Old Mutual Holdings has posted the first profit in over six years on the back of reduced costs of servicing loans.
The insurer has reported a net profit of Sh838 million in the financial year ended December 2024, marking an improvement from a net loss of Sh114 million a year earlier.
The full-year net profit is the first after back-to-back losses in at least five years, with the largest net loss having come in 2019 at Sh3.49 billion.
In the latest results, finance costs dropped by 48.9 percent to Sh1.23 billion despite borrowed funds rising to Sh7.09 billion from Sh6.8 billion. This indicates that it had retired more expensive credit facilities.
The firm said it converted part of the shareholder loans into equity, saving it from higher finance costs.
“The notable sources of the increase in profits include the continued growth of the asset management business, which registered a Sh0.3 billion increase in profits and a significant increase in investment income of Sh2.3 billion,” said the firm in a commentary accompanying financial results.
“We also recorded savings in operating expenses as well as a reduction in finance costs following the conversion of shareholder loans into equity.”
Investment income, including money received from assets such as government securities, fixed deposits and property, rose by 41.6 percent to Sh7.69 billion from the previous year’s Sh5.43 billion.
The increased investment income boosted Old Mutual’s results despite insurance service results —the difference between collected premiums and claims paid out as well as the related expenses— dropping by 77.8 percent to Sh361 million.
The insurer explained that its insurance profit dropped due to increased cost of claims from the medical businesses and costs arising from exceptional events such as the floods that hit Kenya between March and June last year.
The floods, added to widespread street protests that started as anti-tax demonstrations before morphing into anti-government demos, left a trail of death, injuries and looting and destruction of properties, which manifested through high claims for insurers who had covered customers against political and property insurance.
Old Mutual said claim costs incurred during the period under review were Sh15 billion higher than in 2023, reflecting higher payouts.
Additionally, the insurer said lower claim recoveries were noted in its facultative business in Uganda, leading to increased outflows in the reinsurance results.
During the review period, Old Mutual exited the Tanzanian market, booking a Sh363 million loss on the disposal of the subsidiary.
Investment income has emerged as a big contributor to insurers’ profits on the back of major classes of insurance, including motor and medical, posting underwriting losses.
Insurers have been going for investment classes with higher and relatively stable returns, cutting their exposure at Nairobi Securities Exchange to below three percent of their investment portfolio.
