Annual report - front page - Jubilee Insurance

CHAIRMAN’S STATEMENT (CONTINUED)our core business activity, and first class risk management andselection practices.In 2011, Jubilee continued its phased expansion campaign,strengthening its operations in Burundi and Mauritius, as it gearsto expand into three additional countries by 2014 and at least 11countries in Africa by 2020.Jubilee’s strong performance marks the success of yourcompany’s initiative to increase market share in the region.We consider it very important that our core insurance businesscontributes effectively to our group results and to enhancethis, Jubilee is making significant investments in new operatingsystems and customer service capabilities. I am also pleased withan impressive increase in medical underwriting profits, a result offurther improvements in case management protocols and claimsservice efficiency.National economyThe global economy is stable, with the IMF projecting worldeconomic growth in the region of 3.6% The Central Bank ofKenya (CBK) estimates Kenyan GDP to have grown by 4% -4.5% in 2011, which is a slight reduction over the 2010 growthof 5.6%. Key drivers of the region’s economic growth includedimproved performance by the agricultural and industrial sectors.Inflationary pressures and exchange rate volatility escalated in2011 as a result of a combination of domestic and internationaleconomic developments. Inflationary pressures peaked inresponse to increasing food and fuel prices due to persistentlyhigh international oil prices while pressure on the exchange ratewas mainly attributed to uncertainty in the global financial marketthat was caused by the debt crisis in the eurozone. Averageannual inflation was at 14.2% in December 2011, compared to4% in 2010 while the Kenya shilling weakened to KShs 85.06compared to 80.8 in 2010.Short-term interest rates increased significantly in 2011 with thebenchmark 91 day Treasury bill closing at 18.9% against 2.3%recorded in 2010.In the capital markets, the NSE 20 Share performance declinedsignificantly by 28% to 3205 in December 2011 from 4432 inDecember 2010.An intensified tightening of monetary policy was adopted bythe CBK’s Monetary Policy Committee to tame inflationarypressures and stabilize the exchange rates. The MPC in itslatest meeting reviewed several market developments in orderto evaluate whether the desired outcomes of its policy stancehad been achieved. The Committee observed that its tightmonetary policy measures had yielded results with inflation ratesdeclining, interest rates on government securities falling further,the exchange rate stabilizing and private sector credit growthexperiencing a downward trend. However, the Committeeidentified certain potential risks in the economy driven by nonfood-non-fuelinflation, widening of the current account deficitand rising of crude oil prices as well as the high and volatileinterbank rates, among others.Financial PerformanceJubilee, East Africa’s oldest and largest insurance group, reporteda Group Profit Before Tax of 2.144 billion, an increase of 4.4%from 2.1 billion in 2010 and Gross Written Premiums increasedby 39% to Sh15.983 billion, (2010: 11.5 billion) and postedunderwriting profits significantly higher than key peers acrossour markets. These results underscore the importance Jubilee hasplaced on sound risk management and underwriting discipline,which has allowed Jubilee to post a record underwriting profit ofKShs 540 million.Despite the challenges faced in our regional markets, coupledwith the uncertainty in the global environment, the excellentperformance by the Jubilee Group underlines our capability todeliver superior value and returns for our shareholders and otherstakeholders.Based on Jubilee Group’s impressive performance in 2011, I ampleased to report that the Board has recommended a dividendof 110% for the year 2011 (same as 2010), on the increasedshare capital of Kshs 272.25 million. An interim dividend of20% (Kshs 1.0 per share) was paid on 07th October 2011.The Board is seeking your approval for a final dividend of 90%(KShs 4.5 per share) bringing the total dividend for 2011 to Kshs299.475m (2010: Kshs 272.25m). In addition, the Board hasrecommended a bonus share issue in the ratio of 1:10, subjectto the requisite regularoty approvals. This bonus share, will bethe third consecutive one, which upon approval, was planned aspart of the celebrations in a year in which Jubilee attains its 75thbirthday on the 3rd day of August 2012.General Insurance performanceJubilee’s general insurance gross written premium grew by 41%to reach Kshs 7.441 billion (2010: Shs 5.288 billion) and eachof our insurance subsidiaries in Kenya, Uganda and Tanzaniacontributed to achieving a consolidated combined ratio of88.6%, which is an outstanding performance. This reflectsstrategies implemented to improve operating efficiency, ourrigorous focus on risk management, and an innovative productdevelopment drive that has seen Jubilee launch products inagricultural insurance, political violence, terrorism and sabotagecovers, and those targeted to Small and Medium Enterprises.Medical Insurance performanceThe Group’s medical business achieved a 49% growth toreach KShs 3.816 billion (2010: KShs 2.567 billion). Jubileeconsolidated and enlarged its market leadership in medicalinsurance business market leadership in Kenya while expansionof the successful franchise into Tanzania and Uganda generatedan exceptional 341% growth in Tanzania and made significantstrides in Uganda. Our retail medical product, J-Care, tailored toyoung families, was well received in the Kenyan market and in2012 we look forward to introducing it to more regional offices.Life Insurance PerformanceThe gross life insurance premium income and depositadministration inflows demonstrated strong growth of 30% toKshs 4.726 billion (Kshs 3.639 billion in 2010). This reflectsthe Group’s strategy to expand its life insurance portfolio withinthe region and the success of the group’s customer focusededucation and asset building products which are built aroundthe long term saving, education and protection needs of Jubilee’scustomers.Group Operations2.144bnGroup Profit Before TaxJUBILEE HOLDINGS LIMITEDAnnual Report and Financial Statements 2011 7