Kenya H1'2019 Listed Insurance Report
Staff Writer  |  Nov 18, 2019
       

Cytonn Investments released their H1’2019 Insurance Sector Review, which highlighted the performance of the listed insurers in Kenya following the release of the H1’2019 financial results. The report themed “Regulation and Consolidation to Drive Attractiveness”, focused on the performance of listed insurers, as well as the main trends in the sector, and areas that will be crucial for growth and stability going forward, seek


ing to give a view on which insurance firms are the most attractive and stable for investment. The report ranked companies based on franchise rankings, which compares metrics for efficiency and growth, and also from a future growth perspective. These rankings are combined to give the comprehensive score. The comprehensive score rankings are as below: Cytonn Listed Insurance Companies H1’2019 Comprehensive Ranking Insurance Company Franchise Value Total Score Intrinsic Value Total Score Weighted Score
report ranked companies based on franchise rankings, which compares metrics for efficiency and growth, and also from a future growth perspective. These rankings are combined to give the comprehensive score. The comprehensive score rankings are as below: Cytonn Listed Insurance Companies H1’2019 Comprehensive Ranking Insurance Company Franchise Value Total Score Intrinsic Value Total Score Weighted Score Rank Jubilee Holdings 9 1 4.2 1 Sanlam Kenya 13 2 6.4 2 Liberty Holdings 17 3 8.6 3 Britam Holdings 16 5 9.4 4 CIC Group 20 4 10.4 5 Source: Cytonn Research Jubilee Holdings took the top position in the rankings, from a franchise value and future growth opportunity perspective, having a better capacity to generate profits from its core business. Sanlam Kenya took 2nd Position, with Liberty & Britam Holdings coming in 3rd and 4th Position, respectively, with weaker franchise scores, as a result of lower returns on assets and equity for Britam Holdings and high claims and expense ratios for Liberty. CIC came in 5th Position on the back of weak franchise rankings scores. Performance of the listed insurance companies in H1’2019 saw, the average earnings increase by 3.8% points in H1’2019 to 3.2%, from (0.6%) in H1’2018. The insurance core business still remains unprofitable, indicated by high loss and expense ratios. On average, the insurance sector has delivered a Return on Average Equity of 5.7%, an increase from 3.9% in H1’2018. On the key trends that shaped performance, the last half of the year has seen insurance companies increasingly take advantage of digital transformation to drive growth and increase insurance penetration. Insurance companies used innovation to automate manual processes with mobile phones offering a new way of distributing insurance products to consumers who are not online and cannot be served through traditional distribution methods such as agents. On the regulatory front, to ensure that the sector benefits from a globally competitive financial services sector, IFRS 9 adoption, which sets out the requirements for recognizing and measuring financial assets will enable insurance companies develop appropriate models for their customer debtors and develop plans that will help them lower their credit risk in the future, while IFRS 17 is expected to give better information on profitability and allow for better analysis of core performance for the entities. Going forward, we are of the view that insurance companies have a lot they can do in order to register considerable growth and improve the level of penetration in the country with technology and innovation capabilities set to continue being the key anchors of growth for Sub-Saharan Africa in the coming years and thus it would be a great move for the sector to continue adopting mobile and online underwriting platforms enhancing convenience to customers in taking insurance policies The report is available online: (here)

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