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The mood at the 13th annual general shareholders
meeting of United Insurance SC, which kicked-off
with the presence of 67pc of the shareholders, was
rather engaging as the firm grossed 11.42 million Br
profit last fiscal year. Reporting premium sales of
81.3 million Br, United hailed its performance,
though premiums collected from motor insurance still
holds the lion’s share (57pc) of the total premium
raised, despite the desire to bring it down from
what it was last year (55pc).
Shareholders agreed to a proposal by Eyesus Work,
general director of United Insurance, to upgrade
their capital from 31.9 million Br by two million
Birr and disburse the remainding profit at a 25pc
disbursement rate.
“It is inevitable to raise our capital as our risks
are also rising,” said Eyesus Work Zafu, general
director of United Insurance, in the meeting held at
the Hilton Addis last Thursday.
The probability of incurring higher costs is bound
to exist whenever an insurance firm depends
primarily on premiums collected from motor insurance
as Ethiopia is the second most traffic accident
ridden country in the world, causing insurance
companies to loose their impetus to enter an
untapped market. However, raising capital by itself
cannot bring a miraculous change, an expert in the
insurance industry argued.
“The insurance firms themselves are partly to blame
for the rampant traffic accidents in the country,”
he told Fortune. “They focus on short-term
profits instead of aiding the traffic police
department in pooling their financial resources
together to tackle the predicament sustainably.”
However, Eyesus Work does not agree with the
expert’s opinion that insurance firms are sitting
back folding their hands when it comes to ensuring
safety.
“We are working with the traffic police and the fire
brigade to culminate the problem,” he told
Fortune. “Those who forward their opinions must
first see the different publications and symposiums
we run to create public awareness about our cause.”
Despite the concern as to how to deal with these
accidents, the motor business recorded a loss
(86.6pc) slightly better than last year’s 98.4pc.
Broken down, 57pc and 14pc of United’s premium sales
growth came from motor insurance and engineering
class while marine cargo and inland transit
registered an 11pc share. Pecuniary and ‘small
premium’ classes share nine pre cent and five per
cent respectively.
“The portfolio distribution is good,” the expert
told Fortune. “It is not only the premium
secured from motor that grew. Premiums from other
classes also have shown an increase.”
United dubbed the premiums as uneconomic. According
to their report, more sensible market discipline is
needed to collect ideal premiums.
“The frequency and severity of claims is increasing
and the risk involved in insuring motorists is
making the premium uneconomical,” Eyesus Work told
Fortune. “The net operating result,
therefore, is not an extraordinary success.”
From the 48 million Br in premiums sold two years
ago, a profit of 10.4 million Br has been registered
while the 81.3 million Br in premiums sold last
year, only netted an 11.4 million Br profit. While
the premium sales increased by almost 70pc, the
profit only rose by 16pc.
The expert, however, does not agree the premiums are
uneconomic.
“After making a profit of 11.42 million Br with an
investment of only 31 million Br, how can United
rate the premiums uneconomic?” he wondered. “It is
when insurance firms loose their underwriting
surplus that the premiums are called uneconomic.”
The company’s total underwriting surplus rose to
14.1 million Br, slightly higher than the projected
13.7 million Br. The highest contribution to
corporate underwriting surplus for the year under
report (24pc) came from the Marine Cargo and Inland
Transit Class. It was followed by Pecuniary and
Engineering, which contributed 20pc and 19pc
respectively.
United had replaced three members of its Board Of
Directors in July last year to comply with the
directive of the National Bank of Ethiopia (NBE),
whose term had expired last year.
Getamesay Degefa, board chairman, Yonas Seyoum, and
Berhanu Getaneh, president of the sister company,
United Bank SC, were replaced by Guna Trading House
Plc, a subsidiary company of Endowment Fund For the
Rehabilitation of Tigray (EFFORT); Yemane Besrat,
major shareholder and general manager of Airlink
Travel Agent; United Bank SC and Ambanesh Kebede,
owner of Amba Pharmaceuticals. The latter three were
re-elected again last week.
One of the first private insurance firms to be
established following the financial sector
liberalisation of 1994, United Insurance, has 216
shareholders with 32,000 shares. Its largest
shareholder - with 6.5pc stake - is Workeshet Bekele,
who owns Worbek Plc, followed by Eyesus work who
possesses 1,871 (5.8pc) of the shares.
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