Shiv Arora Cytonn Head of Private Equity during the release of the insurance report www.businesstoday.co.ke
Shiv Arora, Cytonn’s Head of Private Equity, speaking on Monday during the launch of the Cytonn Insurance report for first half of 2019. [ Photo / Business Today ]

Cytonn Investments Management Limited has released the 2019 first half Insurance Report, which ranks Jubilee Insurance as the most attractive insurance company from both a potential return and financial health perspective.

The report, Regulation and Consolidation to Drive Attractiveness, analyzed the half one 2019 results of the listed insurers.

 “The analysis is brought about by a need to make actionable recommendations to our investors, by considering which listed insurance companies are the most stable and also those which have the best franchise value and future growth potential,” said Shiv Arora, Cytonn’s Head of Private Equity.

Ranking of insurers

While it remains attractive with vast potential, he said, the insurance sector is grappling with low penetration, increased cases of fraudulent claims and the required increase in capital following the adoption of a risk-based capital adequacy framework.

Mr David Ngugi, an investment analyst at Cytonn Investments, noted the insurance sector has lately benefited from convenience and efficiency through the adoption of alternative channels for both distribution and premium collection such as Bancassurance and improved agency networks.

Advancement in technology and innovation has made it possible to make premium payments through mobile phones while the growing middle class has increased appetite for insurance products and services.

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“These factors have been key in driving growth of the sector,” Mr Ngugi said.  “We also expect more mergers within the industry as smaller companies struggle to meet the minimum capital adequacy ratios.”

 The report says insurance companies are expected to adopt prudential practices in managing risk and reduction of premium undercutting in the industry as insurers will now have to price risk appropriately.

  • Jubilee Holdings took the Top Position, ranking top in the franchise score category on the back of a strong combined ratio, indicating better capacity to generate profits from its core business.
  • The only factor holding Jubilee back is its loss ratio, which is the highest among listed companies.
  • Sanlam Kenya took 2nd Position, on the back of a strong franchise score, driven by the highest Return on Average Equity
  • Liberty & Britam Holdings came in 3rd and 4th Position, respectively, with weaker franchise scores, as a result of lower returns on assets and equity (Britam Holdings) and high loss and expense ratios (Liberty)
  •  CIC came in 5th Position on the back of weak franchise rankings scores.

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