AAR profit down on increased claims

By Wainaina Wambu

AAR Insurance Kenya Managing Director Nixon Shigholi. [Courtesy]

Medical underwriter AAR Insurance posted a 55 per cent drop in performance for the year ended December 2020, attributed to high claims due to Covid-19.

Total profit fell to Sh234 million last year compared to Sh517 million in 2019, its financials showed.

AAR paid about Sh200 million worth of Covid-19 claims in 2020.

“(Last year) was an extremely challenging financial year given the sudden shocks of the new coronavirus health crisis, which significantly affected our bottom line given the impact on many employers and families,” said AAR Insurance Kenya Managing Director Nixon Shigoli after the release of the results.

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

This came even as net premiums grew 19.7 per cent to Sh3.7 billion as total income also rose 14.6 per cent to Sh4.56 billion.

The management expenses ratio improved from 35 per cent in 2019 to 30 per cent in 2020 despite an increase in operating expenses by three per cent owing 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,” Mr Shigoli said.

Total assets grew by four per cent to close the year at Sh5 billion while shareholders’ funds increased to Sh1.3 billion from Sh1.1 billion in 2019.

Net claims and policyholders’ benefits rose 54.2 per cent to Sh2.59 billion from Sh1.68 billion the previous financial year.

Shigoli said AAR had accelerated digitisation of its operations to drive growth and had automated most services.

“We are seeing increased use of digital platforms partly due to Covid-19 limiting in-person contact between clients and service providers,” he said.