NAIROBI: Listed insurance companies have registered an 11.9 per cent dip in profits after tax in the first half of this year.
According to a half-year report on the insurance sector prepared by Cytonn Investments Management, the performance was a result of a high combined ratio of 127.3 per cent.
Combined ratios are measures of profitability used by insurance companies to indicate how well they are performing in their daily operations, and are calculated by taking the sum of incurred losses and expenses and dividing this by earned premiums.
Improve penetration
“The growth in the sector was negative in the first half,” said Maurice Oduor, Cytonn’s investment manager.
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“While the sector is struggling, we are of the view that insurance companies have a lot they can do to register considerable growth and improve penetration in the country.
“Foremost, we expect more synergy between banks and insurance companies to introduce bancassurance, as well as the integration of mobile money payments to allow for policy payments through this increasingly preferred transaction medium.”
Despite the insurance sector having many players, with 51 insurance firms serving 47 million people, it still has a low penetration of 3 per cent of the GDP. Insurance as a product is yet to be viewed as a necessity in Kenya, especially when compared to other financial services such as banking.
The report notes that the country’s middle class with its growing disposable income will be one of the main drivers of growth in the sector. This is because the demand for insurance products and services is expected to rise in tandem with increased spending.
For instance, the growth in car importation has translated into higher demand for motor vehicle insurance.
Kenya Reinsurance Corporation and CIC Insurance Group emerged as the most attractive insurance companies in the first half of this year. Both companies were ranked highly for their potential to give returns and for their financial health.
