Ranked among the top three insurance companies two years back, Africa Insurance Company registered only the second loss in its quarter century existence.

The company registered a loss of 2.8 million Br, a drastic fall from the 59.1 million Br profit it made the preceding year. The loss translated into a huge fall in earnings per share that dropped to 16 Br from 334 Br. The company has 306 shareholders, of which 85pc of them are its employees.

Last year's loss is the second for Africa, which lost 400,557 Br for the first time back in the 2004/05 fiscal year.

The massive claims the company paid out, notably in the motor insurance sector, caused the loss, according to Kiros Jiranie, the managing director of Africa Insurance, which was first established in 1994 with an initial paid-up capital of 30 million Br.

In the reported period, the company paid out 471.2 million Br in claims, an 18.9pc increase from the preceding year.

"The rising number of car accidents and the cost spike in spare parts and maintenance services increased the claims," said Kiros. "Premiums have also been declining gradually over the past years."

During the last fiscal year, a total of 40,871 traffic accidents were registered at the national level causing 4,597 deaths and 872.4 million Br in property damage.

Abdulmenan Mohammed, a financial analyst based in London, United Kingdom, says that there is a serious gap at the company in the screening and pricing of premiums for customers.

“The management should investigate its customer screening and pricing policies,” Abdulmenan commented.

However, Kiros does not agree with risk selection if it would mean excluding certain businesses for being high-risk areas.

"It is most appropriate to use underwriting measures," he said.

Kiros says that the company started implementing a premium adjustment method using updated software, which determines the rates of insurance premiums based on a wide range of factors including the types of motor vehicles, the manufactured years and their level of risk involvement.

"The measures are intended to make up for the huge loss of profitability with an increased surplus in the subsequent years," Kiros said.

Despite its loss, Africa managed to make a marginal improvement in the performance of the general insurance business, registering a 2.6pc increase in premiums to 463.3 million Br.

The commission Africa earned stood at 30 million Br, a 25.7pc drop with the associated decline of 12.4pc in commissions paid to 19.1 million Br.

“The decrease in commission income is concerning,” Abdulmenan observed.

It also recorded an impressive performance in investment activities, which compensated the huge loss it incurred in general insurance. The total value of investments of Africa grew by 12.3pc to 101.5 million Br.

Africa ventured into investment activities in banking, transport services and reinsurance with most of the investment made in Wegagen Bank.