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Britam's net profit drops to Sh995 mn on higher insurance claims

Britam Group MD Benson Wairegi with businessman Jimnah Mbaru. FILE PHOTO | NMG
Britam Group MD Benson Wairegi with businessman Jimnah Mbaru. FILE PHOTO | NMG 

Financial services firm Britam Holdings' #ticker:BRIT net earnings for the half-year period ended June 30 fell 44 per cent on increased claims payments, the NSE-listed firm reported Thursday.

Net profit dropped to Sh995.09 million from Sh1.78 billion a year earlier, reflecting the impact of last year's switch to a new methodology of accounting for liabilities.

The Insurance Regulatory Authority (IRA) now requires life insurance firms to use gross premiums valuation (GPV) when providing for liabilities in their books rather than net premiums valuation (GPV) previously.

That had gifted Britam with Sh1.5 billion in savings on claims, which was factored in half-year net profit for 2016.

“In 2016, we released a lot of reserves after we switched to GPV. We don’t have a lot of that year. It has normalised and you can see that in this year’s profitability number,” group managing director Benson Wairegi told investors Thursday.

Rise in claims

The firm booked Sh680 million more in gross premiums in the six-month period to Sh11.69 billion from Sh11.01 billion in the same period a year ago.

Net claims, however, rose 84.76 per cent to Sh6.67 billion, Britam reported, eating into net profit for the period under review.

Operating expenses grew at a slower pace of 10.48 per cent to Sh3.90 billion compared to a growth of 27.60 per cent in the January-June period of 2016.

“We have started to realise gains from the implementation of the new (Go for Gold” 2016 – 2020) strategy, through the automation of key processes across all our business lines in life Assurance, general insurance, and asset management,” Mr Wairegi said.