Cytonn Ranks Jubilee The Most Attractive Listed Insurance Company

By Cytonn Investments / Published June 8, 2022 | 10:09 am




KEY POINTS

Britam Holdings improved to position 3 from position 5 in FY’2020 mainly due to an improvement in its loss ratio to 69.4 percent in FY’2021, from 85.7 percent in FY’2020.




KEY TAKEAWAYS


The Net Premiums grew by a weighted average of 8.9 percent in FY’2021 which was faster than the 1.6 percent growth in FY’2020 mainly attributable to the continued economic recovery from the economic shocks occasioned by the COVID-19 pandemic.


Cytonn Investments has today released its FY’2021 Insurance Sector Report, which ranks Jubilee Holdings as the most attractive insurance company in Kenya, supported by a strong franchise value and intrinsic value score.

The franchise score measures the broad and comprehensive business strength of Insurance companies across 8 different metrics, while the intrinsic score measures the investment return potential.

The report themed “High Loss Ratios Continues to Impair Insurance Sector’s Earnings” analyzed the FY’2021 results of the listed Insurance Companies excluding Kenya Re-Insurance Corporation Ltd.

The Net Premiums grew by a weighted average of 8.9 percent in FY’2021 which was faster than the 1.6 percent growth in FY’2020 mainly attributable to the continued economic recovery from the economic shocks occasioned by the COVID-19 pandemic.

Loss and Expense Ratios slightly eased, and consequently, the weighted average Combined Ratio improved marginally to 147.4 percent in FY’2021, from 151.1 percent in FY’2020.

Insurance uptake in Kenya remains low with the insurance penetration coming in at 2.3 percent as of December 2021, mainly attributable to the fact that insurance is still seen as a luxury and is mostly taken when it is necessary or a regulatory requirement.

“We expect steady growth in premiums as underwriters come up with products suited to the planning for unforeseen events like COVID-19, mainly in the medical and life businesses. Claims are also expected to grow aggressively with full resumption of economic activities, particularly due to an expected increase in motor claims as travel restrictions ease and medical claims which have been on a constant increase,” said Justin N Mwangi, Senior Investments Analyst at Cytonn Investments.

Cytonn is of the opinion that insurers have to aggressively look into portfolio optimization by re-evaluating their products and services in order to sustain post-pandemic growth and remain profitable. Insurers will have to focus on their core and profitable offerings and dispose of non-core offerings.

“We expect this portfolio optimization to extend into offloading or reducing stake in non-profitable subsidiaries and associates. We further expect the sector to continue to leverage on the adaptation of technology (Insurtech) and personalization of insurance policies in order to increase uptake, in a bid to increase the paltry insurance penetration of 2.3 percent and to ensure high customer penetration,” said Kevin Karobia, Investments Analyst at Cytonn Investments.

Jubilee Holdings improved to position 1 in FY’2021 from position 2 in FY’2020 mainly due to the improvement in the franchise score, with the expense ratio declining to 41.3 percent in FY’2021, from 56.3 percent in FY’2020. As a result, the combined ratio also declined to 149.7 percent in FY’2021, from 157.6 percent in FY’2020.

Liberty declined to position 2 in FY’2021 from position 1 in FY’2020 mainly due to declines in the franchise score in FY’2021, driven by the deterioration in the loss ratio to 78.3 percent, from 55.2 percent in FY’2020 while the expense ratio increased to 79.3 percent, from 45.9 percent in FY’2020.

Britam Holdings improved to position 3 from position 5 in FY’2020 mainly due to an improvement in its loss ratio to 69.4 percent in FY’2021, from 85.7 percent in FY’2020.

Sanlam declined to position 4 in FY’2020 from position 3 in FY’2020 mainly due to deterioration in the franchise score, driven by deterioration in loss and combined ratios to 93.3 percent and 139.0 percent, from 83.7 and 137.9 percent, respectively.

CIC Group declined to position 5 in FY’2021, from position 4 in FY’2020, on the back of weaker franchise and intrinsic scores driven by deterioration of its loss ratio to 71.6 percent in FY’2021, from 71.4 percent in FY’2020, and combined ratio to 123.8 percent in FY’2021, from 121.5 percent in FY’2020.






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