Why Liberty Kenya’s Profit Fell 65% Despite Revenue Growth

Liberty Kenya Holdings Plc reported a sharp decline in earnings for its 2025 FY as increased insurance claims across key business lines wiped out much of the gains, highlighting the underlying challenges in Kenya’s insurance sector.

The company said total earnings fell to KSh487 million for the year ended December 31, 2025, down from KSh1.40 billion in 2024, a decline of more than 65 per cent.

The drop came despite insurance revenue rising 8.5 per cent to KSh11.88 billion from KSh10.95 billion a year earlier.

The results illustrate a widening gap between premium growth and profitability in the insurance industry, where increasing claims costs erode underwriting margins.

Profit before tax from continuing operations declined 47.8 per cent to KSh1.09 billion from KSh2.09 billion in the previous year. Earnings per share also fell sharply, dropping 67 per cent to KSh0.85 from KSh2.59 in 2024.

The decline in profitability was primarily driven by a surge in claims across several insurance classes, including motor, medical, fire and group life policies.

The group’s insurance service result dropped 55 per cent to KSh478 million as insurance service expenses climbed 19.1 per cent to KSh10.15 billion, reflecting the increased claims burden.

Management said the elevated claims environment significantly compressed underwriting margins, even as the company maintained steady growth in premiums across its business segments.

Investment income also weakened during the year. Net investment income fell 17.8 per cent to KSh4.02 billion after the exceptionally strong market performance recorded in 2024 did not repeat in 2025.

Lower interest rates further affected earnings, particularly in the general insurance business, where investment returns play a key role in overall profitability.

Despite the earnings decline, Liberty Kenya maintained solid growth across its operating subsidiaries.

Heritage Insurance Kenya, the group’s short-term insurance arm, recorded revenue of KSh8.65 billion, up 5.6 per cent from KSh8.19 billion the previous year.

However, its claims ratio increased to 61 per cent from 53 per cent in 2024, reflecting the rising cost of claims in motor, medical and property insurance.

Liberty Life Assurance Kenya posted stronger growth, with insurance revenue rising 17.3 per cent to KSh3.23 billion from KSh2.76 billion, driven by demand for life, annuity and savings products.

The company’s investment portfolio also remained substantial, supported by a KSh21.4 billion allocation to government securities.

Overall group assets stood at KSh46.31 billion, slightly down from KSh48.15 billion the previous year. However, the company said its capital position remains strong, with both subsidiaries maintaining capital adequacy ratios well above regulatory requirements.

The group also completed the disposal of its stake in Heritage Insurance Tanzania during the year, a move aimed at streamlining operations and sharpening its strategic focus on the Kenyan market.

Despite the profit decline, Liberty Kenya’s board recommended maintaining a dividend of KSh0.50 per share, unchanged from the previous year. The dividend will be subject to shareholder approval at the company’s annual general meeting scheduled for May 29, 2026.

Group Chief Executive Officer Kieran Godden said the company’s diversified insurance platform helped sustain revenue growth even in a challenging operating environment.

He noted that rising claims, lower investment returns and shifting interest rate conditions created a difficult year for insurers, but that Liberty remains well positioned for long-term growth.

Industry analysts say the company’s results mirror broader trends affecting insurers in Kenya, where higher claims frequency, healthcare costs and property risks are putting pressure on underwriting profitability.

Looking ahead, Liberty Kenya said it plans to maintain cautious financial management while leveraging its strong capital base and expanding its distribution network to support future growth.

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