The lone local re-insurance firm, Ethiopian Reinsurance S.C (Ethio-Re), has reversed its loss record and registered a profit for the first time since its establishment two years ago.

Ethio-Re reported a net profit of 78.6 million Br last fiscal year, paying out 1,515 Br a share.

Substantial unearned premiums brought forward from the preceding year and increased investment income has contributed to the profit surge at the company.

“There were unexpired premiums brought forward from the previous period,” says Yewondwossen Eteffa, CEO of the reinsurer. which has 105 shareholders that included all insurance firms, seven banks, individuals and a labour union.

Last year, the firm underwrote a gross premium of 661.4 million Br, of which 97pc was earned from non-life insurance premiums, representing a 27.3pc increase from two years ago. Ethio-Re brought forward 35.3 million Br of gross premium from two preceding  year to the reporting year. The company also earned 72.9 million Br from retrocession – a condition when the reinsurance company has another reinsurer assume some of its risks.

Earnings from time-deposits gained 66.8 million Br, doubling of the first year reporting.

Claims, on the other hand, reached 334.8 million Br, an increase of 81.6pc from two years ago, representing a 66pc share of earned premiums.

“A huge proportion of premiums earned were paid out as claims. Therefore, Ethio-Re should seriously examine the causes of this increased expense,” said Abdulmenan Mohammed, a financial expert at Portobello UK London with over a decade and a half of experience.

Ethio-Re's executives argue that claims rose as a result of the firms attempt to increase premiums.

“The company participates in every aspect of the insurance business. Even if we manage our claim levels, the practices of the insurers, our clients, are the culprits in the rise of claim payouts,” continued the CEO.

The claims are high compared to private insurance firms. Nib Insurance incurred the highest claim payment of 308 million Br; followed by Awash, 284 million Br; United, 232 million Br; and Nyala, 163 million.

Ethio-Re ceded 150.8 million Br in commissions, payments made to insurance firms when they reinsure their clients, reporting a doubling of the figure paid out two years ago. These commission payments have affected the company's profit negatively, according to Yewondwossen.