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Jubilee Holdings Most Attractive Insurance Company In Kenya – Report

BY Cytonn Investments · October 17, 2022 03:10 pm

KEY POINTS

Loss and Expense Ratios across the sector eased, and consequently, the weighted average Combined Ratio improved to 126.8% in H1’2022, from 146.6% in H1’2021.

KEY TAKEAWAYS

In the period under review, the net claims for the long-term insurance business increased by 4.7% to Kshs 41.3 bn, from Kshs 39.4 bn in H1’2021.

Similarly, net claims for the general business also increased by 14.5% to Kshs 37.1 bn, from Kshs 32.4 bn in H1’2022, driven by a 23.4% growth in medical claims to Kshs 15.5 bn in H1’2022, from Kshs 12.5 bn in H1’2021.

Cytonn Investments has today released its H1’2022 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 “Improved Efficiency Cushions Insurance Sector’s Core Earnings Growth” analyzed the H1’2022 results of the listed Insurance Companies excluding Kenya Re-Insurance Corporation Ltd.

“Despite the constrained business environment arising from elevated inflation and global supply chain constraints, the insurance sector showcased resilience and recorded a 13.2% growth in gross premiums to Kshs 163.1 bn in H1’2022, from Kshs 144.0 bn in H1’2021.

Loss and Expense Ratios across the sector eased, and consequently, the weighted average Combined Ratio improved to 126.8% in H1’2022, from 146.6% in H1’2021.

However, insurance uptake in Kenya remains low with the insurance penetration coming in at 2.2% 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.

In the period under review, the net claims for the long-term insurance business increased by 4.7% to Kshs 41.3 bn, from Kshs 39.4 bn in H1’2021.

Similarly, net claims for the general business also increased by 14.5% to Kshs 37.1 bn, from Kshs 32.4 bn in H1’2022, driven by a 23.4% growth in medical claims to Kshs 15.5 bn in H1’2022, from Kshs 12.5 bn in H1’2021.

We expect steady growth in premiums as underwriters leverage increased technology and digital distribution channels to target a larger reach. Claims are expected to grow in line with increased economic activity and insurers should leverage modern technology such as Artificial Intelligence to reduce insurance fraud and fictitious claims.” said Kevin Karobia, Investments Analyst at Cytonn Investments.

“We are of the opinion that It is prudent for insurance firms to optimize their portfolio by re-evaluating their products and services to sustain the sector’s recovery and realize profitability. Insurers should focus on their core and profitable offerings and dispose of non-core offerings; this is achievable through the sale of business units considered unprofitable. The underwriters should also develop strategies to further lower the high expense ratios which are wearing down the premium growth.” said Christopher Aura, Investments Analyst at Cytonn Investments.

Jubilee Holdings maintained position 1 in H1’2022 as was in FY’2021 mainly due to an improvement in the franchise scores as well as a high intrinsic score in H1’2022, driven by a reduction in expense ratio to 33.7% in H1’2022, from 41.3% in FY’2021.

As a result, the combined ratio also improved to 133.0% in H1’2022, from 149.7% in FY’2021. Liberty maintained position 2 in H1’2022 as was in FY’2021 mainly due to an improvement in the franchise score in H1’2022, driven by the improvement in the loss ratio to 60.6%, from 78.3% in FY’2021.

CIC Group improved to position 3 in H1’2022, from position 5 in FY’2021, on the back of improved franchise and intrinsic scores driven by the improvement of its loss ratio to 68.8% in H1’2022, from 71.6% in FY’2021, and 2 combined ratios to 118.4% in H1’2022, from 123.8% in FY’2021.

Britam Holdings declined to position 4 in H1’2022 from position 3 in FY’2021 driven by a weak franchise score attributable to the deterioration in the loss ratio to 73.5%, from 66.9%.

However, the combined ratio improved to 151.5% from 164.2% in FY’2021. Sanlam declined to position 5 in H1’2022 from position 4 in FY’2021 mainly due to deterioration in both the franchise score and intrinsic value score.

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