Total Insurance Industry Profitability Remains Flat Year-on-Year -Cytonn Report

A report from Cytonn Investments states that IRA had released their H1’2016 numbers for the insurance industry showing that total gross insurance premiums registered a year-on-year growth of 8.6 percent to Kshs 106.0 bn from Kshs 97.7 bn in H1’2015, compared to 15.3 percent increase a year earlier.

The Key highlights of the performance from H1’2015 to H1’2016 include;

• Claims incurred and benefits paid increased by 16.3 percent to Kshs 50.5 bn from Kshs 43.4 bn, outpacing net written premium growth, which grew by 10.4 percent to Kshs 87.0 bn from Kshs 78.8 bn, bringing the loss ratio to 58.0 percent percentup from 55.1 percent. The higher growth in claims is a pointer to the squeezed underwriting margins for the insurance companies. Kenya’s insurance industry remains largely driven by non-life business with non-life premiums contributing 66.2 percent of total premiums compared to the global scenario where non-life premiums contribute 45.2 percent.
• Total industry profitability remained flat year-on-year, with industry profit after tax at Kshs 6.8 bn driven by a 1.2 percent decline in general business profitability
• Total assets held by the insurance sector increased by 10.1 percent to Kshs 501.6 bn from Kshs 455.5 bn. Below, please see a summary of the performance:

According to a report from the company, the H1’2016 performance was in line with their view in their H1’2016 Insurance Report that there is a need to;

1. diversify and tailor-make products to cater for all income brackets,
2. support the uptake of life insurance through market awareness to grow the low penetration of 3.0 percent compared to South Africa at 14.0 percent, and
3. increase regulation in the industry to be in line with the riskiness of the business and to reduce fraud in the industry.