As a result of a massive increase in investment income, the nation's first reinsurance firm, Ethiopian Reinsurance S.C., amassed a huge profit last year.

Since the firm first joined the insurance industry in July 2016, Ethio-Re made the highest stride in increasing its net profit by 70.2pc to 133.8 million Br.

The underwriting profit of the company also registered a remarkable increase by 120.5pc reaching 74.6 million Br. In its first year of operation, the company declared a 61 million Br loss and netted 78.6 million Br profit in the second year of operations. Earnings per share also grew by 21.4pc, up from 15pc in the previous year.

Operations, as well as investments made in time deposits, equity shares and bond purchases, positively contributed to the profit growth of the firm, according to Fikru Tsegaye, business development & corporate affairs manager of Ethio-Re, which has 105 shareholders including insurance firms, banks, individuals and labour unions.

The 969.9 million Br investment in time deposits and the 93.9 million Br equity in bonds, generated 102.7 million Br in income. This investment income registered a 53.6pc spike.

Gross underwriting premium also shows a 5.6pc increase to 698.7 million Br. Out of which, 110.7 million Br was transferred as retrocession, which went up by 51.8pc. Increase in retrocession was accompanied by the 1.8pc decline in the level of claims paid and provided for to 329 million Br.

“The management of the company should be applauded for such performance,” said Abdulmenan Mohammed, a financial statement analyst with close to two decades of experience.

Reductions in claims were achieved due to underwriting measures, and appropriate risk assessment and management practices in the insurance companies Ethio-Re has reinsured, according to Fikru.

Ethio-Re ceded 186.9 million Br to reinsurers marking a 17.3pc increase. The commissions it paid also accounted for 37 million Br, a 3.4pc decline.

The growth of cedant acquisition costs of Ethio-Re had been rising for two consecutive years, according to the expert.

"It is concerning," said Abdulmenan. “The management should seriously look into the growth of these costs."

However, Fikru does not find the cost increase concerning, attributing it to the rise in the commission paid to the insurance companies that resulted from the growth of the industry.