Insurance Companies Post Declining Returns Three Years in a Row

According to the data released by the Watchdog, returns on equity (ROE) stood at 7.91 percent for the general business compared to 12.02 percent in 2015 and 18.23 percent in 2014.

This has seen insurance companies last year post declining returns to shareholders for the third year in a row as new rules on valuation and tough operating environment hit the industry.

An insurance consultant with Ngaru & Associates, Isaac Ngaru said in an interview that insurance firms adjusted to the actuarial calculations. He further noted that general insurers also faced a tough time last year with firms undercutting each other.  There was considerable undercutting in the industry which wreaked havoc on the rates, he added.

He projected a pretty tough year for the business world in the country as Kenyans hold on to their money considering this is an election year.

In 2016, insurance premiums registered a growth of 12.3 percent which was largely driven by growth in the life sector. According to Insurance Regulatory Authority this was an accelerated growth compared to 9.9 percent witnessed in the previous year. The life sector grew by 19.3 percent compared to 8.5 percent growth in non-life segment.

Income generating assets formed 80.6 per cent (Sh423.31 billion) of the total assets.

The insurance industry asset base was Sh525.25 billion as at the end of December 2016. This was a growth of 10.1 per cent from Sh477.22 billion held as at the end of the previous year.

The general insurance business underwriters incurred claims amounting to Sh53.70 billion in 2016, an increase of 9.3 per cent compared to Sh49.13 billion incurred during the previous year.

The total insurance industry’s liabilities grew by 10.3 per cent to Sh384.96 billion from Sh349.05 billion registered in 2015.

This represents a decline of 4.3 per cent during this period. The gross premium income reported under life reinsurance business amounted to Sh2.39 billion while that under general reinsurance business was Sh15.27 billion.

Reinsurance premiums have been shrinking against the backdrop of declining reinsurance activity in the market. The premiums reported by reinsurers by the end of 2016 amounted to Sh17.66 billion compared to Sh18.44 billion reported by the end of 2015.

Related: Unga Group issues Profit Warning for its Full Year 2016 Results

Written by Amina Martha.