AIG Kenya in Sh77m profit - Capital Business
Connect with us

Hi, what are you looking for?

Kenya

AIG Kenya in Sh77m profit

NAIROBI, November 11 – AIG Kenya Insurance Company has posted a profit of Sh77 million in the third quarter and a premium growth of 15 percent compared to the same period last year. 

The announcement is despite a third quarter $24.47 billion loss posted by it parent company AIG Inc. in New York. The results show that the group’s separately capitalised American International Underwriters (AIU), which includes AIG Kenya Insurance Company continue to be profitable and are operating as normal.

Japh Olende, Managing Director of AIG Kenya Insurance said: “For AIG Kenya, it is business as usual; we are in a very strong financial position and continue to pay claims and underwrite new business. AIG Incorporation’s challenges in the United States are localised and are not impacting our operations here.”

AIU said its insurance operations grew 11.5 percent in the third quarter of 2008 with a profit of $99 million at a combined ratio of 96.7perecent. Excluding catastrophes such as Hurricanes Ike and Gustav, the underwriting profit was $232 million at a combined ratio of 92.97 percent.

“We remain tightly regulated and we are required by local law to maintain specific levels of solvency in order to maintain trading licenses,” said Mr Olende.

 According to a statement from AIG Kenya, the solvency margin for the company is 56 percent compared to a statutory requirement of 15 percent, while the paid up capital is substantially above the minimum required by law.

“Our Reinsurance Treaty program has local retention; compulsory cessions to Kenya Re, Africa Re and Zep Re.  Additionally, there is participation by heavily regulated and financially solid AIG subsidiaries and internationally acclaimed reinsures,” the statement read in part. “The insurance industry in USA is heavily regulated which gives the necessary protection to any AIG Insurance subsidiary in the USA.”

AIG Kenya Insurance Company is a majority owned subsidiary of American International Underwriters Overseas Limited (AIUO), a member of the Foreign General Insurance operations which are AIG’s International insurance operations. 

Meanwhile AIG Inc. in New York also announced on Monday an agreement with the US Treasury and Federal Reserve to establish a more durable capital structure for AIG Inc, and revamped facilities designed to resolve the liquidity issues experienced at AIG Inc on its credit default swap portfolio and its U.S. securities lending program.

Advertisement. Scroll to continue reading.

The actions include ongoing financing facilities and one-time transactions. Among which will include, The US Treasury will purchase $40 billion of newly issued AIG perpetual preferred shares and warrants to purchase shares of AIG equal to 2 perception  of the portion of the Fed’s credit facility.

The existing credit facility will be revised to $60 billion, with a decreased interest rate of LIBOR plus 3 percent rather than the original LIBOR plus 8.5 percent, with the term of the loan extended to 5 years from the original 2 years and a reduced fee of 0.75percent as opposed to 8.5 percent on un-drawn commitments.

One time transactions involve the creation of two financing entities capitalised with loans from AIG Inc. and the Fed. These will include: A $22.5 billion senior funding from the Fed with $1 billion subordinated funding from AIG Inc. to enable the transfer of residential mortgage-backed securities from its securities lending collateral portfolio.

This financing entity, together with the other AIG Inc. funds, will eliminate the need for the US securities lending liquidity facility established in October 2008.

AIG and the Fed will create a second financing entity that will purchase up to US$70 billion of Multi-Sector Collateralised Debt Obligations (“CDO”) exposure on which AIG has written Credit Default Swaps (“CDS”) Contracts. AIG will provide $5 billion in subordinated funding and the Fed will provide $30 billion in senior funding to the financing entity.  Approximately 95 percent of the write-downs on the CDS portfolio were related to Multi-Sector CDO’s.  

Commenting from New York, AIG Chairman and Chief Executive Officer Edward M. Liddy said: “Today\’s actions send a strong signal to our policyholders, business partners and counterparties that AIG is on the road to recovery. Our comprehensive plan addresses the liquidity issues that threatened AIG, and gives us the financial flexibility to complete our restructuring process successfully for the benefit of all of our constituencies.

Advertisement

More on Capital Business