CIC draws 27pc of its revenue from asset management unit

CIC Insurance Group drew 26.8 percent of its total income from its asset management business, highlighting the importance of the division to the Nairobi Securities Exchange-listed firm.

The disclosures of CIC’s different businesses in the half-year ended June come in the wake of the adoption of the International Financial Reporting Standard (IFRS 17), which aims to increase transparency, among other objectives.

CIC earned revenues of Sh569.5 million from its asset management arm in the review period, rising from Sh540.6 million a year earlier.

Total income, including from insurance and investments, increased to Sh2.1 billion from Sh1.4 billion.

This, combined with a drop in operating expenses and growth in net premiums, saw the insurer grow its net profit 2.6 times to Sh705.4 million from a restated Sh263 million.

CIC has the largest assets under management in the money markets business, investing capital on a short-term basis for individuals and institutions.

The insurer’s total assets under management stood at Sh59.6 billion as of June. The company runs a money market fund, which holds assets of Sh56.8 billion and a US dollar fund (Sh1.4 billion at current exchange rates), among other products.

Asset managers charge clients a fee to invest their funds in securities such as fixed bank deposits, listed shares, short-term corporate debt and Treasury bills.

Fund managers with more assets typically earn more revenue, attracting and retaining clients a major strategy for growing and stabilizing the fee income.

CIC’s money market fund holds about a third of the assets in the segment, with other major players being NCBA, Sanlam, ICEA, Britam and Old Mutual.

Data from the Capital Markets Authority (CMA) shows that money market funds invest predominantly in government bonds and Treasury bills, followed by fixed bank deposits and cash and demand deposits.

The focus on fixed-income securities is meant to guarantee returns as well as liquidity to investors.

Investors in such funds are often promised the ability to cash out their capital in a matter of days.

Besides asset management, CIC benefitted from improvement in the insurance business which posted a net result of Sh861.8 million in the half-year period, up from Sh446.2 million the year before.

The insurer also cut operating expenses to Sh683.5 million from Sh703.9 million.