IGI Insurance: Comforting bottom line

IGI Insurance Company Limited (IGIIL) announced its 1QCY14 results yesterday, boasting a 69 percent year-on-year upsurge in its bottom line. This overwhelming growth in bottom line was driven primarily by virtue of a significant drop in claims expenses.
Although the growth in net premiums remained insufficient, reduction in claims expenses led the ratio of net claims to net premium to drive down to 54 percent from 77 percent in the corresponding period last year. Thanks to improvement in claims, the underwriting result shot up by nearly three times during the quarter.
On the other hand, despite having a quality equity portfolio, investment income plunged by 77 percent in the quarter under review. However, the reasons for this decline in investment income are unknown at this stage and can only be ascertained once detailed financials are made available.
Going onwards, in order to expand its insurance business, IGI Insurance is feathering nest to team up with Bancassurance channel via its entry into life insurance business. Recall that IGI Insurance has recently acquired a controlling stake in American Life Insurance Company (ALICO). With this, IGI Insurance will be able to sell its insurance policies through Bancassurance channel that has marked a phenomenal growth in yester years. Let’s see how the management is able to capitalise on this!

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IGI Insurance - Financial Highlights

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(Rs in million)                   1QCY13    1QCY14      chng

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Revenue account

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Net premium revenue                  265       278        5%

Net claims expense                 (205)     (149)      -27%

Management expenses                 (63)      (83)       32%

Net commission                        30        37       23%

Underwriting result                   27        83      207%

Investment Income                     13         3      -77%

Rental income                          5         1      -80%

Return on bank balances                0         7         -

Other income                           4         5       25%

Financial Charges                   (11)       (7)      -36%

General & Administrative expenses   (38)      (42)       11%

Share of profit/loss of associates   157       222       41%

Profit before taxation               157       272       73%

Taxation                            (10)      (23)      130%

Profit after taxation                147       249       69%

EPS - basic and diluted             1.32      2.24

Claims ratio                        -77%      -54%

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Source: KSE announcement