EFU Life: Bottom line growth remains flat in 2013

CEO remains satisfied, keeps long-term in mind.

KARACHI:

EFU Life Assurance CEO Taher Sachak has said growth in the company’s premiums remained satisfactory in 2013.

Speaking to The Express Tribune in a recent interview, Sachak said the company made a heavy investment in a major marketing campaign last year, which resulted in almost flat growth in bottom line.

EFU Life Assurance released its financial results late last week, according to which the company’s after-tax profit increased 1.6% to Rs929.1 million in 2013.

“We had a reversal in impairment of certain investments in our shareholders’ fund in 2012, which contributed positively to the bottom line to the extent of Rs179 million. However, this amount was Rs9.5 million in 2013 and thus impacted the profit from the shareholders’ fund,” Sachak said, adding the nationwide marketing campaign resulted in an increase in the respective expense, thus affecting the bottom line.

Premiums net of reinsurance collected by EFU Life Assurance increased 18.2% year-on-year to Rs13.3 billion while investment income and other income surged by 6% in 2013, thus making the collective rise in the revenue 14.4%.

“Keeping in view our long-term objective of consistent and sustainable business growth, I am of the view that this growth level is satisfactory,” he said, noting that a higher cash dividend this year (65%) as opposed to last year’s 55% is reflective of the company’s sound financial position.

After-tax profit of EFU Life Assurance in 2012 was Rs914.1 million, which was greater than the profits of all other private-sector life and Takaful companies put together in that year.

Sachak says it is difficult to determine the market share in terms of number of policies sold by each life insurance player in Pakistan because this information is not publicly available. However, in terms of the number of individual life policies, without micro-insurance, EFU Life must be the largest player in the private sector, he added.

He said the company is building upon its existing distribution channel strengths to augment growth in premiums. “I think the industry is taking collective steps forward in various areas, which will help improve the insurance penetration rate in the country.”

Life insurance penetration – gross life insurance premiums shown as a percentage of gross domestic product (GDP) – in Pakistan is 0.33%. It is significantly lower than life insurance penetration in India, where it was 4.4% in 2010-11.

EFU Life Assurance received claims, including movement in policyholders’ liability, amounting to Rs13.3 billion in 2013, up 13.6% from the preceding year. Saying that claims are a function of the increasing size of a life insurance company’s business base, Sachak noted overall claims remained within the expected level last year.

Management expense increased dramatically by almost a quarter, which was due to a major marketing campaign launched last year. “A significant portion of the management expense directly relates to business, which is in line with business growth,” he said, while emphasising that heavy investment in marketing will bear fruit in coming years.

Published in The Express Tribune, February 20^th, 2014.

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