1H CY14: a mixed affair for big-five insurers

The first half this calendar year remained mishmash for top companies in the non-life insurance sector.
EFU General boasted the highest profitability growth of 50 percent year on year in 1H CY14, followed by IGI Insurance (32 percent) and Jubilee General (11 percent). On the flipside, Pakistan Reinsurance and Adamjee Insurance continued to be the laggards, with the bottom line going down 15 percent and 44 percent, respectively. PAKRI was done in by its suffering treaty business whereas Adamjee had to endure poor motor segment performance.
Overall, there was a slowdown in claims owing to improvement in the quality of insurance portfolios. Therefore, the big five were able to keep a check on their claims ratios, which helped some of them post underwriting results and bottom line growth.
Having the finest claims ratio of 47 percent (industry average: 57 percent), EFU General was impressive in 1H CY14. On the contrary, Adamjee was suffering from the highest claims ratio of 65 percent. Thats why its financials continued to stay in ill health, despite witnessing the highest upsurge in top line during the period under review.
Contrary to the fact that investment income remains the key contributor to bottom line growth for insurers, investment ratio of the sample during the period slid to 24 percent (1H CY13: 31%). However, this decline is mainly attributable to the investment portfolios of Pakistan Reinsurance and Adamjee Insurance, both of which experienced a slowdown in their investment income.
Excluding the two laggards, investment income of the cluster soared by 22 percent year on year, taking the investment ratio up by a decent 200 basis points. It is interesting to note that IGI enjoys the highest investment ratio of 84 percent. With the industrys average investment ratio standing at 33 percent, IGI leads the pack with an investment ratio of 84 percent, as of June 2014.
Considering the recent developments that have taken place in the insurance sector--including allowance of Takaful window operations and the introduction of micro-insurance regulations--the next few years are going to be of great significance in determining the fate of these insurers. It will depend on how well these companies are able to land on their feet while also increasing their market shares in the growing insurance industry!

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Non-Life insurance sector* (combined P&L)

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Rs (mn)                       1HCY14     1HCY13       Chg

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Net premium                    11144      10127       10%

Net claims                    (6151)     (5701)        8%

Other expenses                (2507)     (2266)       11%

Net commission                (1135)     (1124)        1%

Underwriting results            1351       1036       30%

Investment income               2665       3149      -15%

Rental income                    157        147        7%

General & admin expenses       (646)      (583)       11%

Profit before taxation          3814       4106       -7%

Profit after taxation           3108       3431       -9%

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Individual claim ratio

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                      1HCY14      1HCY13

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EFU General             -47%        -51%

PAKRI                   -49%        -49%

Jubilee Gen.            -60%        -60%

IGI                     -62%        -83%

Adamjee Ins.            -65%        -61%

Sample total            -57%        -61%

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