Kenya Reinsurance Corporation (Kenya Re) #ticker:KNRE has issued a profit warning for the full financial year ended December 2018 citing higher claims, forex losses, lower income and impairment of assets.
The Nairobi Securities Exchange (NSE)-listed re-insurer now expects to post at least 25 per cent lower earnings for the year ending December 2018 than what it reported the previous year.
“The expected decrease is mainly attributable to high claims reserves in the year, forex losses due to currency devaluations in some of our markets, unexpected reduction in income from (an) associate and impairment of an asset held for sale,” said the firm in a cautionary statement.
Kenya Re posted an 8.8 per cent rise in after-tax profit in the year ended December 2017, which the listed re-insurer attributed to an increase in its gross written premiums and investment income.
Net profit stood at Sh3.5 billion in the period compared with Sh3.2 billion the year before.
The firm’s net earned premiums during the period grew eight per cent to Sh13.7 billion as the business reaped from expansion into new markets.
The re-insurer, which offers covers to more than 160 insurance companies spread out in over 45 countries in Africa, Middle East and Asia said earlier it is eyeing new markets across the globe in the face of stiffening competition.
Chief executive officer Jadiah Mwarania said the re-insurer is looking to open regional offices in new markets besides expanding the company's line of insurance products where it already operates.
Mr Mwarania noted that several countries have domesticated their reinsurance markets or set up State-owned national reinsurance companies that are eating into its business.
“When they form these national reinsurers it means they get compulsory cessions which reduces the volume of business available for foreign reinsurers,” Mr Mwarania said in August when the firm posted a 24.19 per cent drop in net profit in the half year ended June 2018, weighed down by a decline in its gross written premiums.
Its net profit stood at Sh1.22 billion in the period compared with Sh1.62 billion the year before.
Kenya Re draws most of its gross premiums from the Kenyan market where it will continue to enjoy mandatory cession of 20 per cent until 2020.
The guaranteed cessions to the company are backed by the Kenyan government which owns 60 per cent of the reinsurer, with the remaining shares held by the investing public at the Nairobi bourse.
The re-insurer was in March last year in the eye of a storm after it sent home Mr Mwarania and replaced him with Michael Mbeshi, the reinsurer’s property management general manager, in an acting capacity.
Mr Mwarania went to court to protest the sacking and was re-instated by the Employment and Labour Relations Court with Kenya-Re appealing the decision.