Kenya Re staring at over 25% profit slump

The downward slide in profit in 2018 by Kenya Re will see the firm’s net earnings for the year end drop by more than a quarter of the company’s 2017 figure.

In a profit warning issued by the reinsurer on March 15, the projection is based solely on a preliminary assessement of the corporation’s expected financial results for the year 2018.

“The Board of Directors of Kenya Reinsurance Corporation Limited wishes to inform shareholders of the corporation and the general public that … the net earnings of the corporation for the financial year ending December 31, 2018 are likely to be more than 25% lower than those reported for the financial year ending December 2017,” the Kenya Re board said.

Kenya Re attributed the expected decline to high claims reserves in the year, forex losses due to currency devaluations of some of its markets, unexpected reduction in income from associate and impairment of an asset held for sale.

On Monday, the firm’s share price at the Nairobi Securities Exchange (NSE) dropped by 0.72% to end trading at Ksh13.80.

Last year, the reinsurer posted a profit of Ksh3.5 billion, registering a 9% growth on from 2016. Its asset base had also increased from Sh 38.4 billion to Ksh 42.7 billion.

At the time, Board Chair David Kemei had said the reinsurance market had become intensely competitive over the years,  with more reinsurers eyeing the same piece of cake. “We were also affected by the setting up of national reinsurance companies in neighboring countries such as Uganda, Tanzania and Ethiopia that has led to a decline in our market share’.’ he said.

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Its half year results saw Kenya Re suffer a 24% profit reduction, falling from Ksh 1.62 billion in June of 2017 to settle at Ksh1.23 billion as at June 2018.

A report in September 2018 by South African credit security classes ratings firm Global Credit Ratings (GCR) had predicted the expected slump in profit.

GCR had revealed that the company’s underwriting profitability is likely to remain susceptible to event driven f**e losses as well as deterioration of credit worthiness of its clients which could lead to instability in earnings.

The South African firm however also stated that Kenya Re’s ability to pay national remains stable while a strategic position in the industry as well as diversified earnings contribute to the firm’s fairly strong market share of 18%.

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