Africa Insurance Company (AIC) has registered a stagnant profit for the second consecutive year with a six percent profit decline to 35.4 million Br, and a 29 Br slump in earnings per share (EPS) to 210 Br.
The EPS dipped due to the decrease in profit after tax coupled with an increased paid-up capital by seven percent.
Its nearest competitors Awash and Nile insurance companies recorded 87.7 million Br and 100 million Br net profits, respectively.
“Our profit has decreased as our motor loss ratio could not be improved,” said Kiros Jirane, the Firm’s CEO for a decade. “Plus we injected a considerable amount of money into our under-construction headquarters.”
Africa reported an underwriting deficit, a process of evaluating the risk of insuring, of 7.4 million Br resulting from massive increase in claims paid and provided for, and other technical provisions. These have increased by 31pc to 322.26 million Br.
“The management of Africa should thoroughly investigate its risk management system,” Abdulmenan Mohammed an accounts manager for the London-based Portobello Group with over 15 years experience in finance and accounting commented.
This would not continue next year, according to Kiros, as the management is undertaking studies to identify which type of vehicle is at a higher risk of accidents to make premium adjustments.
“We will hopefully apply the premium adjustments next year,” he told Fortune.
Africa has earned gross written premiums in general and life insurance of 526.2 million Br, an increase of 29pc and has ceded 117.58 million Br. The retention rate in Africa has decreased to 77.7pc from 80pc.
Thus, direct operating expenses have increased by a modest figure of five percent to 59.1 million Br.
“This reveals that direct expenses are well controlled,” said Abdulmenan.
The deficit in general insurance business of Africa has been compensated by better performance in investment activities and surplus from life insurance.
Total interest in general and life insurance on savings has increased by 17pc to 36.36 million Br, and dividend on shares has increased by five percent to 14.94 million Br. Rental income remained steady at 26.15 million Br.
Africa, operational since 1995, has done well in controlling expenses last year. General administration expenditure excluding provision for doubtful expenses have increased by 7.9pc to 31.63 million Br.
The total assets held by Africa have also increased by 13pc to 863.69 million Br. It also maintained 302.04 million Br in interest-earning time deposits account, 127.77 million Br in shares and government bonds and 221.02 million Br in buildings for use and rental.
Africa, a highly-capitalised insurance company, also increased its liquidity level considerably.
Cash and bank balances have soared by 76pc to 87.25 million Br. Cash and bank balances to total assets ratio have gone up to 10.1pc from to six percent, and cash and bank balances to total liabilities rose to 13.5pc from nine percent.
“Africa needs to channel some liquid resources into investment activities to earn more returns,” Abdulmenan suggests.
Source : AddisFortune