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Growing capital base, solid assets and swelling premiums help Oromia Insurance gallop in an industry increasingly limited by industrywide price gouging. Its growth rate exceeded the industry's average.
Its directors and executives declared 198.5 million Br in net profit, an impressive growth of 56.3pc from the last operational year. The profit has translated to 350 Br earnings per share (EPS) for more than 1,000 shareholders who marked a rewarding year during a general assembly held at the Hilton Hotel in December; however, it was 20 Br short of the EPS posted by the veteran United Insurance.
The Board Chairwoman, Merem Chibsa, attributed the result to the "fast-track actions and efforts" made by the management last year.
"Ensuring the OIC's move for sustainable and steady growth in market share will continue to be the focus of the Board," she wrote in her message to shareholders.
For the CEO, Tigistu Shiferaw, introducing "clear terms and policies" has helped him and his executives improve the year's performance.
"It's the result of proper claim management," Tigistu told Fortune.
According to Abdulmenan Mohammed, a financial statement analyst based in London, the management should be applauded for remarkable performance.
The main drivers for the performance of Oromia Insurance come from the significant increase in revenues as the total gross premium upsurged to 823.2 million Br, by 44.16pc, more than double the industry's average growth of 19.5pc. The industry mobilised last year a gross written premium of 16.5 billion Br.
Motor insurance accounts for half of the business, similar to the other industry players.
Oromia Insurance commenced operation in 2009 with 85 million Br capital raised from 540 shareholders. The company has 51 branches and five offices throughout the country and works with 52 brokers and 162 sales agents. It is building a 40-storey headquarters on Ras Mekonnen Avenue, in front of the Ethiopian Coffee & Tea Authority, near Mexico Square.
Its capital grew to 680.7 million Br, surpassing the minimum paid-up threshold of over 100 million Br regulators have set for insurance firms to comply in five years. United is still short of one million Br among the pioneer insurance firms. Oromia Insurance shareholders voted last year to raise the capital to one billion Br in three years. However, Tigistu believes that "this is not sufficient" and hopes to see his shareholders pass another resolution to recapitalise.
Oromia Insurance paid 319.5 million Br in claims, a 22.2pc increase from the previous year and much lower than the growth in net premiums, contributing to the net profit.
According to Temesgen Chewaqa, branch manager at the Abdisa Aga, near the Bekelo Bet area, the company pays competitive claims to keep customers from eyeing other insurance firms. Over the past few years, its retention rate has steadily declined by 69.9pc, a downfall of 14.3pc from the previous year's figure.
"This shows a substantial amount of risk was transferred to the reinsurers," said Abdulmenan.
Out of the total premium, 247.9 million Br was yielded to reinsurance firms. Regulators limit the gross retention of insurance business to no more than 10pc of the capital and reserves of insurance firms.
The insurance firm earned 75.99 million Br in commission, shot up by 82.7pc, and paid commission expenses is 14.8 million Br showing a 40.4pc increase. Incomes from investment activities brought the company 138.5 million Br, a considerable growth of 34.9pc, revealing that Oromia did very well from its investments.
The increase in revenues was accompanied by significant growth in expenses. Employees' benefits went up by 40pc to 133.6 million Br. Other operating and general administration expenses increased to 83.8 million Br (by 24.1pc). Tigistu attributed the high wages and administrative expenses to a corporate restructuring that saw salary adjustments.
Oromia Insurance saw its asset value rise to 2.55 billion Br, a notable increase of 33.5pc. Its liabilities, too, have swelled to 1.58 billion Br, 30.6pc higher than the previous year, allowing the firm to have a sound position where its capital and non-distributable reserves account for 31.3pc of total assets.
The expert recommends the management expand businesses taking advantage of the solid capital base.
PUBLISHED ON
Feb 11,2023 [ VOL
23 , NO
1189]
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