Britam Holdings Limited FY’2016 Results: The Board proposed a dividend payment of Ksh.0.3 per share, amounting to a total payment of Ksh.581.5 million.
Britam Holdings Limited released their FY’2016 results with earnings per share coming in at Ksh.1.1, from a loss per share of Ksh.0.5 in FY’2015. This was driven by the change in reserving methodology as per the Insurance Regulatory Authority (IRA), which required life insurers to prepare their FY’2016 financials based on gross premium valuations which is less conservative compared to the previously used net premium valuation.
Key highlights for the performance from FY’2015 to FY’2016 include:
- Operating revenue grew by 11.1 percent to Ksh.22.4 billion, from Ksh.20.1 billion in FY’2015. This is attributed to gross written premiums rising by 3.5 percent to Ksh.20.3 billion, from Ksh.19.6 billion in FY’2015. Operating revenue growth was also supported by a 35.3 percent rise in interest and dividend income to Ksh.4.2 billion from Ksh.3.1 billion, and a 29.3 percent rise in fund management fees to Ksh.0.9 billion from Ksh.0.7 billion.
- The loss ratio decreased to 28.8 percent from 64.8 percent due to a decline in insurance claims and loss adjustment expenses by 12.3 percent to Ksh.9 billion from Ksh.10.3 billion.
- Total expenses declined by 15.3 percent to Ksh.18.6 billion from Ksh.21.9 billion. This is attributed to net insurance benefits and claims, which recorded a 52.9 percent decrease to Ksh.5 billion from Ksh.10.6 billion, despite a 7.8 percent rise in commission expense to Ksh.3.5 billion from Ksh.3.3 billion. This is due to the valuation methodology to gross premium valuations from net premium valuation. This led to the combined ratio declining to 89.9 percent from 126 percent, indicating that the core business is profitable.
- The Board proposed a dividend payment of Ksh.0.3 per share, amounting to a total payment of Ksh.581.5 million. This translates to a dividend yield of 2.9 percent.
- There has also been increased mergers and acquisition activity with the recent Plum LLP’s Acquisition of a 23.3 percent stake while IFC recently announced plans of acquiring a 10.4 percent stake valued at Ksh.3.6 billion.
Britam outperformed expectations, mainly attributed to a change in the methodology used to account for long-term insurance liabilities to the Gross Premium Valuation from the Net Premium Valuation as per the Insurance Regulatory Authority (IRA) requirements. Unlike in their H1’2016 results where they disclosed the impact of the change methodology for accounting for claims, the management did not disclose the impact in the full year earnings.
Going forward, Britam’s growth will be driven by:
- Solid regional presence to drive growth as evidenced by operations in Uganda, Rwanda and the subsequent acquisition of Real Insurance Company Ltd in 2014 that led to expansion into Tanzania, Malawi and Mozambique.
- A strong distribution channel, coupled with the roll out of the first phase of its financial advisor portal.
- A diversified business strategy as evidenced in the Holdings’ interests in insurance, asset management, real estate and strategic holdings in banks enabling the group to respond effectively to shifting market dynamics.
A few challenges they face include:
- Poor real estate development strategy.
- Overexposure to equities, particularly banking stocks, which have underperformed due to the implementation of the interest rate cap.
