Major losses in the life insurance business pulled CIC Group’s #ticker:CIC net profit down 96 percent in the half year ended June.
The company’s net earnings stood at Sh20.9 million in the review period compared to Sh537 million the year before.
The Nairobi Securities Exchange-listed firm says the sharp profit decline was as a result of losses in its life business, noting that its regional subsidiaries and other business divisions were profitable.
“Profit … declined mainly because of the loss in our life business occasioned by the adverse group life claims that are not expected to repeat,” CIC said in a statement.
Claims rose eight percent to Sh5 billion while operating expenses increased 4.5 percent to Sh3.2 billion, hurting the bottom-line in the period when net premiums and investment income were flat.
Net premiums rose 0.4 percent to Sh7.1 billion while investment income declined one percent to Sh1.6 billion.
“Subdued investment environment and yield curve deterioration (relatively lower returns on longer term bonds) has also resulted in high actuarial reserves,” CIC said.
The company’s general insurance unit and its asset management arm reported pre-tax profits of Sh326 million and Sh104 million respectively in the review period.
CIC says its regional subsidiaries, which have been in multi-year losses, made an aggregate pre-tax profit of Sh50 million in the same period.
The company did not indicate whether all the subsidiaries are now profitable.
The performance could see the insurer issue a profit warning for the full year ending December if there is no major profit booked in this second half of the year.
The company could, however, register a major windfall if its efforts to sell a total of 712 acres succeed. The pieces of freehold land in Kajiado and Kiambu counties, which the insurer carries at cost in its balance sheet, could earn it upwards of Sh10 billion.
The disposals come as the company also prepares to redeem its Sh5 billion bond on October 2.
CIC decided to sell the land parcels after abandoning its earlier plan to build properties.
The company has said that it will continue to hold the land if it does not get attractive offers.
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