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Increases capital to 180m birr
Africa Insurance Company SC, one of the oldest private insurance firms since the free market was introduced in the country,


earned 30.7 million birr in profits before tax during the 2012/13 fiscal year.
The insurance firm, which is one of the market leaders, achieved 408 birr earnings per 1,000 birr shares for the stated period; a year ago the earning per 1,000 birr shares was 421 birr.
According to Kiros Jiranie, CEO of African Insurance, even though the insurance company’s profit was less than projected, the company’s capital has increased significantly. A year ago, the insurance company earned 23.6 million birr, which was 26 million birr in the 2012/13 fiscal year and the income ratio (net profit to net earned premium) was 10.2 percent.
The 30.7 million birr in pre-tax profits that Africa Insurance earned was a 14 percent increase from 26.9 million birr in profits during the previous year. A dividend of 16.8 million birr was paid to shareholders during the 2012/13 fiscal year, based on the profit registered during 2011/12 (30 percent of weighted average capital of 56 million birr).
The gross premium of 310.2 million birr for general insurance declined significantly compared to both the target for this year and the previous year. The budget (target) for the year 2012/13 was 367.5 million birr, 16 percent less than the target. The actual performance for the year was 10 percent less than the 2011/12 performance of 343.8 million birr.
The total gross premium registered for the fiscal year (2012/13) was 330.4 million birr. Out of this, 310.2 million was underwritten from general insurance business while the remaining 20.2 million birr was from the long term insurance business (life insurance).
“We have invested our interest income in other businesses. Therefore, our profit declined from the preceding year. But when we look at the long term business of the insurance company, the profit will increase significantly when we start to see returns from our investment,” the CEO said.  
In the last fiscal year, the National Bank of Ethiopia (NBE), the supervisory body for financial institutions, issued a directive increasing the minimum paid up capital required to establish an insurance company, meaning that the general and long term insurance companies must increase paid up capital to 75 million birr. The directive stipulates the minimum paid up capital for general and long term companies to be 60 million birr and 15 million birr respectively.
According to the Africa insurance report, the ‘no premium no cover’ proclamation has also positively impacted the overall performance of the sector, although some policy holders are asking for credit or have been discouraged from insuring their risk.  The CEO said that it is one of the factors leading to a decrease in general insurance premium production. He said some of the major clients were not prepared for the new arrangement.
“Some of the policyholders have diverted their business to ‘compulsory’ covers instead of comprehensive ones to mitigate their chase deficiency,” Kiros explained.
Long term insurance business (life), on the other hand, increased from 13.3 million birr in the 2011/12 fiscal year to 20.2 million birr as of June 30, 2013.
During the fiscal year a gross of 250.7 million birr was paid to claimants, out of which 55.6 million birr was recovered from treaty reinsurances. The gross increased by 61.7 million birr (33 percent) compared to last year’s 189 million birr. Motor vehicle insurance made up the majority share, as in all other insurance companies, by 184.2 million birr (73 percent) followed by financial guarantee bonds of 43.5 million birr (17 percent), while the remaining 23 million birr (10 percent) came from other classes.
The company earned a total investment income of 29.2 million birr. Investment income grew by 10.9 million birr compared to last year. Dividend income from investments in shares of Wegagen Bank and Selam Bus Line constituted 41 percent(11.9 million birr), while 36pct (10.4 million birr) and 23pct (6.9 million birr) came from rental income and interest on bank deposits respectively. The total assets of the insurance firm reached 567.6 million birr, up from 560 million birr a year ago.
The CEO told Capital that the paid up capital reached 81 million birr, while the subscribed capital also increased to 180 million birr, which makes the insurance company the leading insurance firm in terms of subscribed capital. “In the next two years, shareholders will fully pay the balance,” Kiros said.
Africa inaugurated a 11-story building constructed at a cost of 200 million birr around Bisrate Gabriel. According to the insurance official, the total investment cost is expected to be covered within ten years. He said that the insurance firm expects to rake in 26 million birr a year from rent.  According to the CEO, the insurance firm is expected to earn up to 60 million birr in the current fiscal year.
Africa also plans to build another 12 story building on Bole road. “In the current fiscal year we will float a bid for contractors,” he added