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Kenyan stocks to watch out for in the insurance sector

NAIROBI, Kenya, Oct 17 – Britam, Jubilee Insurance, Liberty Kenya and Kenya Re-Insurance are the stocks to look out for in Kenya’s insurance sector.

This is according to analysts at Genghis Capital who recommend a buy in the four stocks and a hold on CIC Group.

The report – Kenya Insurance Sector ‘Out of the Woods’ – projects premiums to grow at an average of 8.7 percent in 2018 with non-life business expected to grow at a faster rate than the life insurance.

Ordinary Life will outpace Group Life in 2018 while Non-life insurance will continue contributing higher premium.

The recommendation for a buy for Jubilee insurance is based on a fair value of Sh569.90, supported by a 11.3 percent year on year growth in gross premium and a lower combined ratio forecast of 116.6 percent in 2018 against industry average of 105 percent.

Liberty buy recommendation is based on a fair value of Sh16.4 against its market price of  Sh12.6, supported by a solid 5.95 percent gross earned premium, an 8 percent y/y investment income growth in FY18E.

On Britam, the firm revised ratings from a hold recommendation to a buy recommendation with target price of Sh13.13 against the current market price of Sh11.1.   High claims ratio however remains a concern.

“Underwriting loss from the non- life business is, however, a concern. We highlight the underwriting loss experienced in this segment, mainly affected by the undercutting problem. In 2017, A, non-life business recorded an underwriting loss of Sh1.03 Billion from an underwriting profit of Sh2.1Billion. The highest loss was reported in the motor private sector at Sh2.74Billion,” the report states.

In the first quarter of 2018, 23 out of 37 general insurance companies recorded an underwriting loss.

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