FOR IMMEDIATE RELEASE
“CIC GROUP STANDS AS THE MOST ATTRACTIVE LISTED INSURANCE COMPANY AS PER CYTONN INVESTMENTS H1’2023 KENYA LISTED INSURANCE SECTOR REPORT”
NAIROBI, KENYA, October 27th 2023
Cytonn Investments has today released its H1’2023 Insurance Sector Report, which ranks CIC Group 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 “Sustained Growth in Earnings on the back of improved Efficiency” analysed the H1’2023 results of the listed Insurance Companies excluding Kenya Re Insurance Corporation Ltd. “Despite the constrained business environment arising from elevated inflation pressures coupled with sustained currency depreciation, the insurance sector has showcased resilience. However, the Core insurance business performance has been dwindling, mainly attributable to the high loss ratios. As of Q1’2023, loss ratios under the general insurance business increased by 4.3% points to 72.0%, from 67.7% recorded in Q1’2022, mainly attributable to 16.8% increase in claims to Kshs 21.5 bn, from Kshs 18.4 bn in Q1’2022, that outpaced the 13.2% increase in net premiums to Kshs 42.5 bn, from Kshs 37.6 bn in Q1’2022. However, the loss ratios under the Longterm insurance business eased, with the ratio declining to 62.8% as of Q1’2023, from 64.3% in Q1’2022, largely attributable to the 8.7% increase in net premiums to Kshs 34.0 bn, from Kshs 31.3 bn in Q1’2022, which outpaced the 6.3% growth in net claims to Kshs 21.4 bn, from Kshs 20.1 bn in Q1’2022. Additionally, insurance uptake in Kenya remains low with the insurance penetration coming in at 2.3% as at December 2022, 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 a steady growth in premiums as underwriters leverage on increased technology and digital distribution channels in order to improve internal efficiency and accelerate time to market.” Said Kennedy Waweru, Investments Analyst Coordinator at Cytonn Investments.
“We are of the opinion that the insurance firms should optimize their portfolio by re-evaluating their products and services to increase the sector’s growth and realize profitability. Insurers should focus on their core and profitable offerings and dispose non-core offerings, this is achievable through sale of business units considered unprofitable. We expect the insurance sector to maintain the culture of innovation achieved during the pandemic period while maintaining the customer centricity as the main focus of the sector’s operating model.” said David Musau, Investments Analyst at Cytonn Investments.
- CIC Group improved to position 1 in H1’2023 from position 5 in H1’2022 driven by an improvement in both franchise and intrinsic scores, attributable to the improvement in the expense ratio to 50.4%, from 51.1%, taking the combined ratio to 121.1%, an improvement from the 122.8% recorded in H1’2022,
- Jubilee Holdings declined to position 2 in H1’2023, from position 1 in H1’2022 mainly due to the declines in both the franchise and intrinsic scores in H1’2022, driven by the deterioration in the loss ratio to 114.5%, from 99.4% in H1’2022., taking the combined ratio to 153.0%, from the 133.0% in H1’2022,
- Britam Holdings declined to position 5 in H1’2023, from position 3 in H1’2022 mainly due to declines in both the franchise and intrinsic scores in H1’2023, driven by the deterioration in the expense ratio to 71.4%, from 48.6% in H1’2022, taking the combined ratio to 137.5%, from the 122.1% in H1’2022, and,
- Liberty declined to position 3 in H1’2023 from position 2 in H1’2022 mainly due to deterioration in both the franchise score and intrinsic value score.
The table below ranks Insurances based on franchise and intrinsic ranking which compares metrics for efficiency, growth, and profitability, among other metrics:
|
Listed Insurance Companies H1’2023 Comprehensive Ranking |
|||||
|
Insurance |
Franchise Value Score |
Intrinsic Value Score |
Weighted Score |
H1’2023 Ranking |
H1’2022 Ranking |
|
CIC Group |
1 |
3 |
2.2 |
1 |
5 |
|
Jubilee Holdings |
3 |
2 |
2.4 |
2 |
1 |
|
Liberty Holdings |
5 |
1 |
2.6 |
3 |
2 |
|
Sanlam Kenya |
2 |
4 |
3.2 |
4 |
4 |
|
Britam |
4 |
5 |
4.6 |
5 |
3 |
Table 2: Cytonn’s H1’2023 Listed Insurance Companies Earnings and Growth Metrics
|
Listed Insurance Companies H1’2023 Earnings and Growth Metrics |
||||||||
|
Insurance |
Core EPS Growth |
Insurance revenue growth |
Loss ratio |
Expense Ratio |
Combined Ratio |
ROACE |
ROaA |
ROaE |
|
Britam Holdings |
334.5% |
33.8% |
66.1% |
71.4% |
137.5% |
9.7% |
1.0% |
2.0% |
|
CIC Group |
168.2% |
19.9% |
70.6% |
50.4% |
121.1% |
23.2% |
1.4% |
7.7% |
|
Jubilee Holdings |
(47.8%) |
11.4% |
114.5% |
38.5% |
153.0% |
16.5% |
1.1% |
4.3% |
|
Liberty Holdings |
(760.0%) |
(151.2%) |
61.9% |
71.2% |
133.1% |
7.5% |
0.5% |
2.4% |
|
Sanlam Kenya |
(1794.0%) |
(8.8%) |
89.2% |
40.8% |
130.0% |
60.5% |
(0.5% |
(18.1%) |
|
Weighted Average H1'2023 |
19.8% |
9.7% |
86.6% |
54.2% |
140.8% |
15.9% |
1.0% |
3.1% |
|
H1'2022 Weighted Average |
16.0% |
1.7% |
83.4% |
43.4% |
126.8% |
10.5% |
2.2% |
2.2% |
|
*Market cap weighted as at 27/10/2023 |
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|
**Market cap weighted as at 09/06/2022 |
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The key take-outs from the above table include;
- Core EPS growth recorded a weighted growth of 19.8%, compared to a weighted growth of 16.0%, in H1’2022. The sustained growth in earnings was attributable to the improved profitability owing to the increased insurance revenue despite the tough operating environment occasioned by the elevated inflationary pressures as well as the depreciation of the Kenyan currency against the dollar,
- The Insurance revenue grew at a faster pace of 9.7% in H1’2023, compared to a growth of 1.7% in H1’2022,
- The loss ratio across the sector increased slightly to 86.6% in H1’2023 from 83.4% in H1’2022,
- The expense ratio increased to 54.2% in H1’2023, from 43.4% in H1’2022, owing to an increase in operating expenses, a sign of reduced efficiency,
- The insurance core business still remains unprofitable, with a combined ratio of 140.8% as at H1’2023, compared to 126.8% in H1’2022, and,
- On average, the insurance sector delivered a Return on Average Equity (ROaE) of 3.1%, an increase from a weighted Return on Average Equity of 2.2% in H1’2022.
Source: Cytonn Research
Notes to the Editor:
Cytonn Investments is an independent investment management firm, with offices in Nairobi - Kenya and D.C. Metro - U.S. We are primarily focused on offering alternative investment solutions to individual high net-worth investors, global and institutional investors and Kenyans in the diaspora interested in the high-growth East-African region. We currently have over Kshs 82.0 billion of investments and projects under mandate, primarily in real estate.
Cytonn Real Estate is Cytonn’s development affiliate, which is focused on developing institutional grade real estate targeted at specific institutional, high net-worth and Diaspora investors. Collective, Cytonn Investments and Cytonn Real Estate manage over Kshs 82.0 billion of real estate projects.
For more information, kindly contact:
Lee M. Gitau
Brand and Communications
+254 (724) 442 004
Email: lmgitau@cytonn.com
