Listed non-life insurance companies profit increases by 60 percent

The profit of listed non-life insurance companies has increased by 60 percent to Rs 1,345 million in the quarter ended March 31, 2011 as compared to Rs 842 million in the same period last year. "Thanks to some stability in macro economic indicators, better equity values and higher interest rates, the growth in earnings stems from core underwriting business and higher investment income," Mohammad Millwala, an analyst at Topline Securities said.
"With better outlook of capital markets, gradual economic recovery and availability of ample avenues for business penetration, overall scenario looks better for the insurance business," he added. He said that the underwriting and investment income remained the earnings drivers during this period. Thanks to 9 percent growth in net premiums of the sector with net claims ratio remaining unchanged at 59 percent, underwriting business of the companies grew by an impressive 32 percent. This 59 percent claim ratio is still considerably lower than highest 64 percent (in 2007) claim ratio in last 5 years, he said.
Similarly, combined ratio (expense ratio + claim ratio) of the sector improved to 79 percent from 80 percent due to lower expense ratio witnessed in the first quarter of 2011. Interestingly, administrative expenses remained controlled and grew by 7 percent.
Moreover, high interest rate scenario, better capital markets and provisioning reversals led investment income grew by impressive 60 percent, thus further augmenting the bottom line of the non-life insurance sector.
The company wise performance shows that in this quarter most of the companies posted a turn around in earnings. The Central Insurance posted highest earnings growth of 392 percent primarily due to Rs 142 million provision reversals while the largest insurer Adamjee's profit grew by 17 percent.