Kenya Reinsurance Corporation (Kenya Re) has reported significant financial growth for the year ending December 2023, marked by a substantial increase in profitability and dividend payouts.
The reinsurer’s profit after tax surged to Sh4.97 billion, up 42% from Sh3.51 billion in 2022. This robust performance also reflected in its profit before tax, which stood at Sh7.03 billion.
Key drivers of Kenya Re’s success included a noteworthy rise in net investment and insurance results, climbing 42% from Sh5.78 billion in 2022 to Sh8.19 billion in 2023. This increase underscored the company’s strategic focus on expanding its business footprint across Africa, the Middle East, and Asia.
Hillary Wachinga, the Group Managing Director, attributed these achievements to several factors. These included prudent underwriting practices, effective diversification in key geographic regions and product lines, a favorable macroeconomic environment, and strategic investment decisions in products.
In response to its strong financial performance, Kenya Re announced a 50% increase in dividend per share, from Sh0.2 in 2022 to Sh0.3 in 2023, demonstrating its commitment to delivering value to shareholders amid its growth trajectory.
“Our outstanding financial performance in 2023 reflects our commitment to delivering value to our shareholders and maintaining our position as a leading reinsurer in Africa. Our investors will receive one bonus share for every share held,” he said in a statement.
According to the trading results, corporations asset base also reported an increase by 15 per cent from Sh57.45 billion in 2022 to Sh65.98 billion in 2023, while shareholder’s funds increased by 18 per cent from Sh40.9 billion in 2022 to Sh48.17 billion in 2023.
“The increase in the asset base was mainly attributable to the increase in investment in associate by Sh2 billion, increase in government securities by Sh1.1 billion and increase in deposits with financial institutions by Sh4.35 billion,” Wachinga said.
Shareholders funds
The growth in Kenya Reinsurance Corporation’s shareholders’ funds, according to Group Managing Director Hillary Wachinga, was primarily driven by an increase in retained earnings by Sh4 billion and an increase in translation reserves by Sh3 billion.
These factors contributed significantly to the company’s financial strength despite challenges in the business environment throughout the year.
Wachinga highlighted that the group’s financial overview continued to yield positive results for shareholders, underscoring its resilience in navigating a challenging business landscape.
Key drivers of this positive financial state included aggressive collection of reinsurance receivables and real-time market intelligence, which informed the group’s strategic responses to market dynamics and facilitated the uptake of investment opportunities.
However, Wachinga also pointed out that the group faces significant threats in achieving its business objectives during its operations. These challenges likely include market volatility, regulatory changes, competitive pressures, and macroeconomic uncertainties, all of which require careful management to sustain the company’s growth trajectory and profitability.
Kenya Reinsurance Corporation (Kenya Re) faces several market risk exposures and challenges in its operations, as outlined by Group Managing Director Hillary Wachinga. These include:
1. Investment Activities:Market risk arises from reduced earnings on deposits with financial institutions following the repeal of interest rate capping in November 2019. This regulatory change affects the returns on investments in interest-bearing instruments.
2. Equity Market Volatility:Erratic prices of quoted equities pose a risk to the investment portfolio of Kenya Re. Fluctuations in equity prices can impact the valuation of its investment assets.
3. Foreign Exchange Risks:Operating in diverse regions with different currencies exposes Kenya Re to foreign exchange losses in its underwriting operations. Exchange rate fluctuations can affect the financial performance of the company in international markets.
4. Competition:Kenya Re faces stiff competition both locally and internationally. This includes increasing domestication of reinsurance business in key markets and the establishment of national reinsurance companies where none existed before.
5. Mergers and Acquisitions:Consolidation within the insurance and reinsurance industry through mergers and acquisitions can impact market dynamics and competitive positioning.
6. Retention Capacity of Direct Underwriters:Direct insurers increasing their retention capacity reduces the demand for reinsurance premiums, potentially affecting Kenya Re’s premium income.
7. Captive Reinsurance Companies: The emergence of captive reinsurance companies as new entrants in Kenya Re’s target markets creates additional competitive pressures.
8. Legislative Changes:Unfavourable changes in legislation in some markets where Kenya Re operates can impact regulatory compliance and operational costs.
9. Price Undercutting: Intense competition may lead to price undercutting among competitors, affecting premium rates and overall profitability.
