FOR IMMEDIATE RELEASE
“JUBILEE HOLDINGS REMAINS THE MOST ATTRACTIVE LISTED INSURANCE COMPANY AS PER CYTONN INVESTMENTS FY’2022 KENYA LISTED INSURANCE SECTOR REPORT”
NAIROBI, KENYA, June 12th 2023
Cytonn Investments has today released its FY’2022 Insurance Sector Report, which ranks Jubilee Holdings as Kenya's most attractive insurance company, supported by a strong franchise value and intrinsic value score. The franchise score measures insurance companies' broad and comprehensive business strength 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 FY’2022 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. In FY’2022, loss ratios under the long-term insurance business increased by 3.9% points to 53.2%, from 49.3% recorded in FY’2021, mainly attributable to a 21.4% increase in claims to Kshs 68.5 bn, from Kshs 56.4 bn in FY’2021, that outpaced the 12.4% increase in net premiums to Kshs 128.8 bn, from Kshs 114.6 bn in FY’2021. However, the loss ratios under the general insurance business eased, with the ratio declining to 64.6%, from 68.9% in FY’2021, largely attributable to the 18.5% increase in net premiums to Kshs 120.1 bn, from Kshs 101.4 bn in FY’2021, which outpaced the 11.2% growth in net claims to Kshs 77.6 bn, from Kshs 69.8 bn in FY’2021. 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 Sang Gideon, 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 of non-core offerings, achievable through the sale of unprofitable business units. We expect the insurance sector to maintain the culture of innovation achieved during the pandemic period while maintaining customer centricity as the main focus of the sector’s operating model.” said Samuel Ochineg, Investments Analyst at Cytonn Investments.
- Jubilee Holdings maintained position 1 in FY’2022 as was in FY’2021 mainly due to the strong franchise and intrinsic scores in FY’2022, driven by a reduction in expense ratio to 38.5% in FY’2022 from 41.3% in FY’2021. However, the combined ratio deteriorated slightly to 153.0% in FY’2022 from 149.7% in FY’2021,
- CIC Group improved to position 2 in FY’2022 from position 5 in FY’2021 driven by an improvement in both franchise and intrinsic scores, attributable to the improvement in the expense ratio to 50.4%, from 52.2%, taking the combined ratio to 121.0%, an improvement from the 123.8% recorded in FY’2021,
- Britam Holdings declined to position 5 in FY’2022 from position 3 in FY’2021 mainly due to declines in both the franchise and intrinsic scores in FY’2022, driven by the deterioration in the loss ratio to 71.4% from 69.4% in FY’2021. However, the combined ratio improved to 137.4%, from the 151.5% in FY’2021, and,
- Liberty declined to position 3 in FY’2022 from position 2 in FY’2021, mainly due to deterioration in both the franchise and intrinsic value scores.
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 FY’2022 Comprehensive Ranking |
|||||
|
Insurance |
Franchise Value Score |
Intrinsic Value Score |
Weighted Score |
FY’2022 Ranking |
FY'2021 Ranking |
|
Jubilee Holdings |
3 |
1 |
1.8 |
1 |
1 |
|
CIC Group |
1 |
3 |
2.2 |
2 |
5 |
|
Liberty Holdings |
4 |
2 |
2.8 |
3 |
2 |
|
Sanlam Kenya |
2 |
4 |
3.2 |
4 |
4 |
|
Britam |
5 |
5 |
5 |
5 |
3 |
Table 2: Cytonn’s FY’2022 Listed Insurance Companies Earnings and Growth Metrics
|
Listed Insurance Companies FY’2022 Earnings and Growth Metrics |
||||||||
|
Insurance |
Core EPS Growth |
Net Premium growth |
Claims growth |
Loss Ratio |
Expense Ratio |
Combined Ratio |
ROaE |
ROaA |
|
Britam |
962.1% |
2.4% |
5.3% |
71.4% |
66.1% |
137.5% |
2.0% |
0.5% |
|
Liberty |
362.9% |
9.4% |
(13.5%) |
61.9% |
71.2% |
133.1% |
4.2% |
0.9% |
|
CIC |
63.6% |
18.8% |
10.8% |
70.6% |
50.4% |
121.0% |
3.8% |
2.5% |
|
Jubilee Holdings |
(3.8%) |
(5.9%) |
(0.7%) |
114.5% |
38.5% |
153.0% |
14.5% |
4.0% |
|
Sanlam |
(90.0%) |
(11.1%) |
(15.0%) |
89.2% |
40.8% |
130.0% |
(8.7%) |
(0.2%) |
|
*FY'2022 Weighted Average |
377.4% |
1.6% |
1.9% |
88.1% |
52.5% |
140.6% |
7.0% |
2.2% |
|
FY'2021 Weighted Average |
89.2% |
8.9% |
11.9% |
87.9% |
59.5% |
147.4% |
6.6% |
2.1% |
|
*Market cap weighted as at 09/06/2023 |
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|
**Market cap weighted as at 03/06/2022 |
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The key take-outs from the above table include;
- Core EPS growth recorded a weighted growth of 377.4%, compared to a weighted growth of 89.2%, in FY’2021. The sustained growth in earnings was attributable to increased premiums during the period following continued recovery by the sector from the impacts of the COVID-19 pandemic, coupled with higher yields from government papers;
- Britam recorded a significant growth of 962.1% in their Core Earnings Per Share in FY’2022 compared to a growth of 100.8% recorded in FY’2021. A 2.4% increase in net mainly drove the performance earned premiums to Kshs 26.3 bn, from Kshs 25.7 bn recorded in FY’2021, coupled with a 7.1% decline in total operating expenses to Kshs 36.2 bn, from Kshs 38.9 bn recorded in FY’2021,
- Similarly, Liberty’s Core Earnings Per Share increased significantly by 362.9%% in FY’2022 compared to a decline of 87.9% recorded in FY’2021. A 9.4% increase in net drove the performance during the period under review earned premiums to Kshs 7.4 bn, from Kshs 6.7 bn recorded in FY’2021, coupled with a 13.5% decline in net insurance benefits and claims to Kshs 4.6 bn, from Kshs 5.3 bn recorded in FY’2021, and,
- Sanlam recorded the highest decline of 90.0% in their Core Earnings Per Share in FY’2022 compared to a growth of 13.7% recorded in FY’2021. The performance was mainly driven by an 11.1% decrease in net earned premiums to Kshs 8.2 bn from Kshs 9.2 bn recorded in FY’2021,
- The premiums grew at a slower pace of 1.6% in FY’2022, compared to a growth of 8.9% in FY’2021, while claims also grew at slower rate of 1.9% in FY’2022, from the 11.9% recorded in FY’2021 on a weighted average basis,
- The loss ratio across the sector increased slightly to 88.1% in FY’2022 from 87.9% in FY’2021,
- The expense ratio eased to 52.5% in FY’2022, from 59.5% in FY’2021, owing to a decline in operating expenses, a sign of increased efficiency,
- The insurance core business still remains unprofitable, with a combined ratio of 140.6% as of FY’2022, compared to 147.4% in FY’2021, and,
- On average, the insurance sector delivered a Return on Average Equity (ROaE) of 7.0%, an increase from a weighted Return on Average Equity of 6.6% in FY’2021.
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 in real estate projects.
For more information, kindly contact:
Clifford M. Mulama
Brand and Communications
+254 (713) 840 107
Email: cmulama@cytonn.com
