By LOLA OKULO
POOR performance by the stock market has cut insurance companies’ investment earnings by nearly half, according to the latest industry report.
The Insurance Regulatory Authority’s industry report for third quarter released on December 21 shows investment income for the industry dropped by 48.62 per cent to Sh12.77 billion as at end September 2015 compared with Sh24.87 billion the insurers earned over a similar period in 2014.
Long term insurance business was the most affected with investment income dropping by more than half to Sh9.93 billion from Sh21.38 billion previously, a decline of 53.54 per cent.
Government bills and bonds accounted for the largest share of the industry’s investments although their good returns was weighed down by the poor performance of quoted shares.
Total investments for the insurance industry amounted to Sh376.34 billion with investment in government securities at Sh155.22 billion or 41.3 per cent of the total investments.
“This can be attributed to the legal requirement for companies to invest in Kenya government securities coupled with the attractive yield in these bills and bonds witnessed in the recent past,” said IRA in the report.
Data by the Nairobi Securities Exchange shows investors at the NSE lost Sh250 billion last year compared to 2014.
The poor performance is largely blamed on depreciation of the shilling and reduced corporate earnings due to a tougher operating environment.
Sub-Saharan African stock markets have significantly underperformed, various economic reports indicate, posting negative returns across the board due to a sustained outflow of foreign investors’ funds.
This is linked to recent rate increase in the US which has reduced their risk appetite for securities in emerging and frontier markets and made the US market more attractive.