posted operating losses indicating a daunting task for the new owners to grow the business.

UAP, recently acquired by South Africa’s Old Mutual, posted an operating loss of Sh146 million in the general business while Gateway, which was bought by Pan Africa, made a Sh62 million loss.

READ: Abraaj Group sells UAP stake to Old Mutual

Saham Insurance, formerly Mercantile before it was acquired by Moroccans, made an operating loss of Sh52 million. First Assurance, majority acquired by the Barclays group, had a profit of Sh4.7 million.

READ: Barclays acquires Kenya’s First Assurance for Sh2.9bn

Insurers publish their financial results every six months unlike banks which are required to release their performance briefing to the public every three months.