UAP Holdings Limited has posted Sh518 million loss, the first in about a decade, joining the group of insurers whose earnings have come under pressure.
The loss for the financial year ended December 2018 is a 166 percent decline in performance from the Sh608 million profit that was reported in the previous financial year.
Group CEO Peter Mwangi said the business experienced challenging conditions last year.
"Performance was impacted by a tough operating environment in Kenya and the wider region.
"We have had to let go of accounts we couldn't price properly and that has had an impact on the topline," said Mr Mwangi in a press statement.
UAP becomes the third insurer on the Nairobi Securities Exchange (NSE) to post a loss.
Britam #ticker:BRIT returned a loss of Sh2.2 billion while Sanlam #ticker:PAFR posted Sh1.97 billion loss.
All the three insurers issued a profit warning as so did Kenya Re #ticker:KNRE whose profit dipped by 36.4 per cent to Sh2.27 billion.
Profit of Liberty Insurance dropped by 9.8 per cent to Sh608 million.
CIC Insurance had 31 per cent rise in profits to Sh625 million while Jubilee results are not yet out.
Against the UAP performance, investors will not receive any dividend unlike last year when the board declared Sh1.70 per share amounting to Sh359 million.
The combination of increased claims and reduced investment returns also affected the returns.
Gross written premium reduced by 1.8 per cent to Sh18.7 billion as the firm dropped non-performing accounts.
Net claims payable rose by 10 per cent to Sh10.38 billion.
"The increase was largely driven by more prudent reserving in our short-term insurance businesses, claims deterioration in South Sudan where inflation remains high and increased reserves in our life business," said Mr Mwangi.
Total income dropped by 6.8 per cent to Sh18.7 billion majorly driven by 20.4 per cent reduction in investment income due to poor performance of equities market at the Nairobi Securities Exchange (NSE) #ticker:NSE.
NSE 20 share index was down 23.5 per cent last year leading to unrealised losses of Sh478 million for UAP.
Additionally, property valuation write-downs of Sh604 million due to reduced rent prices hurt the income levels.
Operating expenses dropped by 11 per cent to Sh5.4 billion from Sh6.14 billion on increased operating efficiency.
Last year, the group cut staff head count by 89 at a cost of Sh342 million.
'We expect to realise more savings in 2019 given that the impact of the reorganisation exercise will be experienced for the full year," said Mr Mwangi.