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Market News

Insurance profits double on higher investment income

From left: Association of Kenya Insurers
From left: Association of Kenya Insurers Executive Director Tom Gichuhi, AIG Insurance Managing Director Catherine Igathe and ZEP RE Managing Director Hope Murera during the East Africa Insure Tech Forum at the Serena Hotel in Nairobi on September 19. PHOTO | DIANA NGILA  

Insurance companies doubled profits to Sh6.1 billion in the nine months to September from Sh3 billion last year reaping from higher penetration and prudent investment of the billions in assets.

Latest industry data shows the companies increased premium collection by up to Sh10.6 billion from Sh164.2 billion last year to Sh174.9 billion by September.

Although claims in general insurance grew 2.4 per cent to Sh44.9 billion, benefits paid out by long-term business went down 7.2 per cent to Sh35.9 billion easing expenses of the companies.

This left companies with Sh577 billion invested in government paper, real estate, shares at the Nairobi Securities Exchange and term deposits.

“Investments in income-generating assets grew by 13.0 per cent from Sh510.44 billion reported at the end of Q3 2018 to Sh577.04 billion a year later.

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“Asset classes with the highest proportions were; government securities (61.5 per cent), investment property (14.5 per cent), term deposits (9.5 per cent) and listed equities (6.5 per cent),” Insurance Regulatory Authority third-quarter report says.

Insurance companies had concentrated money in government to fend off losses at the Nairobi bourse following the bear run that sent the NSE to record lows.

However, with the lifting of the rate cap and activity resuming at the NSE, insurance firms have the option for alternative investments even as the value of government debt rises promising better returns.

Long-term insurance money held by insurance stood at a total of Sh401.52 billion, an increase of 16.9 per cent compared to Sh343.53 billion as at end of Q3 2018. Out of this Sh276.33 billion had been invested in government securities. For general insurance, investment in quarter three 2019 amounted to Sh124.65 billion indicating an increase of 1.5 per cent from Sh122.85 billion reported in Q3 2018 with almost half-45.5 per cent put in government debt.

Pressure by the regulator to have premiums remitted on time has seen brokers and agents clear Sh740 million pending payments reducing outstanding premiums from Sh43.2 billion to Sh42.5 billion to buck the trend that has been growing over the last couple of years.

The outstanding premiums have escalated over the years from Sh26 billion in 2014, Sh29 billion in 2015, Sh34.5 billion in 2016, Sh37 billion in 2017 and Sh43 billion in 2018. Against the policy of cash-and-carry, this is becoming a concern for covers that are being contested on premiums.

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