Assessment of Financial Performance Analysis in the Case of Awash, Nile and Nyala Insurance Companies

Abstract

This study was conducted under the title “Assessment of Financial Performance Analysis in the Case of Awash, Nile and Nyala Insurance Companies”. Its main objective was to analyze and to compare the performance of Awash, Nile and Nyala Insurance Companies of with industry average with respect to liquidity, Asset efficiency, profitability and long term solvency for the period 2011-2016. This study employed ratios (10 in total) such as Current Ratio (CR), Asset Utilization (AU), Income to Expense Ratio (IER) and Operating Efficiency (OE), Return on Asset (ROA), Return on Equity (ROE), Debt to Equity Ratio (DER), and Debt to Total Asset Ratio (DTAR), and Equity Multiplier (EM). The liquidity measurement showed Nyala had shown better performance while Nile performance was slightly better than the industry average. On the other hand, Awash had shown lower performance, as compared to the industry average. Awash and Nile asset management efficiency had shown to be lower as compared to the industry average. Meanwhile, Nyala had shown an extraordinary performance as compared to the industry average. This study also found that all results of profitability measures went in favor of industry average except as compared to Nyala. The results indicated that Awash and Nile were less profitable than industry average. However, Nyala and Nile had shown an outstanding performance of solvency through the five consecutive years while Awash performance was as equivalent to the industry average. The study also indicated that Awash and Nile should have to hold high quality liquid asset and converted them in the event of liquidity shortage and should improve their asset management efficiency by in generating revenue or disposing unutilized asset, if any. They must also considering improvement in their profitability ratio by reducing their operating expenses. On the other hand, Awash should improve its debt management ratio. This can be achieved by increasing asset while keeping liabilities constant.