Nile Insurance Company S.C. (NIC) has enjoyed a profit after tax of 64.9 million Br in 2013-2014, an increase of 55.44pc from the previous fiscal year. Earnings per share (EPS) has also increased from 445Br to 598Br.
The paid-up capital of the company has also increased, soaring to 100 million Br from the previous year’s 91.6 million Br. The company is planning to increase paid-up capital to 200 million Br within three years, having gained the heart of its shareholders to reinvest their EPS into the capitalization of the company.
The number of company branches reached 30 by the end of the last fiscal year, with five new branches opened in the year.
“The growth in profit after tax has mainly been as a result of increased investment income, income from new lines of business, life insurance, gain on disposal of shares, reversal of provision for doubtful debts and a modest increase in underwriting surplus,” says Abdulmena Mohammed Hamza, an analyst working as an account manager at the Portobello Group Ltd., “that may not recur again.”
The company has a different stance on the issue of provision for doubtful debts.
“The other incomes, such as the disposal of shares from the Bank of Abyssinia and the life insurance income are not recurring,” says NIC CEO, Dawit Gebreamanuel, “but the other income from the provision for doubtful debts is recurrent, as we are expecting up to five million Birr from this line of income.”
The company’s gross written premium (GWP) grew by 17pc from the previous fiscal year, to 300.4 million Br, while retaining 87.74pc of this. The retention rate at NIC is far higher than the industry average. Net claims have gone up by 10.46pc to 152.54 million Br.
“Retaining more premium generates more income, but exposes NIC to additional risks, so NIC management should make sure that the risks will not outweigh the benefits,” says Abdulmena.
A source at the company told Fortune that the strategy to control this risk is to capitalize the Bank.
“The shareholders are willing to reinvest their dividend into the capitalization of the company,” said the source.
Total NIC assets have increased by 17.33pc to 547.34 million Br. Of this, 414.88 million Br has been invested in shares, government bonds and interest earning deposits. The total investments have increased by 20pc.
“The growth in investment is in line with expansion of NIC assets. This has enabled NIC to earn more income,” comments Abdulmena.
The paid-up capital of the company increased by 9.17pc to 100 million Br. The capital and reserves of NIC represent 18.27pc of total assets. This was lower than it was a couple of years ago, as was the case for other insurance companies.
“NIC should capitalize itself in line with exposure to more risks and expansion of business,” says Abdulmena.
NIC CEO says the company is planning to raise the paid-up capital to 200 million within two year.
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