* Pretax profit rebounds to 2.8 bln shillings
* Considers expansion into Tanzania, Rwanda this year
* Sets up 10 billion shillings property fund
NAIROBI, March 14 (Reuters) - Kenyan diversified financial services firm British American on Thursday reported a 2.8 billion shillings ($32.81 million) pretax profit for last year, recovering from a 1.7 billion loss a year earlier.
The company, which has insurance, asset management and property development businesses, attributed the recovery to higher revenues from sale of insurance policies and investment income.
Insurance is seen as a growth area in the region due to low levels of penetration. Only about 7 percent of the 40 million people in Kenya, east Africa's biggest economy, have any form of insurance.
Benson Wairegi, group managing director, said income from the group's investment portfolio rose 5 billion shillings during the period, up from a loss of 2.1 billion shillings earlier.
Financial markets performed strongly last year with the benchmark share index of the Nairobi bourse and Kenyan bond yields going up.
Gross revenue from its insurance and asset management arms grew by nearly a quarter to 7.2 billion shillings.
Earnings per share rose to 1.40 shillings from a loss per share of 1.09 shillings, British American said, adding it was in the process of setting up a 10 billion shilling property fund.
It said it would raise its product distribution network in Kenya through recruitment of staff and investment in information technology. The group, which operates in Uganda and South Sudan, said it plans to expand into Tanzania and Rwanda before the end of this year.
Its shares fell just over 2 percent to 8.70 shillings each as investors booked profits following a 50 percent rally in the year-to-date, traders said.
($1 = 85.3500 Kenyan shillings) (Reporting by Duncan Miriri; Editing by George Obulutsa and Jane Merriman)