Viewpoints | Dec 19,2020
March 2 , 2019
By FASIKA TADESSE ( FORTUNE STAFF WRITER )
Tsehay Insurance, one of the youngest insurers, has reported a positive performance for the third year in a row due to robust income growth.
During the last fiscal year, the firm’s after-tax profit rose by 26pc to 29.5 million Br, leading its earnings per share (EPS) to register a two Birr increase to 37 Br.
The management of Tsehay should take credit for the impressive performance, according to Abdulmenan Mohammed, a financial statement analyst.
The success of the company came despite challenges it faced, according to Mandefro Erkou, board chairperson of the insurer that was established in 2012 and currently has 19 branches, representing 3.5pc of 532 branches held by the insurance industry.
“Despite the growing bargaining power of customers, national political unrest that engulfed the nation and economic instability, the firm managed to achieve an encouraging performance,” said Mandefro.
The positive performance of the firm is driven by expansion in all income items. Underwriting surplus increased by 16pc to 25.6 million Br due to an increase in written premiums that reached 285.7 million Br.
Tsehay managed to retain 79.2pc of the premiums, nearly a percentage point increase from the previous fiscal year.
“The level of retention at Tsehay is reasonable,” said Abdulmenan.
There was an increase in claims and other technical provisions against Tsehay where the firm paid out 146.2 million Br, increasing almost by half from the preceding year.
This demonstrates Tsehay underwrote insurance policies for high-risk clients, according to Abdulmenan. “The management of Tsehay should have a system that screens high-risk clients,” he said.
The business environment in the country has led the firm to have high-risk clients, according to Kassa Lisanework, CEO of Tsehay.
“Due to the business slowdown in the country, there was no business coming from non-motor businesses, and even those non-motor businesses we insured had low premium rates,” said Kassa.
In the last fiscal year, 70pc of the insurance portfolio of the firm was motor insurance, according to the CEO.
"As the price of spare parts has increased, our expenses on motor claims have soared," Kassa told Fortune.
Commissions paid to agents have increased to 20.8 million Br, up by 28pc, slightly higher growth than the written premium growth rate.
Tsehay did well in its investment activities. Interest and dividend income soared by 45pc to 26.9 million Br due to increased investments in interest-earning deposits.
Out of the total 497.1 million Br in assets, Tsehay has invested 48.3pc in shares and time deposits.
The surge in income, however, was accompanied by a rise in expenses. Tsehay spent 21.7 million Br on staff and general administration, an increase of 45pc. The direct expenses of Teshay have gone up by 34pc to 20 million Br.
“The growth in expenses of Tsehay is considerable, therefore, the management should set up a cost control mechanism to keep expenses at bay,” said Abdulmenan.
“Considering our growth in branch expansion and staff recruitment, we were good at controlling expenses,” Kassa told Fortune.
The firm’s total assets have soared by 40pc, reaching 497.1 million Br.
Tsehay’s investment in shares and time deposits was 56.5pc of total assets in the preceding year but dwindled to 48.3pc last financial year.
This must have been due to high levels of receivables being held by reinsurers, according to Abdulmenan.
The amount of receivables from reinsurers and shares of technical provisions increased by 126pc to 153.7 million Br.
“Tsehay needs to collect this money and invest it in income generating activities,” Abdulemanan said.
Liquidity analysis indicates that the liquidity level of Tsehay has dropped.
Its cash and bank balances decreased by 88pc to 33.9 million Br. Cash and bank balances to total assets decreased to 6.8pc from 11.6pc.
The ratio of current assets to current liabilities, which is an indicator of Tsehay’s ability to pay short term obligations, decreased to 150pc from 170pc.
Despite the reduction, Tsehay is in a good condition to fulfill its short-term obligations, according to Abdulmenan.
The paid-up capital of Tsehay has also increased by 17pc to 87.3 million Br. The capital and non-distributable reserves of Tsehay account for 19.3pc of total assets, making the firm one of the well-capitalised insurance companies.
The total capital of the insurance industry has reached 5.5 billion Br, of which three-fourths of it was held by private insurance companies.
PUBLISHED ON Mar 02,2019 [ VOL 19 , NO 983]
Viewpoints | Dec 19,2020
Fortune News | Mar 21,2020
Fortune News | Jan 23,2021
Fortune News | Mar 14,2020
Fortune News | Feb 20,2021
Fortune News | Feb 01,2020
Fortune News | Mar 07,2020
Fortune News | Feb 26,2022
Fortune News | Mar 19,2022
Fortune News | Dec 19,2021
November 27 , 2021
Against my will, I have witnessed the most terrible defeat of reason and the most sa...
November 13 , 2021
Plans and reality do not always gel. They rarely do in a fast-moving world. Every act...
October 16 , 2021 . By HAWI DADHI
Residing in a country with no capital market, an organised marketplace for trading se...
August 28 , 2021 . By HAWI DADHI
The streets of Addis Abeba are as varied as they are many, although too many of them have yet to be named. From the narrow alleyways of the...
Leaders of the National Election Board are in a charm offensive mood, of a sort. Last week, they organised a rare tour for members of the me...
When the country’s most senior diplomats and envoys return back to their posts after two-week debriefings, they leave behind a point or tw...
May 21 , 2022
There was a great deal of handshaking and patting each other on the back at the Hyatt...
May 14 , 2022
Diana Yohannes is one of those actively engaging in social media platforms with her T...
May 7 , 2022
The Ethiopian Economic Association (EEA) recently proposed the formation of a macroec...
April 30 , 2022
There is no ambiguity in the UNDP's assessment of Ethiopia’s economic performance a...
PM Abiy Ahmed (PhD) at a Gala Dinner Called for the Awarding of the Félix Houphouët-Boigny Peace Prize
May 6 , 2019
Adulteration is getting out of hand. Consumers in Ethiopia are being left to their ow...
Or see contact page