Amid concerns that the company's current practices may break industry regulations, Nib Insurance Company announced that it earned 3.4 million Br net profit in 2005-2006, which is less than what it made the previous year at 5.7 million Br.
 

But the company did manage to increase its gross written premiums from 33 million Br in 2004-2005 to 46 million Br this fiscal year, a 40pc rise.
 

During its Fourth Annual Shareholder Meeting held on November 18, 2006, at Sheraton Addis, Tafesse Bogale, chairperson of the Board of Directors, said that though business in the country has been substantial, factors like the high cost of business acquisition, low rate of motor insurance as well as high provision for doubtful debts affected the company in particular and the industry in general.
 

He said that the decline in net profit from that of the previous year is due to the decrease in the underwriting surplus (9.7 million Br from 12 million Br in 2005) and the increase in operating expenses. The decrease can be attributed primarily by a 109pc increase in motor accident claims, he said.
 

Established four years ago by 684 shareholders with a paid capital of 14 million Br, the capital of the company increased last year from 24 million Br to 26 million Br.
 

According to the chairperson, the total current asset of the company showed an increase of 25pc when compared of previous year while the total current liabilities increased by nine per cent making an over all growth in the total assets of 23pc.
 

Despite the generally positive news from the announcement (and confirmed by an auditors report), shareholders have voiced concerns with regulatory issues that they feel risk overtaking any explicitly economic successes.
 

The auditors report by Lia Abdulahi & Co. to the shareholders of the company declares that Nib Insurance has not complied with the governing directive of National Bank of Ethiopia, a measure introduced in 2004 to license and supervise the insurance business.
 

Directive No. SIB/25/2004 limits an insurance company's investment in other ventures to 15pc of its total admitted assets. But the company has invested 28pc of its admitted assets in Nib International Bank.
 

On the other hand, Nib executives claim, the company's reason for not complying with that Directive is from another part of the Directive which states that "in the absence of other feasible investment opportunities in the country, it is believed that under article 2.1(d) which allows that 10pc of admitted assets investment was discretionary."
 

These executives need to be right as Directive No. SIB/14/96, also issued by the NBE declares: "Any insurance company that fails to comply with the requirements of any of the directives of NBE shall be subject to a fine of 10,000Br." The central bank will also resort to taking other measures in the instance it considers necessary.    
 

Tafesse told Fortune that the Directive issued by NBE is vague and needs further improvement as it is not specific in its regulation and requirement. He said that Nib has pointed this factor out to the NBE and that they are presently expecting an official response from the central bank.
 

This is not the first time NBE regulation has been seemingly broken by Nib Insurance. In December 2004, Nib's insurance policy on Life Travel Insurance went against Article 8 of Proclamation No. 86/1994, which prohibits insurance being handled by unlicensed insurance dealers. Nib was not licensed to perform such transactions at the time, but two weeks later NBE issued a new directive allowing local insurance firms to provide emergency travel health policies.