This archive report was first published on 19 November 2019.
November 19, 2019, marked the release of Cytonn Investments Management Limited's 2019 first half Insurance Report, which crowned Jubilee Insurance as the most attractive insurance company in Kenya from both a potential return and financial health perspective.
The report, titled Regulation and Consolidation to Drive Attractiveness, analyzed the half-year 2019 results of the listed insurers in Kenya.
According to Shiv Arora, Cytonn's Head of Private Equity, the analysis aimed to provide actionable recommendations to investors by identifying the most stable and promising insurance companies with the best franchise value and future growth potential.
Ranking of Insurers ¶
While Jubilee Insurance remains an attractive option with vast potential, the insurance sector in Kenya is grappling with low penetration, increased cases of fraudulent claims, and the need for increased capital following the adoption of a risk-based capital adequacy framework.
David Ngugi, an investment analyst at Cytonn Investments, noted that the insurance sector has benefited from convenience and efficiency through the adoption of alternative channels for distribution and premium collection, such as Bancassurance and improved agency networks.
Advancements in technology and innovation have made it possible to make premium payments through mobile phones, while the growing middle class has increased appetite for insurance products and services.
Mr. Ngugi stated, 'These factors have been key in driving growth of the sector. We also expect more mergers within the industry as smaller companies struggle to meet the minimum capital adequacy ratios.'
The report predicts that insurance companies will adopt prudential practices in managing risk and reducing premium undercutting in the industry, as insurers will now have to price risk appropriately.
According to the report, the top five positions in the ranking are as follows:
- Jubilee Holdings took the top position, ranking high in the franchise score category due to a strong combined ratio, indicating better capacity to generate profits from its core business.
- Sanlam Kenya took the second position, driven by a strong franchise score, with the highest Return on Average Equity.
- Liberty & Britam Holdings came in third and fourth position, respectively, with weaker franchise scores due to lower returns on assets and equity (Britam Holdings) and high loss and expense ratios (Liberty).
- CIC came in fifth position, with weak franchise rankings scores.
