UAP Holdings Plc has today announced improved performance in 2021, driven by strong top-line growth, cost reduction, and increased investment income. This was however offset by adverse claims experience largely attributable to the impacts of the Covid-19 pandemic.
Consequently, the firm reported a loss-before-tax of KES 175m compared to a loss of KES 1,048m in 2020, translating into an 83% improvement in financial performance.
Gross written premiums were up 30% driven by both our short-term insurance and long-term insurance businesses. The long-term insurance business experienced a recovery compared to the prior year driven by strong corporate sales while the short-term insurance business has sustained the strong growth recorded in 2020.
Net investment income was KES 4.6Bn up from KES 3.8Bn in 2020. This was primarily driven by the recovery of the Nairobi Stock Exchange, and growth in investible assets which was supported by the increased topline as well as a disciplined collection of premium receivables.
Operating expenses were down 9%. Costs have remained well contained driven by operational efficiencies on the back of the technology investments we have been making in recent years as well as a continued focus on strengthening the control environment.
In addition, interest costs on borrowings were up 9% on account of actions taken by the Group towards the end of 2020 to refinance its debt in local currency to mitigate the forex mismatch risk it was carrying in its books. The Kenyan shilling has been losing ground to the US dollar over the period informing the need to limit our exposure via refinancing in local currency.
Income tax expense also rose 241% compared to the previous year largely driven by increases in non-deductible expenses across the business and derecognition of deferred tax assets relating to tax assessed losses for our loss-making businesses. This treatment is in line with accounting standards.
UAP Holdings Plc Group CEO Arthur Oginga noted, “The performance of the business in the 2021 financial year was delivered against the backdrop of the start of the economic recovery in the different countries we operate in work with businesses working towards a return to normalcy as the management of the pandemic improves.
He added, “Our strategy is focused on delivering integrated financial services offering for our customers in East Africa by leveraging our individual lines of business to deliver a one-stop solution while improving productivity across the Group. As part of this journey we have concluded the combination of our life businesses in the Kenya market and embarked on rebranding in the region with our Rwanda business now fully operating under the Old Mutual Brand” said Mr. Oginga during an investor briefing in Nairobi.
The UAP Old Mutual Group is a diversified financial services business with interests in insurance, banking, investment, real estate, and asset management.
Overall, the company’s management remains cautious about economic prospects in the markets it operates in given that the pandemic is still unfolding, even as governments work toward reducing the spread of the virus through mass vaccination.
“Although economic data from our Kenya, Uganda, and Rwanda markets is promising, we still must factor in the risk of subsequent waves of coronavirus. However, as a business we are engaging with customers impacted by the pandemic while supporting those in need of care to recover through our medical insurance business,” says Mr. Oginga.
UAP Holdings Plc 2021 financial results reflect the impact of the consolidation initiated in 2020 through a resolution by OMLAC shareholders to sell all shares of the company to UAP Life Assurance Limited (UAPAL), resulting in a simplified Group structure.
This resulted in UAP Holdings Plc continuing to exercise control although its shareholding in UAPAL reduced from 100% to 55.7% with the remaining 44.3% being held by Old Mutual Holdings Limited effective 25th January 2021.