Nile Insurance Share Company has seen a highest bid of 1,427 Br per share, 43pc of its par value of 1,000 Br, during the first round of its share sales. The auction was held on April 04, 2017.
Nile, whose market share is around eight percent, made 94 shares worth 94,000 Br available for public subscription. The auctioned shares were owned by two Ethiopian-born foreign nationals. The lowest offer was 222 Br lower than that of the biggest offer made during the auction.
The auction comes seven months after the introduction of a new directive by Central Bank, which forced all private banks and insurers to return share certificates of foreign shareholders and make their share available for public auction. These shareholders were directed to collect the values of their shares and their accrued dividends until the end of the last fiscal year.
The directive was released during a time where banks and insurers present their annual audit report to shareholders; it resulted in controversy as some believed it was unfair and unjust.
After the issuance of the directive, banks and insurance companies have been floating their shares for auction. The offers, according to industry insiders, given during the auction were inflated.
Previously, Lucy Insurance, Lion Insurance, Awash Insurance and Nib Insurance held their auctions.
The highest bid offer given to Nile is small compared to its peers. Awash, which established six months before Nile, pulled 38 bids three weeks ago and received the highest bid of 1,667 Br, which is more than three times of its par value.
Also, other insurance companies which have held auctions brought in bids up to 200pc their par value, an amount offered during Lion Insurance share auction.
Nevertheless, the Marketing & Strategic Planning Manager of Nile, Ermias Teshome, believes that the highest offer at Nile is sensible and reasonable, calling it a smart move.
“We presume the offer is plausible and it’s something that shows our brand equity and image in the eyes of the public,” said Ermias. “Investors are smart enough to comprehended and analyze the current financial market and we believe they have made a better choice.”
An expert who has years of experience in the financial industry also thinks that the offer is not exaggerated compared to previous auctions of other insurers.
“Even though the offer should not be more than 30pc of its par value, it is still modest considering the number of shares auctioned, and previous biddings,” said the expert, who has consulted banks and insurance companies for more than a decade.
Founded two decades ago, Nile is the fourth private firm to join the insurance industry in the country. It has 124 shareholders with a paid up capital of 180.6 million Br, the fifth highest in the insurance industry.
Last year, the Firm has reported a net profit of 20 million Br, which is two times lower than that of the preceding year. The same trend has also been observed in its earnings per share, which dropped by 65.5pc to 119 Br.
During the same period, more than 10 insurers including Nile reported a decline in shareholders’ return and profit.
The insurance industry in Ethiopia is at its infant stage, contributing only one percent to the GDP.
The efforts of insurers to bring new products and ideas had been very slow. The insurance companies tend to compete by undercutting each others’ prices and affiliation.
But, for some industry players such as Nile, the industry is still untapped and has potential to grow.
“The recent offers shows how people are an optimist about the insurance industry,” said Ermias. “Despite all challenges, we expect a positive outcome in the future.”
Currently, Nile has a customer base of more than 38,000 across the country.
Leave a Reply