Mr. Jadiah Mwarania, Managing Director, Kenya Re

Giant organization aims at conquering new markets and growing in profitability in an era of heightened competition

By George Gichuki

Established in 1970, Kenya Reinsurance Corporation (Kenya Re) is just one year shy of its fiftieth birthday. This milestone has not been a walk in the park considering the ups and downs that are the order of the day in the world of business.

Ever since it opened its doors to business in 1971, Kenya Re has consistently grown in respect to profitability and reach. “Kenya Re started by serving the local market only, but with time, it has spread its wings to serve the African, Asian and Middle East markets,” says Mr. JadiahMwarania, the Managing Director. “We cover a total of 265 insurance companies in 65 countries and our main market is Kenya which contributes about 50% of our revenue,” he adds.

In its early years, Kenya Re was partly involved in non-core business activities; especially in real estate. In that regard, it developed residential estates in Nairobi including South B and C, Waiyaki Way and Karen. In addition, it put up iconic commercial buildings like the Reinsurance Plaza (its headquarters) and the Anniversary Towers in Nairobi’s central business district, Kenya Re Towers (Upper Hill), Reinsurance Plaza ( Kisumu) and Reinsurance Plaza ( Mombasa) – which it has already sold. In the same breath, Kenya Re also developed a heavy property portfolio including a hundred acre piece of land on Kiambu road and sixty acres on Ngong road. Nevertheless, even though the company is still realizing investment income from real estate, its current focus is on its core business – income from insurance premiums. “Our investment in property was guided by various government policies that were in place at that time, but we have now taken a different strategic direction,” observes Mr. Mwarania.

Trends in the local insurance industry

The Kenyan insurance industry has become very competitive in the recent past. In the reinsurance market for instance, new players have gained entry, bringing the total number to ten. “ We have seen the entry of international insurance companies ( both life and general) as well as international insurance brokerage firms hence intensifying competition among players in the local market,” says Mr. Mwarania adding that the industry is becoming more sophisticated as a result of this development. “ These international players have introduced their first world culture and efficiency which they have built over the years in the local market, while at the same time launching new products, hence giving them a competitive edge ,” he adds. By the same token, the uptake of technology in the industry has grown tremendously. This has become a key driver of business in respect to service delivery, settlement of claims and product development.

Kenya is the biggest insurance market in East and Central Africa. It commands in excess of Kshs. 150 billion worth of premiums which is very substantial compared to other countries. The country’s infrastructure is also very advanced compared to its neighbours. For instance , over the last decade, the internet connectivity has been enhanced by fibre optic broadband . By and large then, Kenya has become the gateway to the East and Central Africa market and many multinational companies have established their headquarters in the country. Moreover, Kenya is endowed with highly skilled manpower and this has attracted many international investors.

In 2018, the profits of many insurance companies in Kenya declined mainly because of incurring losses in the income from their investments. For instance, there was a bear run at the Nairobi Securities Exchange and therefore the insurance companies which have invested in stocks made substantial losses. In addition, the interest from government securities and bank deposits declined in 2018. Lastly, most of the insurance companies settled very heavy claims hence affecting their profitability.

According to Mr. Mwarania, as more and more players continue gaining entry into the Kenyan market, mergers and acquisitions are expected due to the heightened competition and the need to have a strong balance sheet. In 2019 he further says, the investment environment is still bearish and players in the local insurance industry will therefore need to employ very good strategies in order to attain substantial growth.

Kenya Re’s performance

In 2018, the total business that Kenya Re realized from insurance premiums was Kshs.14.8 billion. In addition, it realized an investment income of Kshs. 3.1 billion. Consequently, the company made a profit of Kshs. 3.2 billion which was a drop of 36%in comparison to 2017 when it generated Kshs. 4.5 billion in profit.

According to Mr. Mwarania, the decline in profit was caused by the poor performance of Zep Re- an associate company of Kenya Re. “We have a 20% stake at Kenya Re whose profit declined by 76% in 2018 hence reducing our share of income substantively,” he says. In addition, the fair gain in value of the buildings in its property portfolio in 2018 was Kshs. 300 million compared to Kshs. 550 million in 2017.

Moreover, the company does business in Sudan whose pound almost collapsed in 2018. Whereas it was being exchanged with the Kenya shilling at a rate of 15.3 in 2017, this drastically dropped to 2.2 in 2018. Consequently, the volume of premiums from Sudan went down in 2018 and this adversely affected Kenya Re’s profits.

The company also made a provision in its audited books for the Shanzu Plot hence reducing its balance sheet. “All these factors reduced our income in excess of Kshs. 1 billion,” observes Mr. Mwarania. It is worth noting that Kenya Re’s income from insurance premiums grew from Kshs. 14.2 billion in 2017 to Kshs. 14.8 billion in 2018.

Strategic direction

Kenya Re is currently in the third year of implementing its 2017 – 2021 strategic plan. The plan provides directions on what the company intends to achieve within five years. It focuses on five core areas: financial growth, profit growth, business processes, internal audit and rating as well as people.

Under financial growth, Kenya Re is aiming at growing its premium and investment income streams and ultimately its profitability. This growth will also be anchored by business development whose objective is to expand the market by getting into new territories as well as increasing the volume of business in the existing ones. “We shall focus on market deepening, penetration and development under this pillar,” avers Mr. Mwarania.

Thirdly, the core area on business processes will enable Kenya Re to evaluate its internal efficiencies and improve on the same. In that regard, it has put in place robust reinsurance software (which went live in March 2018) and whose objective is to enhance the efficiency of its business. By the same token, it has put in place an actuarial software which is dubbed ‘prophet’ to assist in pricing its business and assessing its catastrophic exposure. Moreover, Kenya Re has an internal audit software (dubbed ‘idea’) to enhance its internal audit process, besides assisting the company in data mining. Finally, the company has a software for enhancing its governance, risk and compliance.

The internal audit and rating area focuses on continuous review of the organization’s operations. In that regard, Kenya Re is rated by A.M Best and GCR Agency limited. Finally under the people core area, the objective is to recruit people with the right skills besides training them so that they can become competent in their respective fields. In the same regard, the company takes into consideration how the staff members are rewarded, compensated and sanctioned. “The objective is to make sure that the staff compliment is right in terms of numbers, skills and training,” Mr. Mwarania avers. The strategic plan according to him has targets for all the five core areas which are being evaluated and monitored continuously until its final year.

Supporting the local insurance industry

Besides conducting reinsurance business, Kenya Re was established in order to offer training and support the development of the local insurance industry. To that end, it has partnered with the Association of Kenya Insurers (AKI) in the roll out of programmes that are aimed at growing the local insurance industry. For instance, Kenya Re is a platinum sponsor of the annual AKI Agents of the year awards. Other pertinent issues that Kenya Re is addressing in partnership with AKI include undercutting among the industry players which has contributed to losses as well as the domestication of our insurance market as practised in Zimbabwe, Nigeria, Ghana, Uganda, Ethiopia and India. It also sits in AKI’s consumer education committee.By the same token, Kenya Re supports the College of Insurance in its endeavour to train manpower for the local insurers. Some of its staff members give lectures to the students in the college on topical insurance issues whenever they are called upon to do so.

Kenya Re has also partnered with local underwriters in their endeavour to develop products that meet their clients’ needs. Finally, the giant reinsurer has joined hands with the University of Nairobi in giving awards to top performing actuarial science students.

Giving back to the community

Kenya Re is a responsible corporate citizen. To that end, it participates in various corporate social responsibility (CSR) programmes as guided by its strategy. The flagship CSR programme of the company since 2011 has been ‘Niko Fiti’ through which people with disabilities are supported in various ways so that they can live productive lives. “We have set a fixed proportion of our profit for this programme over the years so that we can create awareness among the members of the public on the need to avoid viewing disability with stigma,” Mr. Mwarania observes. The second objective of the ‘Niko Fiti’ campaign is to provide assistive devices – for instance wheelchairs, walking sticks and braille – to persons living with disability.

Kenya Institute of Special Education (KISE) new state of the art assessment centre where Kenya Re has adopted a block.

This year, the innovative campaign is focusing on a partnership with the Kenya Institute of Special Education (KISE). In that respect, Kenya Re has adopted a building block at KISE which it has branded with its logo and corporate colours and will install state of the art equipment in the hydrotherapy, gymnasium and treatment rooms for persons with disabilities. “This is a legacy project for Kenya Re and it is set to be officially by President Uhuru Kenyatta,” says Mr. Mwarania.

Kenya Re also participates in other CSR initiatives including: supporting HIV/ AIDS awareness campaigns and projects, donations to children’s homes and afforestation. “In line with the government’s policy, we plant at least one thousand trees every year,” avers Mr. Mwarania. “A good case in point is Kibiku Primary school where we have planted around 3,000 trees in a piece of land dedicated to us over the last three years,” he adds.

Going forward, Kenya Re will continue being guided by the strategic plans it devices after every five years in order to be a profitable and solid organization that is able to pay handsome dividends to its shareholders, besides giving back to the community.



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