Lucy Insurance SC has recorded a 300pc increase in paid up capital, amounting to 62 million Br, and a doubled its profit after tax to eight and a half million birr.
The former was a result of having sold 46.7 million birr worth of shares in the past fiscal year alone. However, the quadrupling of the number of shares has come at the expense of a 12pc decrease in Earnings Per Share (EPS).
Although Lucy’s annual report puts their capital as of June 2015 at 62 million Br, additional sale of shares to the tune of 13million Br had enabled them to reach the central bank’s milestone of 75 million Br by the date of their annual shareholders’ meeting on 21 November 2015.
The major driver behind growth in Profit after Tax is huge increase in underwriting surplus and interest income, commented Abdulmenan Mohammed Hamza, accounts manager at Portobello Group Ltd, a London based holding company with subsidiaries in property investment and development.
Underwriting surplus has gone up by 70.7pc to 15 million Br. Interest on deposits has also increased to 3.65 million Br, up 110pc from last year’s record.
Lucy’s biggest earners in policy sales were from the motor sector, accounting for 52.7pc or 30 million Br.
Some of its growth in profits can be attributed to strategies applied in their formative year of 2012, said Alemseged Abraham, CEO. Lucy had intended to disregard branch expansion in an aim to keep administrative costs to a minimum; and instead, aimed to use brokers and hired agents, he articulated.
This puts the weight of sourcing and handling clients on the brokers’ and agents’ shoulders.
“The pressure is intense,” said Tsegab Sileshi, a senior insurance officer at General Insurance Brokers, a brokering firm that connects companies with insurance firms, one of which is Lucy.
Though Lucy sometimes takes time processing contracts, he added, its redeeming factor lies in their speed of processing claims – seven to 10 days in his experience.
Lucy’s short-term plans were to get into the market and build a reputation that would attract prospective investors, said Tewodros Teklu, Executive Officer for Finance & Resources at Lucy.
The company, having started with 39 shareholders, now has 503.
“We have succeeded,” he said.
The liquidity level of Lucy has improved. This has been done so, mainly by injection of fresh capital. Cash and bank balances to total assets have increased to 30.44pc from 16.35pc.
“This indicates that Lucy has been sitting on a pile of money beyond its operational needs. Lucy should use these resources to bring in more income,” said Abdulmena.
This is also due to their short-term planning, said Tewodros. Investments require hefty sums of cash, adds Alemseged, and so far they had not been able to start that route. Currently however, long-term investments in fixed assets and investments are being studied, both executives claim, and will soon come to the Board of Directors’ table for approval.
Current assets to current liabilities ratio, has improved to 2.1 from last year’s 1.35. “This is very good,” continues Abdulmenan, “Lucy has capital and reserves of 72.97 million Br. These account for 58.77pc of its total assets so Lucy should use resources efficiently in the years to come.”