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Tuesday, August 3, 2021

AAR Insurance profit declines, Covid-19 pushes up claims

By The Frontier Post Reporter

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AAR Insurance Kenya overall performance decline by 55 percent to post Sh234 million in 2020 compared to Sh517million in 2019.

The firm’s profit-before-tax also declined from Sh756 million to Sh317million over the same period.

Gross written premiums, representing the company’s revenue, declined marginally by 3 per cent from Sh5.86 billion to Sh5.68billion.

According to the insurance firm that also runs chain of outpatient health facilities across the country, the decline was occasioned by a tough operating environment, coupled with a surge in claims due to Covid-19.

However, net earned premiums grew 19.7 percent to Sh3.74 billion as total income also increased 14.6 per cent to Sh4.56billion.  

Net claims and policyholders’ benefits rose 54.2 per cent to Sh2.59 billion from Sh1.68 billion the previous financial year, with the company paying out close to Sh200 million in Covid-19 claims in 2020, signaling the harsh financial impact of the pandemic on health insurers.

AAR Insurance Kenya Managing Director, Nixon Shigoli, attributes the surge in claims to Covid-19 impact on business and families.

“2020 was an extremely challenging financial year given the sudden shocks of the new coronavirus health crisis which significantly affected our bottom line given impact on many employers and families,” explained Shigoli.

Total assets grew by 4 per cent to close the year at Sh 5 billion while shareholders’ funds increased to Sh 1.3 billion from Sh1.1 billion in 2019.

Management expenses ratio improved from 35 per cent in 2019 to 30 per cent in 2020 despite an increase in operating expenses by 3 per cent due to costs incurred in cushioning staff and customers against the pandemic.

“Currently, 80 per cent of our staff are working from home. We have taken measures to ensure minimum disruption to our business while at the same time ensuring the health and safety of our customers,” he said.

Going forward, AAR Insurance is banking on accelerated digitization of its operations to improve efficiency and drive growth of its business.

Shigoli said that the insurer has automated most of its services leading to improved efficiency, faster turnaround times and a better customer experience, even as he amplified the importance of digital transformation in insurance.

“The biggest winner is digitization. We are seeing increased use of digital platforms partly due to COVID-19 limiting in-person contact between clients and service providers. However, convenience is also a driving factor especially for tech-savvy consumers seeking real-time solutions to their insurance needs,” he explained.

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