Jubilee Holdings Posts a 1.3% y/y Decline in After Tax Profit for FY2018

Jubilee Holdings registered a 1.3% y/y decline in after tax profits for FY2018 to KES 4.2 billion. The group’s performance was characterized by a decline in total income, which was offset by a dip in net insurance benefits and claims. Total income eased by 10.4% y/y to KES 28.0 billion due to a 9.8% y/y drop in net insurance premium revenue to KES 17.3 billion and a net fair value loss on financial assets of KES 375.0 million. The dip in net insurance premium revenue was occasioned by a 5.6% y/y decline in gross earned premium revenue to KES 26.7 billion. We opine that the weak top-line performance in premiums was underpinned by a challenging operating environment; especially in Kenya. Total income was however supported by a 15.1% y/y increase in investment and other income to KES 8.7 billion (that benefited from a conservative investment strategy) and a 30.0% y/y growth in commission income to KES 2.3 billion. Total expenses grew by 4.8% y/y to KES 8.0 billion, mainly driven by a 10.4% y/y increase in operating expenses to KES 4.7 billion. Net insurance benefits and claims contracted by 19.0% y/y to KES 15.9 billion on the back of a 17.7% y/y decrease in claims and policy holder benefits expense to KES 20.7 billion. Consequently, the loss ratio fell to 138.2% from 142.2% in FY2017 and the expense ratio declined to 92.0% from 102.4% in FY2017 (owing to the lower claims and total expenses). The reduction in claims was influenced by the group’s adoption of biometric identification which helped minimize instances of fraud. We believe the group’s continued focus on fraud management (for instance its use of biometric identification) will further minimize claims and enhance bottom-line performance.