A Comparative Study of Non-Life Insurance Companies; How Did They Perform Individually In Q4 for the FY 2078/79?

When we take a careful look at the numbers of non-life insurance, it seems that this sector has been growing at a steady rate. Nepalese insurance companies are also one of the successful enterprises of Nepal, which are still running the insurance business without suffering heavy losses from the date of establishment until now.

Previously, the business penetration was quite low and was not achieving its full potential but due to the covid-19, it has brought a favourable scenario for the insurance business which can be seen by the increasing numbers.

Most companies are earning decent profit each year. However, for some companies, it is not significant and satisfactory against the volume of transactions if we give an overlook in the balance sheet and profit and loss account. The volumes of transactions are increasing tremendously year by year, but the growth of net earnings is not in the same ratio.

With the fourth-quarter report published by all the non-life insurance companies, it is obvious that those with a strong business model and effective marketing strategies have shown better results. So, let's dive into the major indicators of non-life insurance in the fourth quarter of FY 2078/2079.

Note: Everest Insurance Company Limited (EIC) and Himalayan General Insurance company Limited (HGI) have started joint transaction after successful merger from 1st of Shrawan, 2079. They both have published separate Q4 report of FY 78/79. 

Net Profit:

Neco Insurance Company Limited (NIL) posted the highest net profit of Rs. 55.01 crores till Q4 of 2078/79. The second highest profit of Rs 47.35 crore was reported by Rastriya Beema Company Limited (RBCL). The industry average net profit stands at Rs 25.33 crore.

Among all the companies, 5 companies reported a decline in net profit in compared to the corresponding quarter of the previous year. The highest fall in net profit for FY 78/79 is Everest Insurance Company Limited (EIC) whose earnings reduced by 59.61%. 

Paid-Up Capital:

The board of directors of Beema Samiti has decided to raise the paid-up capital of life insurance companies to Rs. 5 Arba and that of non-life insurance companies to Rs. 2.5 Arba by the end of Chaitra 2079. 

Shikhar Insurance Company Limited (SICL) reported the highest paid-up capital worth 2.28 Arba. Neco Insurance Company Limited (NIL) reported the second highest capital worth Rs. 1.74 Arba. 

Following the Insurance Board's judgment, the insurance companies have combined several strategies, including pursuing a merger, to meet that standard. There are a total of Twenty non-life insurance companies, after the merger of ten non-life insurance companies, the non-life insurance companies will come down to fifteen. 

Reserve and Surplus, Insurance Fund, and Contingent Fund:

The reserve and surplus have an outlier at the upper end. RBCL has the highest reserves of Rs 3.38 arba which also impacts the industry average figure.

Following RBCL, SICL has the highest reserves of Rs 87.07 Crores. 

Likewise, RBCL and SICL has the highest insurance fund of Rs 2.66 arba and Rs 1.41 arba respectively. The industry average insurance fund stands at Rs 88.22 crore.

Likewise, Sagarmatha Insurance Company Limited has the maximum amount of contingent fund which stands at Rs. 11.95 Crores for the fourth quarter.

Total Premium Earned and Net Premium:

Net premium is the main source of earning for insurance companies. The average net earnings from premium stood at Rs 70.94 crore till Q4 of 2078/79. 

Sagarmatha Insurance Company Limited (SIC) collected highest amount of Net Premium which stands at Rs. 1.41 Arba  where as Shikhar Insurance Company Limited (SICL) collected highest total premium of Rs. 5 Arba. 

On the other side, General Life Insurance (GIC) managed to collect Net premium of only Rs. 16.62 Crores during the review period.

Claim Paid (Gross) and Claim Payment (Net):

Net claim payment signifies how much money the company paid in claims over a certain period of time. Rastriya Beema Company Limited (RBCL) reported the lowest claim payment in this quarter amounting to Rs. 4.02 crores. This is followed by Sanima General Insurance Company Limited (SGI) which paid out Rs. 10.16 crores in claims.

Likewise,  Shikhar Insurance Company Limited (SICL) has reported highest amount of claims paid - both in Gross figure and net figure. It shows that the company paid Rs. 97.51 Crores as a net payment in the Fiscal Year 2078/79. 

NOTE:  Investors always needs to compare apple to apple meaning that when we see the claims that are being paid out, for an example Sanima General has one of the lowest claims, however, it also has one of the lowest premium collection which signifies that the business is still small for Sanima General compared to Shikhar Insurance and other old players.

Number of Policies and Renewed Number of Policies:

In terms of the number of policies, Prudential Insurance Company Limited (PICL) has issued the highest number of policies reaching 433,420 policies. Likewise, Neco Insurance Company Limited (NIL) has issued the second highest number of policies reaching 298,820 policies.

The list is followed by Shikhar Insurance Company Limited (SICL) which has issued a total of 262,598 policies. Similarly, NLG Insurance Company Limited (NLG) has issued a total of 212,955 policies.

The average number of policies stood at 162,586 where 6 companies have reported their policies above the industry average.

Unpaid Claims:

The average unpaid claims stood at Rs. 1.22 Arba. As per the report published by the company's Sanima General Insurance Company Limited (SGI) has the lowest unpaid claims worth Rs. 42.77 crores. 

On the other hand, Premier insurance Company Limited (PIC) has the highest unpaid claims worth Rs. 2.94 Arba.

In the same vein, SICL has the highest number of unpaid claims which stands at around 15,900. 

Major Indicators:

Earning per share (EPS):

Rastriya Beema Company Limited (RBCL) has reported the highest annualized earnings per share in this quarter with Rs. 177.58 per share. Neco Insurance Company Limited (NIL)  and Sagarmatha Insurance Company Limited (SIL) have reported an EPS of Rs. 31.44 per share and Rs. 30.16 per share respectively.

Net Worth per share:

The highest net worth per share is reported by Rastriya Beema Company Limited (RBCL) at Rs. 2,369.81 per share. RBCL is followed by Sagarmatha Insurance Company Limited (SIC) with a net worth per share of Rs. 236.01 per share. Siddhartha Insurance Company Limited (SIL) has reported a net worth of Rs. 222.11 per share making it the third-highest.

The average Net worth per share stood at Rs. 304.33 per share.

Price to Earnings Ratio (PE Ratio) and Price to Book Ratio (PB Ratio):

In terms of Price to Earnings ratio, Neco Insurance Company Limited (NIL) has reported the lowest P/E of 18.69 times. Similarly, Premier Insurance Company Limited (PIC) has reported the second lowest P/E of 19.62 times.

The lower P/E suggests that the investors have to pay relatively lower for a rupee of earnings than their competitors. The highest P/E stood is reported by Everest Insurance Company (EIC) which has P/E ratio of 88.91.

The Price-to-Book (P/B) ratio is used compare a company's market capitalization to its book value. Traditionally, any value under 1 or 3 (Max) is considered a good P/B value, indicating a potentially undervalued stock. 

Accordingly, Lumbini General Insurance Limited (LGIL) has the lowest P/B ratio of 2.14 times and Rastriya Beema Company Limited (RBCL) has the highest P/B ratio of 5.65 times. 

Finally, the below table illustrated the overall picture with the major indicators of 18 non-life insurance companies as of the fourth quarter of FY 2078/2079.