Nile’s CEO Departs, profit Down


The firm's profit plummeted to 20 million Br from nearly 50 million Br




Nile Insurance‘s CEO has stepped down following declining profits for the second year in a row.

The firm confirmed that Melaku Sissay left his position on December 15, 2016, and has been replaced as CEO by the board of directors by claims manager Hailu Makonnen. Hailu’s appointment has to be approved by the National Bank of Ethiopia.

Hailu joined Nile as junior clerk 21 years ago during its establishment, and served in various key positions, including a stint as acting CEO of Tsheay Insurance in 2013.

In 2015, a month before Melaku’s appointment , the insurance’s proposed CEO was rejected by the NBE for failing to meet the stringent criteria.

Melaku served at Nile for more than a decade. Prior to becoming CEO last year, he was Manager of the Internal Audit Department for more than nine years.

His resignation comes a week after the insurance presented its latest performance report to its shareholders.

The insurance’s profits plummeted to 20 million Br from nearly 50 million Br in 2015.The same trend was also observed in its earning per share, which dropped to 119 Br. Many factors contributed to such a profit performance.

Underwriting surplus declined by 25pc to 56.5 million Br.

Nile has written gross premiums of 433.3 million Br, 17pc higher than the preceding fiscal year, from general and life insurance businesses. Out of this total, 12pc has been ceded to reinsurers.

As a result, the retention rate has increased to 89.4pc from 87.4pc in 2015, considerably higher than the industry average.

The expansion in gross written premium and increased retention rate has resulted in increased claims.

The amount paid to claims has increased to a quarter of a billion Br.

“The management of Nile should have a mechanism to control such expanding claims as this may have been due to increased risks,” said Abdulmenan Mohammed Hamza, accounts manager for the London-based Portobello Group Ltd.

“Behind the usual surge in motor claims, we have also seen unexpected claims from fire policies,” said Ermias Teshome, marketing & strategic planning manager.

General and administration expense increased to 70 million Br, 13.3pc higher than of the preceding fiscal year.

Increased paid up capital has also resulted in lower earnings per share.

The paid up capital of the Insurance reached 180 million Br from 157 million Br in 2015. This is the sixth highest in the industry and two times higher than the minimum requirement set by the National Bank of Ethiopia.

Nile has reported zero income from life funds for the second year in a row.

“We usually report life fund every three years, so next year will be the right time to report,” Ermias underscored.

However, salaries and benefits have undergone a seven percent increase to 39.1 million Br. The growth rate is lower than industry competitors.

Some of the insurance employees have complained about the firm’s policy on salary and benefits.The last salary raise was in September 2015.

“We didn’t receive a bonus payment last year,” a senior clerk at Nile told Fortune.” The salary of the insurance is among the lowest in the industry.”

During 2014/15 fiscal year, the insurance paid two months of salary as a bonus.

“It would not fair to pay a bonus with a declining profit,” Ermias argues. ” A bonus is not something to claim. It is a reward for a good job.”

Oromia Insurance, which saw a 27pc profit decline to 33.5 million Br, gave one and half months salary in bonuses to employees.

Since the beginning of the preceding fiscal year, 10 senior level managers have left the company.

An officer at the firm’s human resources department told Fortune that an unknown number of clerical staff have also left the company due to the absence of annual bonuses and salary increments. Meanwhile, Nile’s total assets have increased by 13.35pc to 733.72 million Br. More than half of this has been invested in shares, government bonds and interest earning deposits.

The share of investments to total assets have dropped mainly due to the large sum of money paid for construction in progress.

Currently, Nile is building a 25-storey headquarter along Ras Abebe Aregay street in the so-called financial district..

Rama Construction on the 3,116 sqm land was contracted a year and a half ago with a cost of 173 million Br. It is being designed by Wossen Architects at a cost of 1.7 million Br.

The project was planned for completion in five years after the firm signed a land lease agreement in 2010/11. Currently, the project has reached 41pc of completion rate and is scheduled to be completed in May, 2018.

In addition, Nile is also building industrial zone at a cost of 12 million Br.

Investment on share increased by to 100 million Br. Currently, the firm has 75 million Br worth of share in Bank of Abyssinia and 25 million Br of share in Ethiopia Reinsurance Corporation.

It is among the major shareholder in Abyssinia, with a stake of close to five percent.

Currently, Nile has a market share of eight percent in the insurance industry.

 

 



By Samson Berhane
Fortune Staff Writer

Published on Dec 30,2016 [ Vol 17 ,No 869]


SHARE :
               


Editorial

Ethiopia is in the midst of a state of emergency. At a press conference...


Agenda

Holidays are mostly considered by the Banks to be a peak season when it...


Fineline

Addis Abeba is in a bizarre mood lately. And for a...


Commentary

Over the past decade or so, Ethiopia has been in the limelight of globa...


Viewpoint

Over two-thirds of Africa’s people lack access to electricity. Approx...


Opinion

Karl Marx was not such a naive man, as some would be forgiven to think,...


View From Arada

Our subscribers to the print edition are entitled to get a bonus in a f...


Editors Pick










MEMBERS' LOGIN

ADVERTISEMENT



ADVERTISEMENT

SUBSCRIBE TO ADDISFORTUNE

Subscribe to our Newsletter

* indicates required