British-American Investment Announces Half Year Results

British-American Investment Ltd announced results for the half year ended 30 June 2015 with the following highlights:

• Gross earned premiums grew by 81.7 percent from KES 5.61bn in 2014 to KES 10.20bn in 2015 while net earned premiums increased by 66.4 percent from KES 5.03bn in 2014 to KES 8.37bn in 2015 following a 213.9 percent increase in reinsurance premiums paid out.

• Total revenue increased by 7.9 percent from KES 10.24bn in 2014 to KES 11.05bn in 2015 following a 38.8 percent increase in investment income from KES 1.69bn to KES 2.35bn as well as an increase in commissions earned and other income which recorded a 203.4 percent and 443.9 percent increase respectively.

• Operating expenses increased by 38.2 percent from KES 7.39bn in 2014 to KES 10.21bn in 2015. This was attributed to a 42.0 percent increase in net insurance benefits and claims payable and 81.0 percent increase in commissions payable. In addition, the company embarked on payment of interest of KES 390.00mn to bond holders arising from the KES 6.0bn bond offered in 2015.

• Profit after tax dropped by 77.3 percent from KES 2.75bn in 2014 to KES 624.56mn in 2015. The bottom line performance was significantly impacted by their equity portfolio which lost value in the current bear market. As a result, the company booked a net unrealized fair value loss of KES 842.95mn.

• Going forward, the company has plans to reduce the equity portfolio which currently accounts for 27.0 percent of Investment holdings. Assets under management grew by 78.3 percent from KES 41.5bn to 74.0bn in 2015.

• Total assets grew by 38.9 percent from KES 55.15bn in 2014 to KES 76.61 bn in 2015 while total liabilities grew by 59.9 percent to KES 55.65 in 2015. Total shareholders’ equity grew by 2.8 percent from KES 20.35bn in 2014 to KES 20.92bn in 2015.

Our View:

We expect investment income to accelerate driven by diversification to property investments as well as alternative investments. Acquisition of Real Insurance business gives the company an entry point to a wider regional network offering high premium growth potential.

Key Risk:

Exposure to market volatility through equity portfolio could negatively affect Britams’s non-realized gains from equity investments