Britam's profit surges by over Sh1b despite economic gloom

Britam’s Finance Director Charles Njuguna,  group MD and CEO Tom Gitogo and Chairman Kuria Muchiru after the launch opf their financial results. [David Gichuru, Standard]

Britam Holdings' net earnings surged by a record Sh1.3 billion in the first six months of the year, bucking a trend of depressed performance by various companies amid economic uncertainty and gloom.

The financial services firm reported a 335 per cent growth in net profit for the six months to June to Sh1.64 billion from Sh377.9 million posted a year earlier.

A sluggish economic growth has sapped the profitability of Kenya’s leading companies amid mounting economic uncertainty.

Britam’s performance also comes after years of corporate restructuring and changes in the corner office, which saw several executives leave the giant insurer.

Britam said its gross earned premiums and fund management fees grew by more than a third to Sh20.7 billion. 

Its insurance services revenue was up 34 per cent to Sh16.6 billion, while investment income went up 28 per cent to Sh7.1 billion.

“The encouraging performance has been driven by growth in top-line revenue as well as improved investment income that continues to cushion the business from fair-value losses, resulting in an improvement in profitability,” said Group Chief Executive Tom Gitogo at an investor briefing in Nairobi yesterday.

“The total gross earned premium and management fees in the six-month period was up 31 per cent to Sh20.7 billion compared to the Sh15.8 billion for the same six-month period in 2022.”

He added that the firm's businesses in the region continued to increase their contribution to the Group’s earnings, reducing reliance on Kenya, which has been its mainstay.

International general insurance generated 23 per cent of the Group's total gross earned premiums.

“We are confident of the growth and performance trend that Britam has achieved, supported by its subsidiaries in Kenya and in the region. The business continues to grow its revenues while operating costs grow at a lower rate than the topline growth,” said Mr Gitogo.

The improved insurance underwriting performance was driven mainly by the increased motor business and continued strong performance from the life insurance business. 

The growth in the investment portfolio was driven by revenue growth and the ongoing realignment of the portfolio to grow and stabilise yields. Investment income grew by 28 per cent to Sh7.1 billion compared to Sh5.5 billion recorded in the same period of 2022.

“Continued focus on customer-centric transformation continues to grow our customer numbers and drive the uptake of our products, especially through our emerging market consumers, partnerships and digital channels,” said Mr Gitogo

The firm said the performance came on the back of a challenging macroeconomic environment.

Despite the higher earnings, Britam did not recommend the payment of an interim dividend for the half-year period.

The company said this was the first set of financial results under the IFRS 17 Accounting Standard.

It fully implemented the new reporting standard in January this year.

It, however, added the implementation of the new standard is not expected to significantly impact its business operations, strategy and other areas but rather the Group’s reporting and emergence of profits, especially from its long-term insurance contracts. 

The firm said in line with the new insurance accounting standard IFRS 17, the insurance results now include a portion of the unearned profit (contractual service margin) from the long-term business that is now reflected in the statement of profit or loss.

The improved insurance underwriting performance was driven mainly by the increased motor business and continued strong performance from the life insurance business. 

However, the Group’s profitability continues to be negatively impacted by fair-value losses on investment assets, especially on its fixed-income instruments.

This is attributed to the challenging macroeconomic environment which has been characterised by rising yields.