Higher claims trim Kenya Re’s profits

Higher claims from insured businesses in the health and agriculture sectors weighed down Kenya Reinsurance’s (Kenya Re) profitability last year.

The government-affiliated reinsurer has reported a 36 per cent decline in net profit from Sh3.5 billion in 2017 to Sh2.2 billion in the 12 months to December last year.

Managing Director Jadiah Mwarania said at an investor briefing in Nairobi yesterday lower valuations on the firm’s real estate property, forex losses in South Sudan and regulatory changes that took away business from some of its subsidiaries also contributed to the profit decline.

“We had a 65 per cent drop in revenues from ZepRe which is not listed, so we can only speculate that it came from an impact on claims that took away a big chunk. We are not privy to their accounts, but from our 20 per cent investment there, the drop was fairly big,” said Mwarania.

The insurer of insurance companies, which gets 50 per cent of premiums from Kenya, 30 per cent from Africa and 20 per cent from Asia and the Middle East, said the business was also hurt by mergers and acquisitions which impacted the size and the numbers of premiums paid by clients.

Domestication of reinsurance in Zambia, Ghana India and Nigeria meant local companies got more premiums in the market at the expense of Kenya Re.

Forex losses in South Sudan, where the pound to the Kenyan shilling declined from 15.4 units to 2.24 units, also hurt regional business by about Sh185.7 million.

Meanwhile, occupancy in the property owned by the reinsurer in the local market meant lower valuations of about Sh274 million while a Sh23 million land in Shanzu meant for sale was removed from the company’s books on the auditors’ advice.

Provisions for bad credit also increased by seven per cent to Sh427 million, up from Sh395 million previously.