Unusual lag: State Life yet to issue financial results for 2012

Delay in reporting attributed to ‘dysfunctional’ board, absence of chairman .

KARACHI:

State Life Insurance Corporation has yet to issue its financial statements for 2012, although private-sector life insurers have either released – or are about to release – their performance for 2013.

Wholly owned by the government of Pakistan, State Life is the largest player in the country’s life insurance sector controlling as much as 65% market share.

State Life’s financial accounts for 2012 have not been approved and published, although their audit has been duly carried out, according to a spokesman for the Securities and Exchange Commission of Pakistan (SECP), the apex regulator of the insurance sector in the country.

The unusual lag in the approval of the financial statements of the country’s biggest life insurer is because of the unavailability of the corporation’s chairman and board of directors, he added.

“The board of directors of the corporation is dysfunctional, as certain directors have resigned and their vacancies have yet to be filled up by the federal government. Moreover, the chairman of the corporation is to be appointed by the federal government,” the SECP spokesperson added.

The government had removed Shahid Aziz Siddiqi – who became State Life’s chairman in June 2008 – from his position in May last year, although his job contract had not expired yet. State Life has been operating without a chairman since then.

The SECP has formally advised the federal government to appoint the chairman and board of directors of the corporation so that its 2012 accounts can finally be published, the SECP spokesperson said.

Although 2013 accounts can be submitted by April 30, it seems State Life will miss this year’s deadline as well in view of the government’s apparent lack of interest in the affairs of the state-owned life insurance corporation.

Under the stewardship of Siddiqi, State Life saw substantial improvement in a number of areas like total income, investment income, individual life first-year premiums and individual life renewal premiums.

In a press briefing held in January last year, Siddiqi had presented unaudited, unofficial figures for the preceding year, according to which, State Life’s total premium income totalled Rs53.9 billion in 2012. The corresponding figure stood at Rs22.7 billion in 2008, which reflects an annualised growth rate of 24.1% between 2008 and 2012.

Similarly, individual life first-year premiums in 2012 amounted to Rs13.9 billion after increasing on average 29.4% annually between 2008 and 2012.

However, State Life seems to have many deep-rooted, structural problems. According to a reform committee constituted by the SECP, State Life appears to be overstaffed relative to its private-sector competitors.

The committee also reported that State Life seems to have relatively high agency costs compared to its peers in other countries. Moreover, it said there are concerns about “procedural irregularities at decentralised levels” at State Life.

According to an assessment conducted jointly by the World Bank and the International Monetary Fund (IMF), the life insurance sector in Pakistan is undercapitalised “largely because of the position of State Life.” It also stated that the annual reports of State Life are “not particularly transparent.”

Despite many attempts for well over a week, no one from the office of the State Life chairman agreed to speak to The Express Tribune. Similarly, no one from the corporate communications department, including its head Ata Muhammad, was available for comment.

Published in The Express Tribune, March 17^th, 2014.

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