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The combined after-tax profit of 19 non-life insurance companies listed on the stock exchange stood at Rs3.9 billion in April-June, up 116% on a quarter-on-quarter basis, according to a research report by Topline Securities analyst Umair Naseer.
The non-life insurance industry has three big players that jointly represent more than 58% of its overall profitability. Year-on-year earnings growth of Adamjee Insurance, Jubilee General Insurance and EFU General Insurance was 298%, 178% and 106%, respectively, in the second quarter.
Investment income, which contributes significantly to the earnings of non-life insurance companies, grew by 139% to Rs3.7 billion, he said, driving the overall profitability of the sector in the second quarter. Higher dividend income and capital gains on equity portfolio contributed to the investment income, he added.
Underwriting business
As for underwriting business, Topline Securities noted that growth of 79% to Rs1.3 billion was led by improving macros, increasing car business and a better security situation.
Within the overall sector, Adamjee Insurance’s underwriting income rose substantially to Rs230 million in April-June against a loss of Rs4 million in the same three-month period of 2014.
EFU General Insurance and Jubilee General Insurance also posted growth of 20% and 598%, respectively, in the underwriting income.
It maintains a positive outlook on the sector due to improving macro-economic indicators, better security situation, increasing car sales and initiation of infrastructure and power projects under the China-Pakistan Economic Corridor, the brokerage house said.
Net premiums of the non-life insurance sector grew by 15% to Rs7.2 billion in April-June. In contrast, claims increased at a slower pace (6%) to Rs3.5 billion over the same period. As a result, claims ratio came down to 50% in April-June versus 54% in the same quarter of 2014, the report said.
“We attribute this to an improving security situation, lower car theft incidents and increased use of tracker technology in cars,” Naseer stated.
Stock prices of insurance companies have also risen substantially in a sector-wide rally on the Karachi Stock Exchange (KSE).
Each insurance stock registered a gain in its price in the first month and a half of the current fiscal year, KSE data shows. In total, there were 28 non-life insurance companies in the private sector in 2014. Their combined profitability last year was Rs8.7 billion, up 13.6% from 2013.
Published in The Express Tribune, September 5th, 2015.
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