Zep-Re earnings drop to Ksh.1B on rising insurance claims

Regional re-insurer Zep-Re has booked a Ksh.1 billion (USD10.1 million) profit for the year ended December 31, 2018, representing a 58 percent dip in earnings from 2017.

The reduced earnings for the Pan-African firm and the Common Market for Eastern and Southern Africa (COMESA) anchored business is attributable to higher insurance claims and a deteriorating environment in Sudan in a factor that saw the country’s currency dip by 85 percent in value.

Gross incurred claims for instance went up 25 percent to stand at Ksh.8.3 billion (USD 83.2 million) taking the insurer’s total liabilities for the year to Ksh.15.4 billion.

Zep-Re’s new business however provided respite for the drop in earnings, registered under an all round depressive year for insurers and re-insurers to hold off a further sink in earnings.

Gross written premiums for the year topped Ksh.17.8 billion to register a 17 percent growth in new business with a share of Ksh.5.1 billion making up retrocession premiums.

“This growth is anchored on a strategy of doubling down on our clients by creating a customer centric strategy and opening offices. We’re now the best re-insurer at paying claims,” Zep-Re Managing Director Hope Murera said.

The performance by the re-insurer came up against major headwinds described as the worst in recent times with its clientele base – made up of primary insurers – coming up against spiraling claims, higher management expenses, price-cutting and fraud.

The insurers further took a hit from impairment costs from both property and investments with an approximate one third of insurance firms in Kenya, for instance, sliding into full year losses with the lucky few registering a dress-down in profit making.

Zep-Re Chairman William Erio expects the re-insurer to keep tabs on prevailing risks in the industry to keep up the notable performance into the near term.

“In our coverage, we have to assess all of the risks that we may face in our underwriting exercises. What we do is to limit our coverage on high risk areas where we offer a low coverage as it is possible in case of any eventuality, he said.

Zep-Re remains on a strong balance sheet position with assets totaling Ksh.38.3 billion in book value.

The re-insurer has further expanded on its capitalization to Ksh.10.7 billion backing up its already positive credit rating of a B++ Good and AA+(KE) Stable from the Best Financial Strength Rating and the Global Credit Rating (GCR) agencies respectively.