EIC's Financials Soar on Investment Income, Despite Record Claims

Aug 30 , 2025. By BEZAWIT HULUAGER ( FORTUNE STAFF WRITER )

The Ethiopian Insurance Corporation (EIC) posted a gross profit of more than 1.98 billion Br for the year ended July 2025, driven by a sharp rise in investment income. Gross premiums climbed to 13.3 billion Br, a 50pc increase from the previous year, with 97pc drawn from general insurance. Life insurance, by contrast, contributed only three percent. Its underwriting and investment operations generated over three billion Br and 1.27 billion Br, respectively. Investment income alone surged nearly 75pc from the previous year, providing a boost to profits.

The Ethiopian Insurance Corporation (EIC) delivered a robust pre-tax profit of 1.98 billion Br, comfortably surpassing its target. The performance was largely underpinned by a substantial 1.27 billion Br in investment income, representing a nearly 75pc increase year-on-year, alongside strong underwriting results of over three billion Birr. Gross premiums hit 13.3 billion Br, growing by more than 50pc from the previous year.

Notably, 97pc of premiums were from general insurance, with the remainder from life insurance, demonstrating the continued underdevelopment of the life segment in the insurance market.

The Chief Executive Officer (CEO), Abel Tadesse, disclosed that the state-owned insurance firm's gross profit exceeded the annual plan by almost two percent and increased by nearly one-fifth compared to the previous year.

Despite the growth, customer retention was only 58pc, which management recognised as a weakness.

Claims expenses increased sharply. EIC paid out 6.56 billion Br in compensation, more than double the amount paid out the previous year. This was fueled by inflation, higher spare parts and garage costs, as well as a rise in medical reimbursements. For every 100 Br collected in premiums, the company paid out 58 Br in claims. Reinsurance covered around seven percent of these losses, leaving a net loss ratio of 51pc. Although unpaid claims were 3.8 billion Br, this was an improvement from the previous year.

Mengistu Meharu, chief of customer service, attributed the spike in claims not only to rising prices, but also to increased traffic accidents and the settlement related to Ethiopian Airlines Flight 302.

The crash in March 2019, shortly after take-off from Bole International Airport, killed all 157 people on board. Addis Abeba itself continues to face road safety challenges. Police reported 400 road traffic deaths last year, slightly above the recent average. A study covering 2018 to 2020 documented 1,274 fatalities, or about 425 each year, with more than four-fifths of victims being pedestrians. Most crashes involved speeding light vehicles on median-divided roads.

According to Mengistu, surging property values also pushed payouts higher. The gross loss ratio, which was 46pc last year, worsened as a result. The biggest clients for EIC remain Ethiopian Airlines, BGI Ethiopia, and Ethiopian Electric Power.

Even as industry-wide premiums grew by 45pc to reach 41.1 billion Br, EIC increased its market share to 32.5pc, up more than two points from the previous year.

Inflation, currency depreciation, and rising healthcare costs have put pressure on customers and the company’s own costs.

Regulators are also stepping in. The National Bank of Ethiopia (NBE) issued a directive in 2023 setting minimum tariffs for motor insurance at 3.5pc of a private vehicle’s value, 4.5pc for commercial vehicles, five percent for taxis, and up to six percent for long-distance trucks. Insurers who break the rule risk fines, warnings, or having their licenses revoked. International standards consider a net loss ratio of 70pc to be healthy, a benchmark echoed by regulators, though EIC’s net loss ratio is much lower.

General insurance premiums now face a 15pc VAT, while life and health insurance remain exempt. Industry sources say that this move could suppress demand among price-sensitive retail customers, particularly for products that have yet to establish a foothold in the broader market.

As of June 2024, the insurance industry held total assets of nearly 27.5 billion Br. However, insurance remains a relatively minor part of the financial system, accounting for only four percent of the financial sector's assets, compared to banking, which controls 96pc of sector assets.

The insurance industry is expected to reach around 800 branches by mid-2024 and surpass 20 billion Br in total capital. However, the industry remains highly fragmented, with a large number of small players competing for market share. Penetration in the broader economy is strikingly low, measured at 0.3pc of GDP in 2022. The motor insurance line, which covers about 45pc of gross written premiums, illustrates the industry’s narrow focus and urban orientation.

However, the Corporation’s grip on the industry has not insulated it from criticism.

Mekonnen Gebrewahid, a consultant with two decades of experience in the insurance industry, see a large company "lacking efficiency.” He attributed 710 million birr of insurance contribution to the pre tax profit to high expenses and operational leakages. According to Mekonnen, premium rate revisions could make EIC less competitive if problems in claims and underwriting are not addressed, citing issues such as exaggerated claims.

He also stated that health insurance is unprofitable, as it is impacted by wasteful spending, such as unnecessary prescriptions, while premiums remain low. He urged EIC to tighten controls and develop a more commercial mindset.

EIC's owner, Ethiopian Investment Holdings (EIH), has set strategic priorities for the firm, focusing on transformation programs that include digitalisation, improved operational processes, and expanding the customer base to attract more private clients. EIC is planning new initiatives in corporate governance, human resources, and efficiency to address these challenges and reinforce its lead in the industry.

Its CEO, Abel, recognised the strains on profitability and disclosed that premium rates would need to be adjusted. He also admitted weaknesses in risk management, which he said would be addressed.

“Spare parts, garages, and medical reimbursements are becoming increasingly expensive,” Abel said. “We need to adjust our strategies accordingly.”

PUBLISHED ON Aug 30,2025 [ VOL 26 , NO 1322]