KARACHI: Life insurance companies operating in the private sector earned a net profit of Rs798.6 million in the first quarter of 2016, which is up 28.5% from the comparable period of 2015.
Latest statistics released by the Insurance Association of Pakistan (IAP) show that EFU Life Assurance remained the most profitable entity among the five private life insurance companies operating in Jan-Mar.
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Its net profit for the first quarter of 2016 was in excess of Rs411.3 million, which constitutes more than half of the collective earnings of the private-sector insurance industry in the three-month period.
The second highest earnings were posted by Jubilee Life with an after-tax profit of Rs375.1 million. It was followed by IGI Life (Rs10.7 million), Adamjee Life (Rs917,000) and East West Life (Rs490,000).
EFU Life has become more profitable than Jubilee Life only recently. Earnings of EFU Life exceeded those of Jubilee Life until 2012. But Jubilee Life turned the corner afterwards and posted higher net profits for three subsequent years.
Earnings of Jubilee Life grew at an annualised rate of 44.2% between 2011 and 2015 while the average increase in the profitability of EFU Life was 26.4% per annum over the same four-year period.
In terms of total gross premiums, a key performance indicator in the insurance sector, Jubilee Life remained ahead of its rivals in the first three months of 2016. After increasing by 24%, its total gross premiums amounted to Rs7.9 billion for Jan-Mar. This was over 46.3% of the total gross premiums collected by all private-sector life insurance companies in the three-month period.
EFU Life is not part of any bank-owning conglomerate. This means it relies mainly on its network of insurance agents across the country as opposed to bancassurance, which means selling insurance products through the branches of conventional banks.
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In contrast, Jubilee Life is a subsidiary of Aga Khan Fund for Economic Development, the owner of majority shares in Habib Bank, which is the largest commercial bank with the widest branch network in Pakistan. This has enabled Jubilee Life to sell its products more effectively through HBL branches at a competitive cost.
In terms of assets, EFU Life remained the largest private life insurance company with total assets amounting to Rs91.2 billion by the end of March. It means the company controls 46.1% assets of the country’s private-sector life insurance industry.
Total assets of Jubilee Life amounted to Rs74 billion at the end of the first quarter of 2016, up 38.2% from a year ago.
The federal government imposed withholding tax on insurance premiums in the 2016-17 budget that, analysts say, will hurt the insurance industry.
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The imposition of 1% withholding tax on life insurance premiums of non-filers in case they are in excess of Rs200,000 per annum is expected to make life insurance costlier for people who do not file their annual income tax returns, they say.
Currently, the penetration of life insurance is only 0.51% of GDP in Pakistan. The savings-to-GDP ratio decreased from 14.7% in the preceding fiscal year to 14.5% in 2015-16, according to the latest economic survey.
Published in The Express Tribune, July 24th, 2016.
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