Integrated financial services firm, Britam Holdings Plc, has today announced a profit before tax of Kshs 2.38 billion for the half year period ending 30 June 2023.
The profit almost triples the Kshs 812 million recorded in the same six-month period ended 30 June 2022.
This is the Group’s first set of financial results under the IFRS 17 Accounting Standard. The Group has fully implemented IFRS 17 effective 1 January 2023 and the resulting adjustments on the net assets as of 1 January 2022 are included in the opening retained earnings. The 2022 financial statements have been restated in compliance with the IFRS.
Implementation of IFRS 17 is not expected to significantly impact our business strategy, business operations, cash generation, solvency, and dividends but rather the Group’s reporting and emergence of profits especially from our long-term insurance contracts. The Contractual Service Margin which represents the value of future unearned profits on contracts sold from long-term insurance contracts is systematically amortized into profits over time thereby creating long-term stability in profit emergence.
- A sustained growth in gross earned premiums and fund management fees which were up 31 percent to KShs 20.7 billion.
- Insurance services revenue was up 34% to KShs 16.6 billion.
- Strong growth in interest, dividend, and rent income which was up 28 percent to Kshs 7.1 billion.
- Regional general insurance businesses contribution of 23 percent to the Group’s gross earned premiums.
- As of 30 June 2023, the total shareholders’ equity was up 10% to KShs 23.5 billion, reflecting the improved results.
The encouraging performance has been driven by growth in top-line revenue, as well as improved investment income that continues to cushion the business from fair-value losses, resulting in an improvement in profitability.
The total gross earned premium and management fees in the six months were up 31 percent to Kshs 20.7 billion compared to the Kshs 15.8 billion for the same six-month period in 2022. The International general insurance businesses continue to contribute to the Group’s revenues and profitability. The businesses generated 23 percent of the Group’s total gross earned premiums and remain a key pillar of the Group’s geographical diversification strategy.
The improved insurance underwriting performance was driven mainly by the increased motor business and continued strong performance from the life insurance business. In line with the new insurance accounting standard IFRS 17, the insurance results now include a portion of the unearned profit (contractual service margin) from the long-term business that is now reflected in the statement of profit or loss.
The growth in the investment portfolio was driven by growth in revenues and the ongoing re-alignment of the portfolio to grow and stabilize yields. Investment income grew by 28 percent to KShs 7.1 billion compared to KShs 5.5 billion recorded in the same period of 2022.
In the third year of the implementation of its five-year strategic plan, for the period 2021-2025, the Group continued to focus on improvement in operational efficiency. The Group managed to keep the underlying operating expenses ratio for the six months at 30 percent which was similar to the same period in 2022.
Commenting on the Group’s financial performance, Britam’s Group MD & CEO Mr. Tom Gitogo said:
“We are confident of the growth and performance trend that Britam has achieved, supported by its subsidiaries in Kenya and in the region. The business continues to grow its revenues while operating costs grow at a lower rate than the topline growth.”
Mr. Gitogo added, “Continued focus on customer-centric transformation continues to grow our customer numbers and drive the uptake of our products, especially through our emerging market consumers, partnerships, and digital channels.”
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However, the Group’s profitability continues to be negatively impacted by fair-value losses on investment assets, especially on its fixed-income instruments. This is attributed to the challenging macroeconomic environment which has been characterized by rising yields.
Supported by its strong brand position, Britam remains focused on seizing the growth opportunities across its footprint, taking advantage of the low penetration of insurance products, catalyzed by ever-increasing financial literacy.
With slightly over two years remaining in the 2021-2025 strategic plan, the positive trajectory in Britam’s operational and financial performance makes the company optimistic about fully realizing the strategic goals that were set. This is expected to unlock the Group’s potential and deliver value to its shareholders and all its key stakeholders.
The Group remains fundamentally strong. The ongoing execution of the Group’s EPIC2 #OneBritam Transformational Strategy is expected to improve the company’s financial performance and business growth.
The Board of Directors did not recommend the payment of an interim dividend for the half-year period ended 30 June 2023.