Kenya Re sounds warning on profit

Kenya Re MD Jadiah Mwarania during an interview at Re-insurances plaza. [Edward Kiplimo/Standard]

Kenya Reinsurance Corporation (Kenya Re) has issued a profit warning on account of higher claims and impairment of assets meant for sale.

The company yesterday warned forex losses in some of its markets an unexpected reduction in income from associates is expected to cut revenues drastically.

The reinsurer’s half-year profits declined from Sh1.6 billion in June 2017 to Sh1.2 billion in June last year as it faced higher claims in the latter part of the year, including claims by two underwriters for the dusitD2 terror attack.

“This announcement is based solely on a preliminary assessment of corporations expected financial results of 2018,” said Company Secretary Charles Kariuki in a statement.

Kenya Re has joined the long list of companies that have issued profit warnings this year.

The others are Unga Group, Crown Paints, UAP, Britam, Sameer Africa, Kenya Power, Bamburi Cement, Mumias Sugar and Sanlam.

The reinsurer, which offers cover to more than 160 insurance companies spread out in over 45 countries in Africa, the Middle East and Asia, may have stretched its balance sheet on unforeseeable risks.

It has also been having challenges with its management following the termination and subsequent reinstatement of its Managing Director Jadiah Mwarania.

Mr Mwarania was reinstated in July last year by the Employment and Labour Relations Court.

The court further restrained Kenya Re’s board of directors from interfering or sabotaging him once he resumed office.

The board said it would appeal the case, but Mwarania remains in office to date.

The wrangles exposed the Government’s interference in the company’s business after the MD dragged the name of Joseph Kinyua – the then Chief of Staff and Head of Public Service – in the mess regarding appointments to the board.

Analysts say that despite having a strong business, the firm has been clouded by poor management and government control, making it unattractive to the market.

Genghis Capital head of research Joy D’Souza said the reinsurer has been trading below book value for years due to lack of strategy, poor management and could only be unlocked if the Government would sell it.