Awash Insurance Company S.C. (AIC) has reversed last year’s poor performance in profit after tax and earnings per share (EPS) but the general growth rate is still lower than that reported in the fiscal year 2012/13 and previous years. In the past year, the Company registered a 10.5pc increase in profit after tax to 64.3 million Br and marginal 3.8pc increase of EPS to 272 Br.
The decline in growth rate of EPS is attributed to the sluggish growth rate in profit after tax coupled with massive expansion in paid up capital, said Abdulmena Mohammed, a financial analyst working as an account manager for Portobello Group Ltd, based in London. For instance in 2012/13 the insurance firm had registered a 114pc boost in its profit after tax while expanding its capital by 38.6pc, in contrast to this year’s 6.5pc raise.
Its income from investment has gone up by 40.7pc to 22.4 million Br; and interest earned on savings has increased by only 2.29pc to 24.1 million Br. Particularly, income from rent and other activities has jumped by 130pc to 10.3 million Br.
Total expenses caught up with the income increase reaching 57.8 million Br.
The gross written premiums of AIC have gone up by 13.8pc to 404.3 million Br; it has retained 89pc of this, which is far above the industry average of 70pc. This rate has helped AIC to improve its performance given that it has experienced slow growth of income from insurance premium and increase in expenses.
However, the growth in premiums has exposed it to higher risks, said Abdulemena, with net claims having increased by 6.9pc to 189.6 million Br.
It is important for the management to look into its retention policy as well as customer screening procedures, he recommended.
By investigating the frequency and severity of risks and enhancing risk selection skills, Awash has been able to mitigate the increasing claims ratio, Jibat Alemneh, claims manager, said. Training customers is just one of the methods, he said.
Of the total claims, the majority, 157.8 million Br, was incurred from motor insurance.
Awash’s liquidity stands at 1.79, well above the recommended minimum of one.
“As long as we fulfil liquidity obligations, we opt to invest in other sectors and make sure we don’t over liquidify,” said Adane Seyoum, the financial manager.
In line with the above assessment the company has increased its investment in assets by 15 million Br from last year, reaching a little less than hundred million Birr. It invested in various areas like financial institutions, hotel and tourism, and agro-industry sectors.
In business since 1995, AIC now has 791 shareholders with a branch network of 36. During its 2015 annual shareholder meeting the firm announced that it will raise its paid-up capital to 300 million Br by selling 180 million Br worth of shares.
A hot subject of debate at the assembly was the proposal to retain five million Birr worth of shares for the 448 employees of the company. One shareholder threatened to take the case to court if Awash went through with that, arguing there was no guarantee that the employees would continue working for the company after getting the shares. The management made the proposal as an incentive to employees.
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