A Peer To Peer Comparison Between Non Life Insurance Companies; How Did They Perform Individually In Q1?

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 favorable 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 first-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 first quarter of FY 2079/2080.

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 and published a joint financial statement from this quarter onwards.

Also, Sanima General Insurance Limited and General Insurance Company Nepal Limited has completed their merger process at a swap ratio of 1:1. However, they have published separate Q1 report of FY 79/80. 

Out of the 17 listed Non-life insurance companies, only 9 companies are currently trading in Nepal Stock Exchange. 

The following companies are not trading as they are undergoing merger/acquisition procedure- 

Ajod Insurance Limited and Prabhu Insurance Limited.

Lumbini General Insurance Company Limited and Sagarmatha Insurance Company Limited.

Siddhartha Insurance Limited and Premier Insurance Company (Nepal) Limited.

Sanima General Insurance Limited and General Insurance Company Limited.

Net Profit:

Shikhar Insurance Company Limited (SICL) posted the highest net profit of Rs.13.49 crores till Q1 of 2079/80. The second highest profit of Rs 7.80 crore was reported by Premier insurance Company Limited (PIC). The industry average net profit stands at Rs 5.23 crore.

Among all the companies, 7 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 79/80 is General Insurance Company Nepal Limited (GIC) whose earnings reduced by 50.71%. 

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. Himalayan Everest Insurance Company Limited (HEI) after the joint transaction has reported the second highest capital of Rs. 2.23 Crores.

Neco Insurance Company Limited (NIL) reported the third highest capital worth Rs. 1.74 Arba. 

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 3.41 arba which also impacts the industry average figure.

Following RBCL, SICL has the highest reserves of Rs 91.81 Crores. 

Likewise, RBCL and SICL has the highest insurance fund of Rs 2.69 arba and Rs 1.47 arba respectively. The industry average insurance fund stands at Rs 52.91 crore.

Likewise, SICL has the maximum amount of contingent fund which stands at Rs. 13.09 Crores for the first quarter.

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. 2.03 crores. This is followed by Sanima General Insurance Company Limited (SGI) which paid out Rs. 2.52 crores in claims.

Likewise,  Sagarmatha Insurance Company Limited (SIL) has reported highest amount of net claims paid. It shows that the company paid Rs. 23.33 Crores as a net payment in the Fiscal Year 2079/80. 

Number of Policies and Renewed Number of Policies:

In terms of the number of policies, Neco Insurance Company Limited (NIL) has issued the highest number of policies reaching 78,604 policies. Likewise, Shikhar Insurance Company Limited (SICL) has issued the second highest number of policies reaching 61,585 policies.

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 58.66 crore till Q1 of 2079/80. 

Shikhar Insurance Company Limited (SICL) collected highest amount of Net Premium which stands at Rs. 45.19 Crores  where as Neco Insurance Company Limited (NIL) collected second highest net premium of Rs. 44.94 Crores. 

On the other side, General Insurance Company (GIC) managed to collect Net premium of only Rs. 7.14 Crores during the review period.

Unpaid Claims:

The average unpaid claims stood at Rs. 1.19 Arba. As per the report published by the company's Lumbini General Insurance Limited (LGIL) has the lowest unpaid claims worth Rs. 78 Lakhs. 

On the other hand, Premier insurance Company Limited (PIC) has the highest unpaid claims worth Rs. 3.06 Arba.

In the same vein, SICL has the highest number of unpaid claims which stands at around 17,657. 

Major Indicators:

Earning per share (EPS):

Rastriya Beema Company Limited (RBCL) has reported the highest annualized earnings per share in this quarter with Rs. 80.80 per share. Premier Insurance Company Limited (PIC) and Shikhar Insurance Company Limited (SICL) have reported an EPS of Rs. 25.40 per share and Rs. 23.60 per share respectively.

Net Worth per share:

The highest net worth per share is reported by Rastriya Beema Company Limited (RBCL) at Rs. 2,390 per share. RBCL is followed by Sagarmatha Insurance Company Limited (SIC) with a net worth per share of Rs. 235.44 per share. Siddhartha Insurance Company Limited (SIL) has reported a net worth of Rs. 220.36 per share making it the third-highest.

The average Net worth per share stood at Rs. 314.68 per share.

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

In terms of Price to Earnings ratio, Nepal Insurance Company Limited (NICL) has reported the lowest P/E of 19.22 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 Rastriya Beema Company Limited (RBCL) which has P/E ratio of 158.30.

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, Prudential Insurance Limited (PICL) has the lowest P/B ratio of 2.14 times and Rastriya Beema Company Limited (RBCL) has the highest P/B ratio of 5.35 times. 

Finally, the below table illustrated the overall picture with the major indicators of 17 non-life insurance companies as of the first quarter of FY 2079/2080.