UAP Old Mutual Group has recorded a profit before tax of KES 552m in HY 2021 compared to a loss of KES 57m for the same period in 2020. The performance was an improvement on 2020 driven by strong topline growth and investment income performance on the back of the NSE recovery in Half Year (HY) 2021. Excluding the impact of the Old Mutual Life Assurance Company (OMLAC) consolidation the Group recorded a profit before tax of KES 518m.
Arthur Oginga, Group CEO noted,
“The performance of the UAPHL PLC business in H1 2021 was delivered on the backdrop of the initial stages of the expected economic recovery as the different countries we operate in work towards a return to normalcy while managing the risks of subsequent waves of the Covid-19 pandemic. In our core Kenya market, we have seen positive results in the NSE indices and economic data as at H1 2021 which speaks to the initial stages of the recovery. The highlights for our business in this period include strong topline growth, return to profitability and positive cash flow generation from operations”.
Following an Extraordinary General Meeting held on 31 December 2020 by Old Mutual Life Assurance Company Limited (OMLAC) shareholders, a resolution was passed to sell all the shares of the Company to UAP Life Assurance Limited (UAPAL) in exchange for shares in UAPAL.
This resulted in UAP Holdings Plc continuing to exercise control, although its shareholding in UAPAL will reduce from 100% to 55.7% with the remaining 44.3% being held by Old Mutual Holdings Limited. Effective date of control was 25th January 2021. The consolidation of the two life companies is part of our corporate structure simplification and the UAPH results as at H1 2021 is the first set of consolidated results that include OMLAC.
Gross written premiums were up 33% driven by both the short-term insurance and long-term insurance businesses. The long-term insurance business experienced a recovery compared to prior year driven by strong corporate sales while the short-term insurance business has sustained the strong growth recorded in 2020. Net earned premiums were up 17% over the same period in 2020 in line with Gross earned premiums which were up 22%. Excluding the results of OMLAC, on a like for like basis, gross written premiums were up 26%, gross earned premiums were up 14% and Net earned premiums were up 8%.
Investment income was up 121% driven by recovery in the Kenya equities market. The NSE All Share, NSE 25, and NSE 20 indices were up 14%, 10% and 3% respectively in H1 2021 compared to down 17%, 22% and 27% in H1 2020 on the back of the economic impact of the measures imposed to contain the pandemic. Excluding the impact of the Old Mutual Life Assurance Company consolidation, investment income was up 90%.
Net claims payable were up 48% driven partly by increased medical claims relating to Covid cases and hardening of reinsurance terms in 2021 that has led to reduced reinsurance recoveries. Excluding the impact of the OMLAC first time consolidation, net claims payable were up 30%. The Group has continued engaging with customers who have been impacted by the pandemic and supported them in receiving appropriate care to recover.
Operating expenses were up 2% over H1 2020. Costs have remained well contained driven by operational efficiencies on the back of the technology investments we have been making in recent years. Excluding the impact of the OMLAC consolidation operating expenses were down 8%.
Interest costs on borrowings were down 8% on HY 2020 driven by forex losses on the dollar denominated debt in the previous year. We refinanced our dollar denominated debt in the second half of 2020 and as such eliminated the forex mismatch risk.
“Our strategy is focused on delivering an integrated financial services offering for our customers by leveraging the solutions provided within our individual lines of businesses to deliver on a one-stop solution. This will drive improved productivity in the individual businesses and consequently the whole Group. As part of this strategy, we have concluded the takeover of OMLAC by UAP Life Assurance Limited which will result in a combined life business in the Kenya market and we expect to unlock the synergies that this presents going forward. We remain cautious given that the pandemic is still unfolding and are supportive of ongoing vaccination efforts as the governments work towards reducing the spread of the virus”
said Mr. Oginga during the investor briefing.