CIC Insurance group records a US$3.1m loss in half year of 2020

KENYACIC Insurance Group, which specializes in the provision of insurance services to the co-operatives sector, has made a KSh335.5 million (US$3.1m) net loss in the half year ended June, reversing a net profit of KSh20.9 million the year before.

This came as investment income fell 25.9 percent to KSh1.2 billion (US$11.08m) in a period when the Covid-19 pandemic pulled down share prices on the Nairobi Securities Exchange and returns on fixed income investments like bank deposits and T-bills.

The insurers’ bottom-line was also hurt by a 7.6 percent rise in claims to KSh5.4 billion (US$49.85m). Its net premiums were flat at KSh7.1 billion (US$ 65.55m). CIC’s operating expenses dropped 10.7 percent to KSh2.8 billion (US$25.85m) while finance costs declined 10.1 percent to KSh302 million (US$2.79m).

The company’s borrowings rose marginally to KSh3.77 billion (US$34.8m) but refinancing of part of its debt at lower rates helped it save on interest expenses.

The insurer last year redeemed its KSh5 billion (US$46.46m) bond (which had a 13 percent coupon) using a mix of internal cash flows and a KSh4.5 billion (US$41.54m) loan from Co-op Bank obtained at an interest rate of 12.5 percent.

Co-op Bank owns a 24.8 percent stake in the insurer with which they share the model of serving saccos as their main customer base. CIC had initially planned to settle the bond using proceeds from sale of its 712 acres of freehold land but the proposed disposals are yet to be completed.

This comes a month afrter Co-op Bank reduced its indirect ownership in CIC Insurance to 24.8 percent after selling shares to a group of saccos for a total of KSh106.6 million (US$0.98m).

The lender has been a long-term investor in CIC through the investment holding company Co-op Insurance Society Limited which has a 74.3 percent stake in the insurer.

Co-op Bank says in its latest annual report that its ownership in the holding company dropped to 33.41 percent in the year ended December 2019 compared to 35.71 percent a year earlier.

This resulted in the bank’s effective ownership in the insurer also declining from the previous 26.5 percent to the current 24.8 percent that has a market value of KSh1.4 billion (US$12.92m).

The lender says it received KSh106.6 million (US$0.98m) from the multiple transactions that saw it sell a total of 44.7 million shares in the investment vehicle.

Co-op Bank’s chief executive Gideon Muriuki said that the shares were sold to several saccos, adding that the transaction is part of the “ongoing strategic transformation agenda at CIC Insurance.”

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