Tsehay Insurance Shines with Profit

The insurer's 133 shareholders have everything to smile about but management must strive to reduce risk

Tsehay Insurance S.C. has ended its third year with 11.6 million Br profit after tax, a massive increase from last budget year by 185.7pc. In line with this, earnings per share (EPS) have almost doubled to 32 Br.

The massive growth in profit is attributed to the parallel expansion in all income items. The report indicated that underwriting surplus has increased by 57.6pc to 21.1 million Br, which came due to the expansion in gross written premium. It has increased from 80.3 million Br to 121 million Br. Moreover, the increased interest income has moved upward by 146pc to 6.2 million Br.

Increase in interest income has been attributed to the company’s increased investment earning deposits. Tsehay has investments totalling 16.45 million Br in United Bank S.C., Dynamic Micro Finance, Tsehay Industry S.C., Ethiopian Re and government bond. Last year the over investment of the Company in interest earning investments was 5.2 million Br. The Company is a shareholder in Tsehay Industry S.C.

The retention rate including reinsurance commission has remained the same from last year with 86pc. Tsehay has managed to set aside 22.5 million Br for outstanding claims, an increase of 71.7pc.

Kassa Lisanework, CEO of Tsehay attributed this to outstanding claims for motor insurance, which constitute 78pc of the whole class of business.

“This indicates that Tsehay has underwritten insurance for high risk clients,” commented Abdulmenan Mohammed Hamza, accounts manager for Portobello Group Ltd., based in London. “It has to put in place a system that screens high risk clients,” he suggested.

Looking at its expense, Tsehay has spent 161 million Br on staff and general administration, an increase by 33.77pc.

“Even though massive expansion in expenses is common in the insurance industry, Tsehay still needs to keep an eye on soaring expenses,” added Abdulmenan.

The Company had 75 persons on its payroll in 2013/14 and this figure increased by 41 by 2014/15. In this regard salaries and benefits have increased from 4.6 million Br to 7.15 million Br, as of June 30, 2015.

As far as the balance sheet of Tsehay is concerned, total assets have increased by 67.2pc to 140.3 million Br. Out of the total assets 99.68 million Br has been invested in shares and time deposits.

Liquidity analysis shows the ratio of cash and bank balances to total assets has decreased to 19.4pc from 32.41pc due to huge investments in time deposits and shares.

The ratio of current assets to current liabilities, which is an indicator of Tsehay’s ability to pay short term obligations, has dropped to 379pc from 385pc.The capital and reserves of Tsehay account 34.58pc of its total assets.

This ratio indicates that Tsehay is in a very good condition to fulfil its short term obligations, commented Abdulmenan.

The paid up capital of Tsehay has increased by 43pc to 42.46 million Br. However, Tsehay was far behind from the National Bank’s minimum requirement of 60 million Br paid-up capital. As of December, 2015 the Company reached 62.3 million Br. This came after it sold shares to both existing and new shareholders, injecting 4.1 million Br. Established three years ago it has a plan to increase its paid-up capital to 120 million Br within the coming two years. In this regard it will float the sale of new shares starting from February 8, 2016. Tsehay has 133 shareholders.

If it manages to increase its paid up capital next year, such a massive increase will affect its EPS.

The CEO admitted that the capital increase may have a short-term impact on EPS. “We will work on investing in interest earning investments and reducing our risks,” he said.


Published on Feb 01,2016 [ Vol 16 ,No 822]



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