The profit after tax of the Awash Insurance Company (AIC) has increased to over 90 million Br. At the same time, its earnings per share has declined by 66 Br to 478 Br. The variation in the increase and decrease of the two was justified by the capitalisation of the companys earnings. Currently, it has hit 190 million Br in paid up capital.
The revenue growth was mainly driven by the huge amount of money earned from life insurance policies. Last year, the AIC earned close to 110 million Br from life insurance premiums – 33pc of the industry. This is nine percent higher than the preceding fiscal year.
In 2014/15,the AIC transferred 15.49 million Br to life funds without appropriating any money. Conversely, in 2015/16, it appropriated 28.6 million Br after transferring 22.1 million Br. This hugely contributed to the current years good performance.
The latest financial statement of the company reveals that the underwriting surplus of the company increased by 8.5pc to 92.9 million Br. The amount of net claims incurred increased by 15.4pc to 219 million Br.
On the other hand, the rate of expansion of income at Awash outstripped the increase in expenses. The latter increased by 3.6pc to over 98 million Br, while the former grew by 5.3pc compared to 2014/15 fiscal year. This shows that the AIC invested in those business areas that cost less than the benefits they might bring in.
“As net claims incurred have been expanding over the past few years, the management of the AIC needs to keep an eye on them,” said Abdulmenan Hamza Mohammed, analyst at London Portobello Ltd. “In comparison to the industrys expense expansion, the rate of increase at the AIC shows that it has controlled its staff and general administration expenses well.
The figure would have been higher if the management was not able to raise the number of premiums written by 18pc to 524 million Br, which helped the company to keep its claim ratio fixed at 63pc – lower than the industry’s average of 69pc.
Out of the total written premiums, nearly 95pc were retained and the rest passed on tore insurers. Despite the significant improvement of the retention rate from last years 80pc, the net claims incurred are increasing due to the rise in the number of high risk customers.
Over 60pc of the companys claims come from motor insurance. while the industry average for motor claims is around 70pc.
“This is an alert for the company to look up its risk management system, so as to identify high risk customers, “Abdulmena added.
“The problem is not only our problem, but rather one that the whole industry has experienced,” said the chief of the AIC. “We are undertaking a study to show how to bring a control mechanism to the issue.” The insurer has around 440 employees, who serve its millions of customers at 41 market outlets across the country. Awash’s total assets have reached over one billion birr – 28pc higher than in 2014/15. The expansion was mainly financed by raising paid up capital and technical provisions. It is one of the companies that invested in the newly established Ethiopian Reinsurance.
Awash has registered a success story in investment activities, particularly in interest earning areas, involving other players in the finance sector. Interest on savings has increased by 15pc to 37.6 million Br; dividend income has also gone up by almost the same rate to 24.5 million Br. However, the other non-investment income of the company declined by almost 150pc to three million birr.
It paid 25 million Br to establish Ethiopian Reinsurance along with other shareholders, with a paid up capital of 500 million Br. Ethiopia Reinsurance was initiated by state-owned financial institutions. A 40pc share of the company is jointly owned by The Ethiopian Insurance Corporation (EIC) and the Commercial Bank of Ethiopia (CBE). The remaining shares are divided among 17 private banks and insurance companies, as well as 81 individuals.
In addition to Ethiopia Re, last year the AIC also purchased additional shares worth 33.6 million Br from Awash International Bank, which raised the AICs share to 122 million Br.
Currently, the two companies do not have any overlapping board members. However, the AIB is the major shareholder at the AIC. Likewise, the AIC owns close to a five percent stake at the AIC.
To boost its technological advancement, the company also signed a 3.3 million Br IT infrastructure contract within fusion Software in a bid to acquire Enterprise Resource Planning – a system that would automate and integrate the company’s core businesses. Last year, the total capital of insurance companies grew to 3.6 billion Br from 2.7 billion Br, of which over seven percent went to the AIC. This makes the company the most capitalised private insurance companies, out of the 16 in the country.
The business commenced in 1994 with 456 shareholders. The AIC now has over 1,200 shareholders.
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