Insurance: INTERNATIONAL GENERAL INSURANCE COMPANY OF PAKISTAN LIMITED - Year Ended December 31 2004

In 2004 the insurance industry seems to be propelled by worries of new entrants, enhanced paid-up capital requirement induction of Takaful Insurance based on Islamic principles and above all marketing. Health insurance and auto insurance growth fuelled by auto lease cum finance have come on the forefront of all other segments of insurance business.
On the other hand, a competitor, Adamjee Insurance has emerged of the fog of litigation and a number of insurance companies are re-engineering their business processes supported by information technology. During the year under review, the company has enlarged its branch network by acquiring the Pakistan Branch of a global insurance company Royal & Sun Alliance Insurance plc.
The company's gross premium increased significantly and net revenue as a percentage of gross premium also increased. Investment income was on the higher side. The company booked lower pretax profit mainly because of amortisation of goodwill. However future outlook is good because of rising GDP of Pakistan.
International General Insurance Company of Pakistan Limited (IGI) (a Packages group company) was incorporated in the province of Sindh as a public limited company in 1953.
IGI provides traditional insurance covers like Fire, Marine and Motor and also provides other insurance covers like contractor/erection, All Risks, Machinery Breakdown, Consequential Loss of Profit, Home Protection Policy (specified), specialised burglary cover etc.
In the company's stock ownership profile, as recorded on December 31, 2004, there were 963 shareholders from general public who held 25% of the company's stock. Syed Babar Ali held 22% of the company's stock and Packages Limited held 10.61% of the IGI shares.
Industrial Technical and Educational Institute owned 17% of its stock.
IGI shares are listed on Karachi Stock Exchange and Lahore Stock Exchange. The equity shares of the company are under dematerialisation category. The IGI shares are highly priced stocks as during the last one year the highest and lowest prices of its shares were quoted at Rs 195 and Rs 300 per share. Recently, on August 4, the closing price of IGI share was recorded at Rs 240.95 per share which is a little more than 24 times of the par value.
The registered office and head office of the company is situated at Finlay House I.I. Chundrigar Road Karachi, a commercial and financial hub of the country. Finlay House is very close to City Railway Station Karachi on the one side and head offices of SBP, NBP, MCB on the other side.
The year has been eventful for the company. During the year, it successfully acquired the business of the Pakistan Branch of Royal & Sun Alliance Insurance Plc. (R&SA), which is one of the world's leading multinational insurance groups, presently conducting business in 130 countries. With the acquisition of R&SA Pak Branch four more branches were added to its network one each in Karachi, Lahore, Islamabad and Sialkot swelling its network to 10 branches.
R&SA also selected IGI to be their partners for their global business in Pakistan and as a consequence, IGI is now the Global Network Partner of Royal & Sun Alliance Global Network Ltd.
The Pakistan Credit Rating Agency (Pvt) Ltd (PACRA) has once again assigned the company, an "Insurer Financial Strength" (IFS) Rating of "AA" (Double AA) on the basis of financial statements for the year 2003, consecutively for the fifth year.
The company is committed to invest in Information Technology which is critical for increasing efficiency. IGI has entered into agreement with Sidat Hyder Morshed Associates for replacing its system by an integrated system which would be compatible with the system acquired by R&SA. The new system is scheduled to be operational in the current year.
IGI has reinsurance arrangement with acclaimed reinsurers of the world, some of these are: Swiss Re of Switzerland, Korean Re, M. Sumitomo. The list of reinsurers also include Pakistan Reinsurance Company Ltd.
During the year 2004, the company wrote direct (Gross) Premium at Rs 423.16 million as against Rs 358.66 million in the preceding year showing increase by Rs 64.50 million or by 17.98% over last year's.
Net premium revenue amounted to Rs 208.70 million and comprised 49.3% of Gross Premium as against 39.7% in the preceding year. This shows higher conversion of business into revenue.
On the other hand net claims also increased to 41.42% by 3.73 percentage points from 37.69% in the preceding year.
It can be seen from the performance statistics that highest contributor to the revenue was Motor Business. The directors emphasized that higher retentions in motor insurance resulted in the increase by 46% in overall net premium.
Its investment portfolio generated income at Rs 231.31 million as against Rs 215.85 million in the preceding under writing profit was higher but pretax profit was lower because of large amount booked as amortisation of goodwill.

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Performance Statistics                    (Million Rupees)

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31 December                             2004          2003

Share Capital-Paid-Up:                122.81        122.81

Reserves & Retained Earnings:         771.35        641.16

Shareholders Equity:                  894.16        763.97

Provision for Outstanding

 Claims (including IBNR):             143.06         41.96

Provision for Unearned Premium:       189.54        100.81

Commission Income Unearned:            57.40         28.48

Total Underwriting Provisions:        390.00        171.25

Creditors & Accruals:                 124.84         72.29

Borrowings:                           100.00         70.16

Other Liabilities:                     17.01          9.03

Cash & Bank Deposits:                 189.87        143.03

Investments:                          854.68        728.86

Other Assets:                         361.67        200.70

Fixed Assets:                          17.14         14.11

Good Will:                            102.65             -

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TOTAL ASSETS:                       1,526.01      1,086.70

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Revenue Profit & Pay Out

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Net Premium Revenue from:

Fire & Property:                       10.94  Not Reported

Marine Aviation & Transport:           62.63  Not Reported

Motor:                                115.34  Not Reported

Other Including Miscellaneous:         19.79  Not Reported

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Net PREMIUM REVENUE                   208.70        142.21

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Admin Surcharge Recovered:              7.18          4.62

(Net Claims):                        (86.44)       (53.60)

(Expenses)                           (69.35)       (41.74)

Net Commission                         46.79         47.84

Underwriting Results (Profit):        106.88         99.33

Investment Income:                    231.31        215.85

Amortization of Goodwill:            (51.32)             -

Other Income:                           1.22          1.31

Financial (Charges):                  (2.50)        (4.64)

Gen & Admin (Expenses):              (35.30)       (31.20)

Profit Before Taxation:               250.29        280.65

Profit After Taxation:                222.29        239.55

Dividend Cash 75% (2003 60%):        (92.11)       (64.07)

Dividend Stock 25% (2003 %):         (30.70)             -

Earnings Per Share (Rs):               18.10         19.51

Share Price (Rs) on 4-08-2005:        240.95             -

Gross Premium:                        423.16        358.66

Price/Earning Ratio:                   13.31             -

Book Value per Share:                  72.81         62.20

Price/Book Value Ratio:                 3.31             -

Net claims/Net Premium (%):            41.42         37.69

Net/Gross Premium Ratio (%):           49.32         39.65

R.O.E. (%):                            24.86         31.36

R.O.A. (%):                            14.57         22.04

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