Berhan Insurance swings back from last year’s losses registering a net profit of 10 million Br in the concluded budget year, a record-high since its establishment. It is an unexpected and quick recovery for the Insurer that lost seven million Birr in the preceding year, according to analysts and industry insiders.
Declaring an earnings per share (EPS) of 201 Br, the Board Chairperson of the Firm, Daniel Wondimu, who had replaced Meaza Kitaw in mid last year, found the latest performance of the Firm to be encouraging. “It was a tough time of transition for both outgoing and new board members,” said Daniel, who is chairing a board composed of executives from United and Berhan banks. Last year’s performance, in terms of shareholders’ return, was also better than its competitors such as Lucy Insurance, which paid its stakeholders 146 Br a share in the past fiscal year mainly owing to the bulge in paid-up capital of the Firm.
Gebreyohnnes Balcha, one of the shareholders of the Firm, is delighted with the performance. “I never expected such tremendous success,” said Gebreyohannes, who expected the firm to take atleast three years to recover.
“But, there is still room for improvement in the dividends.” Abdulmenan Mohammed, a financial expert with 15 years experience in UK and Ethiopia, has also praised the Firm’s latest performance. “The Insurer has remarkably absorbed its accumulated losses from the preceding year,” he said. The massive increase in profit after tax resulted from an enormous surge in underwriting surplus, soaring interests and dividend income coupled with a slump in the growth of expenses. Particularly, underwriting surplus, the difference between premium and paid claims, has soared due to a rise in gross written premiums, a surge in retention rate, and a large chunk of premiums transferred from the preceding year. It has grown by almost four folds to 19.1 million Br.
“We have made price adjustments on certain vehicles, such as Vitz and Sino Truck exposing us to high amount of claims,” said Alemayehu Tefera, the chief executive officer (CEO) of the Berhan. Gross written premiums of the Firm reached around 99.3 million Br, although its market share showed a slight improvement from 1.3pc to 1.4pc.
The Insurance has not introduced any new policies in the past fiscal year. Instead, it focused on price control mechanisms to boost its products. As motor insurance policy accounts for more than half of its premiums and claims, Berhan’s management has linked-up with owners of garages and spare part outlets to save cost, while paying claims to policyholders. With such strategies, the Firm managed to reduce the growth rate in paid claims, registering a 35pc increase to 57.3 million Br.
The Firm transferred low percentage of premium to re-insurers, raising its retention rate from 70.4pc to 82pc, higher than almost all insurance companies. Furthermore, massive interest and dividend income have been earned by the Firm from investment in time deposits and shares. Its interest income has soared by 77pc to 12.3 million Br, and dividend income has also shot up by 120pc to 3.71 million Br.
Looking at its expense account, salaries and benefits have gone up by 26pc to 12.33 million Br and general administration expenses have increased by 14pc to 13.46 million Br. Berhan, whose major shareholder is Berhan Bank with five percent of a stake, has over 85 million Br paid-up capital invested by over 1,400 shareholders.
Three companies have joined the insurance industry after its establishment, while Zemen Insurance Company is under formation to become the 17th private insurer in the country.