The Kenya Reinsurance Corporation (Kenya Re) will stop covering marine vessels following a rise in claims.

The international re-insurance company paid out about Sh200 million in marine claims last year, accounting for almost 10 per cent of its total net insurance claims of Sh2.6 billion.

Managing director Eunice Mbogo says most of the claims came from reported sinking or damage to the body of the vessels in the Middle East.

The company which is listed on the Nairobi Stock Exchange said it would avoid the business as part of its growth and profit sustainability strategy in the short to medium term.

The re-insurer recorded a 22 per cent growth in its pre-tax profits to Sh966 million for the financial year ended December 31, 2007, up from Sh796 million realised in 2006.

But also eating into Kenya Re's pre-tax profits was a voluntary staff retirement programme which cost the company Sh197 million as it seeks to reduce its operational costs. Ms Mbogo said the retirement scheme saw about one third of the company's staff estimated at about 100 apply for early retirement.

"The company was overstaffed and the retirement option was extended to willing staff to bring the company in line with internationally accepted standards," says Ms Mbogo.

The company's pre-tax profits also exceeded last year's projection of Sh689 million promised to investors during its initial public offering (IPO).

After tax profits increased by 35 per cent to Sh729 million, buoyed by a lower tax rate applied to newly listed companies as part of the Capital Markets Authority's listing incentives.

Companies that sell at least a quarter of their shares to the public pay corporate tax at a lower rate of 25 per cent for the first five years after listing compared to a normal corporate tax rate of 30 per cent, while those that offload at least 40 per cent enjoy an even lower rate of 20 per cent.

Kenya Re went public last year after the Government sold 40 per cent of its shareholding in the company through an IPO. Net premiums earned increased by 6.54 per cent to Sh2.9 billion, while investment income mainly from rent on building and other investments increased by 25 per cent to Sh939 million.

Total assets went up by 14 per cent to Sh14.7 billion in the period under review, while shareholders' funds increased by Sh1 billion to Sh7.3 billion.

The board has recommended a payment of a first and final dividend of Sh0.36 per share.

The re-insurer is looking to spread its geographical risks by increasing its focus on the French speaking West African countries of Senegal, Ivory Coast and Cameroon. Ms Mbogo says there is a huge potential for growth in the West African market whose re-insurance premiums are estimated at about Sh88 billion, yet it is served by only about three re-insurance companies.

The managing director who joined Kenya Re from private insurance company British American (Britak) last year says that Kenya Re does not expect to suffer from any significant claims resulting from damage caused to insured businesses by the post- election violence early this year.

Primary insurers have said they expect to pay out about Sh1.2 billion as compensation for claims from businesses that suffered damage from the violence that followed the disputed December presidential poll.

But Ms Mbogo says t no insurer in Kenya offers a policy cover relating to damage resulting from acts of political violence, and all payments will be paid by insurers on a voluntary basis.

"Such payments will be voluntary and will be approved on a case by case basis, meaning that they are not likely to result in any significant claims to Kenya Re," says Ms Mbogo.