Madison Life Assurance set to sale of US$68M property to shore up capital

KENYA – Madison Life Assurance Kenya Limited, a leading Insurance company in Kenya, has announced plans to sell properties valued at KSh8 billion (US$68.59m) and quit the annuity business in a move to restructure its balance sheet and boost capital.

The insurer said it has decided to cut annuity business, including investments in property which it terms as an expensive product.

Annuities portfolios take up lump-sum payments from policyholders in return of regular payouts, beginning either immediately or at some point in the future.

It will now focus on less expensive products such as education, investment and pension products.

Madison, which posted a net loss of KSh1 billion (US$8.57m) in the year ended December, had seen its capital ratio sink to negative 59 per cent in the review period forcing a rethink of its current offering.

Despite the huge shortfall, the company said it is not under duress, noting that it settled claims and benefits of KSh4.5 billion (US$38.58m) in the period.

The insurer holds investments in property in Nairobi and cosmopolitan areas around the city which it reckons will be enough to lift its balance sheet back into compliance.

“Madison Life is not experiencing any financial strain. The company pays claims timely, is one of the best payers, and is top 10 in the industry per the IRA quarterly reports,” Madison said in an emailed response.

“Our capital ratio will be addressed by restructuring our investment mix through disposal of properties and conversion to Government Securities, which have zero capital charge and generate higher investment income. The disposal of properties will generate more than enough capital required for compliance.”

Madison said the investment in properties attract a capital charge from the regulator resulting in reduced capital ratio.

The company said it is in the process of disposal of properties to increase investment in government securities, which do not attract a capital charge.

Insurance companies are under pressure to shore up their capital following the lapse of the June 2020 deadline to comply with the new risk-based regulatory framework.

Although the regulator has been mum since offering temporary reprieve two years ago to allow the industry to recover from the adverse effects of the Covid-19 pandemic, companies that have been deep in the red have been forced to restructure their books, seek a strategic investor or face closure.

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