Profits of the non-life insurance sector showed a cumulative year-on-year decline of nine per cent in 2010.
According to a research note by InvestCap Research, the sector suffered the drop in profits due to a significant 32 per cent fall in the core insurance business amid higher claims due to floods, and a 21 per cent decline in investment income.
Out of a sample of 21 non-life insurance companies which represent almost the entire market capitalisation, IGI Insurance recorded a massive 217 per cent jump in profits, while three companies booked net losses.
Total net premium (gross premium minus reinsurance arrangements) of non-life insurance companies stood at Rs23 billion, showing an appreciation of three per cent compared with the preceding year. This growth, however, could not trickle down to the underwriting results, owing to a 10 per cent increase in total claims that reached Rs15 billion, amid poor law and order situation and last summer’s devastating floods.
During the year, investment income declined by 21 per cent, despite better performance of the equity market in the last quarter, increasing 28 per cent during the year. Moreover, a four per cent increase was observed in general and administrative expenses in 2010.
Slowdown in economic activities and a poor law and order situation are likely to keep the sector inactive, added the note.
Published in The Express Tribune, April 12th, 2011.
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