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National Insurance Company of Ethiopia S.C (NICE) Profits 21 ml. br for 2016 / 2015 fiscal year

nice insuranceNational Insurance Company of Ethiopia S.C (NICE) has suffered a decline in both profits and its market share despite a growth in premium production.

NICE’s board of directors disclosed at the company’s annual meeting that its profits plummeted by 32pc to a little over 21 million Br for the recently concluded fiscal year.

“Our legal provisions were very high due to the amendment of the old directive,” said Zewdu Astatke, NICE Deputy CEO of Business Development. “The new directive demands 100pc provision to be held for any pending legal cases.”

Last year, NICE’s legal provisions escalated from less than four million Birr to around 16 million Br.

NICE is not the only insurance that saw a decline in its profit. Other competitors such as Nile Insurance and Nyala Insurance also declared profit decline by 57pc and 24pc, respectively.

Established in 1994, NICE only engages in the general insurance business.

Many factors have contributed to the drop in profits.

The surge in expense over income is one factor that contributed to the profit decline. The company’s expenses grew at a rate almost twice that of the revenue, which is attributed to the expansion of the firm’s branches. The Firm opened seven branches last year alone. This raises its number of branches to 29, half of which are in Addis Abeba.

“NICE should keep an eye on operating expenses as they are expanding at an alarming rate,” Abdulmenan Mohammed Hamza, an analyst at London Portobello, commented.

Underwriting surplus has declined by 10.5pc to over 50 million Br. The decline has been due to mixed factors.

Gross written premiums have increased by 32pc to 150 million Br. Out of this 93.6pc has been retained, which is eight percentage points lower than the preceding fiscal year.

However, the increase in written premium was accompanied by a surge in claims. Claims paid soared by 63.2pc to 112 million Br.

The surge in claims has undermined the efforts made to collect more premiums.

“Claims would have been higher if we didn’t manage risky clients,” said Zewdu, the Firm’s long-serving Deputy CEO.

Last year shareholders appeal to the National Bank of Ethiopia about the Firm’s claim policy. The Firm was accused of paying 1.6 billion Br in claims on expired policies, according to the letter written by the shareholders.

The letter accused former deputy CEO Tedros Bogale of misconduct and violating policies and directives.

Two weeks ago, he resigned after 17 years of service, citing board interference as a major reason for his departure.

However, his resignation was linked with the company’s disappointing performance, according to a senior level manager at the firm.

This was not the first time that Tedros has resigned from the company. In 2014, he departed after the retirement of long-serving CEO Habtemariam Shumgizaw.

The letter also mentioned that shareholders’ returns for 2013 had not been paid for seven months.

“I was cleared of all those accusations,” Tedros said two weeks ago.

Nice’s profit decline was also accompanied by a drop in earnings per 1,000 shares by almost half, to 366 Br. The nine percent increase in paid up capital contributed to the fall in EPS. The paid up capital and non-distributable reserves of NICE account for one-fifth of its total assets, which means that NICE has stronger capital than all insurance companies.

The Firm fulfilled the 60 million Br capital requirements for general insurance businesses during the last fiscal year. However, NICE is short of 15 million Br to comply With NBE’s requirement from life and general insurance businesses. This year, the Firm’s 35 shareholders promised to raise the current paid-up capital of the company by 40 million Br.

Source - Fortune

Tags: Insurance Companies in Ethiopia,, Ethiopian Insurance Companies Profit,, National Insurance Company of Ethiopia (NICE) S.C,, National Insurance Company of Ethiopia (NICE) S.C Profit,

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