Annual report 2014: Life insurance industry in private sector surges 35.8%

Increase in asset base largely in line with average growth rate for last five years.

KARACHI:

The life insurance industry in the private sector grew by over one-third in 2014, a review of the latest annual reports of market players shows.

Total assets of the life insurance industry in the private sector stood at Rs139.1 billion at the end of 2014, which is 35.8% higher than the comparable figure from a year ago.

The increase in the asset base of the private-sector life insurance companies is largely in line with its average growth rate for the last five years. Assets of the private-sector life insurance companies have grown at an annualised rate of 36% in 2009-14, industry-wide data shows.

Jubilee Life Insurance remained the most profitable entity among the six private life insurance companies that operated in Pakistan in 2014. Its net profit for the year was in excess of Rs1.3 billion, which constitutes more than 56% of the industry’s collective earnings.

Combined profits of all life insurance companies operating in the private sector amounted to Rs2.4 billion in 2014, up 20.2% from a year ago.



The second highest earnings were posted by EFU Life Assurance with an after-tax profit of Rs950.9 million. It was followed by IGI Life (Rs55.3 million), East West Life (Rs29 million), Adamjee Life (Rs15 million) and Asia Care Health Insurance (Rs13.8 million).

Jubilee Life Insurance became the most profitable industry player recently, as its profit was substantially less than that of EFU Life Assurance until 2012. Earnings of Jubilee Life grew at an annualised rate of 53.7% in the last three years while the increase in the profitability of EFU Life Assurance was 18% per annum over the same period.

Other than the six private-sector companies, government-owned State Life Insurance Corporation is also part of the life insurance industry. However, its post-2012 statistics are yet to be released.

State Life Insurance Corporation was the most profitable company in the industry after EFU Life Assurance in 2012 when the bottom line of the state-owned entity clocked up at Rs809 million.

In terms of total gross premiums, a key performance indicator in the insurance sector, Jubilee Life remained ahead of its rivals in 2014. After increasing by 27.8%, its total gross premiums amounted to Rs21.8 billion last year. This constituted over 45% of total gross premiums collected by all private-sector life insurance companies in 2014.

Industry analysts believe one reason for the exceptional growth of Jubilee Life Insurance is its focus on alternate distribution channels, such as bancassurance that uses bank branches to sell insurance products while minimising administrative expenses.

Jubilee Life Insurance is a subsidiary of Aga Khan Fund for Economic Development, the owner of majority shares in Habib Bank (HBL), which is the largest commercial bank with the widest branch network in Pakistan. This has enabled Jubilee Life Insurance to sell its products more effectively through HBL branches at a competitive cost across the country.

In contrast, other life insurance companies, except Adamjee Life Insurance, are not part of any bank-owning conglomerate. This means they have to rely heavily on the network of their own life insurance agents across the country, which hikes up their overall cost of operations.

In terms of total assets, EFU Life Assurance remained the largest private life insurance company with assets amounting to Rs67.2 billion at the end of 2014. It means the company controlled 48.3% assets of the country’s private-sector life insurance industry. Total assets of Jubilee Life amounted to Rs49.6 billion last year, up 44.6% from a year ago.

Published in The Express Tribune, May 17^th, 2015.

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