Real Insurance banks on expansion to battle crisis

Mr Kiuna who took over from current chairman Mr Sam Kamau faces an uphill task ahead as pressure builds to increase income and revise the composition of investment portfolios in the face of reduced profits.

“Our target remains to grow business by 30 per cent this year across the East and Southern Africa region,” he said, “in the first quarter of this year, we grew by 25 per cent.”

The company made a net profit of Sh83 million in 2008 compared to Sh30 million the previous year.  

Within the same period the company raised its share capital from Sh130 million to Sh200 million. General insurance companies are required to have a minimum capital base of Sh300 million by 2010.

With a rise in gross premiums of Sh1.8 billion in 2008 compared to Sh1.3 billion in 2007, Real Insurance expects better prospects this year, because even if the business does not grow, it will not make the ex-gratia payments of Sh12 million it made to clients affected during the 2008 post election violence.

Mr Kiuna sees his company’s partnership with Royal Sun Alliance (RSA), a FTSE 100 insurance company, listed on the London Stock Exchange as a major growth area.

The company underwrites RSA clients in the East and Southern Africa region.

Locally, the firm has its eyes set on the industrial town of Thika, which Mr Kiuna says is still sees as untapped especially in agro-processing.

The company will open a branch in Naivasha to tap into the flower sector and Meru because of the area’s ever green agro-business. In Malindi, the strategy is to spread out closer to clients who have to travel 120 kilometres to Mombasa to get its services.

“By August, we shall introduce a motor vehicle product where the owners can pay premiums on a monthly basis. Our sister company in Tanzania is already doing it and has been hugely successful,” said the CEO.

In Kenya, motor vehicle insurance is only effective if paid upfront in what is popularly known as ‘cash and carry’.

Premiums range from 4 per cent of the value of the vehicle, a figure the industry players say is becoming a burden to vehicle owners as they revise their household budgets to cope with economic slow-down.

“We see innovation as part of growth driver because customers are becoming more sophisticated. But the fact that penetration in Kenya is low gives us room to grow through volumes,” Kiuna said.

Mr Kiuna assumed the leadership of Real Insurance at a time when the industry has received a major battering from a drop in share prices at the stock market.

In the last one month, the investment segments of the insurers’ balance sheet reads less than they did for 2007, indicating the level of losses estimated at Sh15 billion for the whole industry.

For Real, the bet at the Nairobi Stock Exchange (NSE) was Sh60 million.