Nib Insurance reverses the two-year trend of low profits, registering a 15pc profit rise to 58.2 million Br. Earnings per share (EPS) have also gone up to 117 Br from 108 Br.
The improvement in profit after tax is a result of increased investment, rental and other sources of income coupled with a reversal of provision for bad debts.
The structural reforms at the Company, and policy and premium revisions additionally helped it get back on track, according to Berhanu Woldegiorgis, board chairperson of the Firm.
“One of the reforms was bringing new blood to the management team,” he told Fortune.
Last year Nib appointed the former Deputy General Manager of United Insurance, Zufan Abebe, as its new Chief Executive Officer (CEO).
Interest on time deposits, savings and government bonds have increased by 22pc to 49 million Br, dividend income and rental revenues have gone up by 34pc to 18.4 million Br and 11pc to 3.57 million Br, correspondingly. Income from other sources has also surged by 21pc to 4.57 million Br. It has also reversed 3.14 million Br provision for doubtful debts.
Yet, Nib’s EPS is still far lower than what it was in 2015. While Nyala Insurance registered the highest shareholders’ return of 539 Br.
“Nib still needs to put extra effort to stay on track,” said Abdulmenan Mohammed, a financial analyst with 15 years experience in Ethiopia and UK.
Underwriting surplus, general and life, has gone down by one percent to 86.8 million Br. The gross written premiums of Nib have increased by nine percent to 419.8 million Br. Out of this 15.15pc was ceded to reinsurers.
The retention rate at Nib has decreased to 84.9pc from 87pc, which is higher than the industry average of 82pc.
Despite reduced retention rate, the claims paid and provided for and actuarial liability for life have increased by 14pc to 255.74 million Br. The increase is far higher than the growth in underwritten premiums.
“Most of the claims we paid last year were rolled up from the previous years,” said Berhanu.
But still, Abdulmenan recommends that the Firm reviews its risk management system to keep claims at an acceptable level.
The net commission Nib paid last year declined by 27pc to 4.13 million Br.
The performance of Nib, which was established in 2002, in the insurance business has not been satisfactory. Underwriting surplus has basically remained the same as the preceding year.
“Nib should try to secure more income from insurance as it is its main area of business,” said Abdulmenan.
But it was one of the Firm’s strategies, argues Berhanu. It is working on diversifying its means of earning revenues.
“We aimed to diversify our sources of profit to manage our financial status,” he said.
Salaries and benefits have increased by nine percent to 52.08 million Br and general administration expenses, including life, have gone up by 20pc to 49.02 million Br.
“The expansion of general administrative expenses is a bit concerning so Nib should keep tabs on these,” said Abdulmenan.
Nib’s total assets rose by 14pc to 996 million Br. Out of this, 465 million Br went into investment in time deposits and 135.8 million Br in shares and government bonds. These account for 60pc of total assets of Nib- higher than the industry average of 55pc.
“The fact that Nib has directed a huge amount of its liquid resources to income-generating activities is commendable,” Abdulmenan.
Liquidity analysis shows that Nib’s position has improved in value terms but slightly dropped in relative terms. Its cash and bank balances have increased by 13pc to 86 million Br.
Cash and bank balances to total assets dipped to 8.62pc from nine percent. Current assets to total assets ratio have dropped to 67.7pc from 68pc.
Nib has raised its paid-up capital by six percent to 247.99 million Br, slightly lower than Nyala whose current paid-up capital stands at 259 million Br. Its capital and non-distributable reserves represent about 29pc of its total assets.
“Nib is a well-capitalised insurance company, so it should use its strong capital to bring in more income and improve its returns to shareholders,” Abdulmenan posits.
Source : AddisFortune