Kenya Re goes into a post dividend slump

Recognized globally as a reputable reinsurance company, Kenya Reinsurance provides reinsurance services for most classes of business. With recognition from international rating agencies like A. M Best and Global Credit Rating, this corporation that was established through an act of parliament is trusted by businesses across the globe.

A veteran of the reinsurance industry, they've been in business for more than half a century and have built a huge customer base in a low-competition industry. With a customer base of more than 480 companies spread across Africa and Asia, Kenya Re is a recognized player in the industry. Being the oldest reinsurer in East & Central Africa positions them fairly well in an industry where legacy is highly valued.

The slump

They recently fell victim to the good-old post-dividend slump; after a good year with profits up 53% since fiscal year '22, there's been a frenzy by investors to sell their holdings which in turn has sent the share price tumbling. This came right after books were closed, which was expected after the stock had rallied to a high of KES 2.87. The price correction has just began and investors should expect further price drops, if the year average is anything to go by, especially after the firm announced a bonus share.

Encountered headwinds

It wasn't all rainbows and sunshine however, the firm's insurance revenues decreased by 15% from KES 23.13B in 2022 to KES 19.57B in 2023. With insurers delaying payouts and requiring further due diligence before paying out claims due to new taxes that came into effect in 2023, this number(insurance revenues) should increase as insurance company clients get frustrated and abandon the claims.

Increased efficiency

With their primary objective being increasing shareholder value, their cutting of operating costs by 2% and posting an increase in shareholder funds by 18% certainly sent a clear message to the market. In the same light they increased their asset base by 15% from KES 57.45B to KES 65.98B, which is remarkable to say the least.

Conclusion

This is a company in a low-competition industry, an industry where the customer is looking for reliability and a track record that proves it, and the fact that they've been around for more than 50 years speaks volumes. Together with a couple other players, they control a sizeable chunk of the market and wield immense influence in the industry.

With recent developments; the issuance of a 1:1 bonus share, the stock seems to be fairly valued. With a p/e of 1.6, earnings per share of 1.9, after basic calculations(bonus share considered) the stock price is right at home and might see an upward trend in coming months. This is of course with all other factors being constant, there certainly are a lot of other factors at play that influence the price, nevertheless, in my opinion it's a stock with potential and one to keep an eye on.

Note

Information used was information available as of June 28, 2024.

Resources

Kenya Re , Delays in payouts by insurers , Nairobi Securities Exchange