Pan Africa Insurance profit may drop

PAN Africa Insurance Holdings expects full-year profits for 2014 to fall by at least a quarter on reduced gains from its investment at the Nairobi Securities Exchange (NSE).

  The insurer said that gains from the Nairobi bourse last year were lower compared to 2013, which was further compounded by reduced deals in the property market.

  Pan Africa is the first insurer to offer a preview of its 2014 earnings. Analysts said the performance is representative of the insurance industry whose results are influenced by NSE’s.

  The insurers rely on income from investment in the stock market, property, bonds, unit-linked and pension funds to offset any underwriting losses.

  They also book appreciation of share prices in firms they have invested in as unrealised or paper gains (also known as fair value gains) in their income statements.

  “In 2013, the group’s profit benefited from unrealised mark-to-market gains on equity investments, which did not repeat to the same extent in 2014… profit earned from property sales was much lower in 2014 than the 2013 financial year due to lower level of sales,” said Pan Africa chairman John Simba in a statement on Wednesday.

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   Pan Africa’s net profit grew 31 per cent to Sh295.5 million in 2013 and the profit alert means it will post earnings below Sh221 million.

  Insurance firms and fund managers have increased their exposure in equities over the past three years in a period that saw NSE record a bull run.

  The main NSE 20 share index grew by 3.8 per cent last year compared to 19 per cent in the previous year.

  Market capitalisation of all shares was up 20 per cent compared to 44 per cent in 2013. Pan Africa reported a net profit of Sh295.5 million for the 2013 financial year, which represented a 31 per cent gain on the previous year.

  Unrealised gains on investments, such as equities, stood at Sh1.17 billion, having doubled.