Insurance Regulatory Authority (IRA) released their Q1’17 numbers for the insurance industry with the market recording growth in total gross insurance premiums by 14.9 percent y/y to 67.2 billion shillings from 58.5 billion shillings in Q1’16.
The operating revenue grew by 9.7 percent to 44.6 billion shillings from 40.6 billion shillings, driven by net premium income, which grew by 14.1 percent to 45.5 billion shillings from 39.8 billion shillings.
Just as is the case with most African countries with low insurance penetration rates, the non-life segment remained dominant contributing 66.9 percent (44.9 billion shillings), while long-term business contributed 33.1 percent (22.3 billion shillings) of the total premiums during the period.
Operating expenses grew by 7.1 percent to 40.7 billion shillings in Q1’17 driven by a number of issues including a 6.4 percent increase in claims incurred and benefits paid to 26.6 billion shillings from 25.0 billion shillings, and an increase of 8.4 percent in commissions and management expenses to 14.1 billion shillings from 13.0 billion shillings.
The slower growth in claims compared to premiums led to a decline in loss ratio to 58.5 percent from 62.7 percent. This coupled with the 8.4 percent increase in commissions and management expenses led to the combined ratio declining to 89.5 percent from 95.4 percent.
Total industry net profitability rose by 56.6 percent to 2.8 billion shillings from 1.8 billion shillings driven by growth in life business profitability to 1.2 billion shillings from a loss of 0.3 billion shillings in Q1’16. The increase in profitability was also supported by a 14.1 percent increase in gross premiums to 67.2 billion shillings from 58.5 billion shillings.
Total assets held by the insurance sector increased by 9.8 percent to 547.4 billion shillings from 498.5 billion shillings in Q1’16 driven by an 9.5 percent growth in investments to 436.5 billion shillings from 398.9 billion shillings.
Shareholders’ funds on the other hand grew by 6.6 percent to 138.6 billion shillings from 130.1 billion shillings in Q1’16 which was attributed to capital restructuring following the changes in regulatory capital requirements.
According to Cytonn Investments, there is expected increased product innovation and operational efficiency to drive profitability and thus growth of the sector amidst the heightened regulation. Adding that the Insurance Regulatory Authority (IRA) is at the forefront of this initiative, pushing for the observance of prudential guidelines, better corporate governance of insurance companies, increased transparency in financial reporting, and use of a risk-based approach to capitalization, with varying risk charges on respective investment options.
Vera Shawiza is Soko Directory’s in-house journalist. Her zealous nature ensures that sufficient and relevant content is generated for the Soko Directory website and sourcing information from clients is easy as smooth sailing.Vera can be reached at: (020) 528 0222
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