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Re insurer offsets assets to boost liquidity

NAIROBI, July 14 – Kenya Reinsurance Company intends to reduce its current asset base by 3 percent in a bid to improve its liquidity and consequently its financial rating.

Currently the re-insurer has an asset base of 33 percent of its investment portfolio, which stands at Sh14.7 billion.

Kenya Re has just sold off Mombasa Reinsurance plaza, a nine storey building in Mombasa town for Sh190million to University of Nairobi as it begins the process of rationalising its investment and business portfolios, by disposing of some of its non-strategic commercial properties.

Apart from the Mombasa property, the re-insurer is also seeking Sh200 million for its South C sports complex.

Kenya Re Managing Director Eunice Mbogo said this was part of a process to safeguard the corporation’s financial strength rating grade and to improve it so as to attract more business especially from the international market.

“We want to be in line with the regulations where in reinsurance business, the requirement is that investments should be in liquid cash or near liquid, for efficiency of claim settlement,” Mbogo said.

In Nairobi the re-insurer owns three buildings namely Reinsurance Plaza, Anniversary Towers, and Kenya Re towers in Upper Hill. Their Mombasa portfolio included the just sold Mombasa Reinsurance Plaza and in Kisumu they own the Kisumu reinsurance plaza.

The Corporation also owns thousands of residential homes and housing schemes that are spread in various parts of the country.

Speaking during a ceremony to handover the building to the University of Nairobi, Mbogo said funds raised from the sale of the idle assets would be reinvested in treasury bills, bonds and shares where they can attract a higher return on investment.

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“We want to reinvest in shares where we can get between 14 – 15 percent return and even up to 20 percent,” she said.

Currently the firm is rated B+ by international rating agency A.M. BEST, but with the rationalisation process, the corporation is looking at improving this rating to A.

Mbogo revealed the company would be undergoing another rating process within the month.

In the financial year ending December 2007, the re-insurer recorded a 22 percent growth in its pre-tax profits to Sh966 million in the period, up from Sh796 million realised in 2006.

The corporation’s revenues were boosted by new business investments in Seguros of Angola, UAP Uganda and New Sudan Insurance Company.

Total assets grew by 14 percent from Sh12.9 billion to Sh14.7 billion over the 12-month period. Shareholders funds increased by 15 percent from Sh6.3 billion in 2006 to Sh7.3 billion in the year under review.

Profit after tax increased by 35 percent to Sh729 million from Sh539 million reported in 2006.

Investment income increased by 25 percent to Sh939 million from Sh753 million reported a year earlier.

The re-insurer is planning to diversify its product lines and focus more on agro business, and commercial mortgage venture financing.

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