Things weren't as bad as it seemed for life insurance companies amidst the pandemic: Here's how they performed this first quarter

Every economic turmoil opens new opportunities for every business. The global pandemic sure has brought a lot of opportunities for the insurance business. Life Insurance business has an opportunity to sell the best-suited policies to their clients in this global health crisis. We saw that before the pandemic hit Nepal, almost all the insurance companies had started paying their premium through an online payment gateway such as Khalti, Esewa, IME Pay, which laid a better foundation for them to tackle this situation.

When we observe the premium collection of last quarter, there has been a major increment in this fiscal year. According to the data published by the Beema Samiti, till Ashwin of this fiscal year, Life insurance companies had collected a total premium amounting to Rs. 32.32 Arba.

In this article, we will be focusing on the key parameters from the quarterly report published by all the life insurance companies. So, let’s study the first-quarter performance of the fiscal year 2077/2078 of life insurance companies.                                                                                                        

Net Profit:

Nepal Life Insurance Company Limited (NLIC) has reported the highest amount of net profit amounting to Rs. 22.90 crores against its competitors. NLIC is followed by Prime Life Insurance Company Limited (PLIC) which has reported a profit of Rs. 10.02 crores. National Life Insurance Company Limited (NLICL) has reported a profit of Rs. 11.83 crores making it the third-highest.

In terms of non-listed companies, Met-Life American Life Insurance Company Limited (ALICO) has reported the highest net profit amounting to Rs. 7.55 crores. This is followed by Jyoti Life Insurance Company Limited (JLICL) with a net profit of Rs. 7.22 crores.

Out of 19 life insurance companies, 3 companies have reported a decline in their net profit.

Net Premium:

Net premium is a core business revenue for life insurance companies after ceding some portion of the premium to Re-insurer.

Despite many challenges along the way in this global pandemic, insurance companies have been able to increase their business volume. Among listed companies, Nepal Life Insurance company Limited (NLIC) has reported a net premium worth Rs. 8.92 Arba. Life Insurance Corporation Nepal Limited (LICN) has reported a net premium of Rs. 5.03 Arba making it the second-highest.

Among non-listed companies, Union Life Insurance Company Limited (ULICL) has reported the highest net premium of Rs. 1.39 Arba. This is followed by Met-Life American Life Insurance Company Limited (ALICO) with a net premium of Rs. 1.16 Arba.

In this quarter all the companies have reported an increase in their net premium.

Capital:

Nepal Life Insurance Company Limited (NLIC) has the highest paid-up capital among its peers which amounts to Rs. 5.49 Arba. National Life Insurance Company Limited (NLICL) has the second-highest paid-up capital amounting to Rs. 3.08 Arba. Similarly, Prime Life Insurance Company Limited (PLIC) has the third-highest paid-up capital which amounts to Rs. 2.25 Arba among the listed companies.

On the flip side, Rastriya Beema Sanstha (RBS) has the lowest paid-up capital amounting to Rs. 18 crores.

In terms of non-listed companies, Citizen Life Insurance Company Limited (CLICL) has the highest paid-up capital amounting to Rs. 1.75 Arba.  

Reserve and Surplus:

In the first quarter of this fiscal year, Nepal Life Insurance Company Limited (NLIC) has reported the highest reserve and surplus which amounts to Rs. 3.66 Arba. Similarly, National Life Insurance Company Limited (NLICL) has a reserve of Rs. 1.14 Arba.

On the other hand, among the listed companies, Reliance Life Insurance Limited (RLI) who recently got listed in the stock exchange has the lowest reserve amounting to Rs. 17 crores.

Met-Life American Life Insurance Company Limited (ALICO) among the non-listed has reported the highest reserve of Rs. 2.50 Arba.

NOTE: Investors should always compare companies with which it is applicable to compare. Reliance is a relatively smaller company which started its operation only a few years ago. So, investors are requested to compare companies of relatively similar size.

Insurance Fund:

Insurance Fund is a total fund collected from the premium paid by the clients for certain coverage. Unlike non-life insurance companies, the insurance fund of life insurance has to be paid back after the expiry date of the coverage. This fund can be invested in a low-risk investment.

Among the listed companies, Nepal Life Insurance Company Limited (NLIC) has the highest insurance fund of Rs. 94.82 Arba. NLIC is followed by Life Insurance Corporation Nepal Limited (LICN) which has a fund of Rs. 70.73 Arba. Similarly, National Life Insurance Company Limited (NLICL) has the third-highest insurance fund amounting to Rs. 18.35 Arba.

The total insurance fund of all the life insurance companies combined is 3.21 Kharba till the first quarter.

Net Claim:

Among the listed companies, Reliance Life Insurance Limited (RLI) has the least amount of net claim payment in the first quarter which amounts to Rs. 6.78 crores. This is followed by Gurans Life Insurance Company Limited (GLICL) which has a net claim payment of Rs. 14.29 crores. Similarly, Surya Life Insurance Company Limited (SLICL) has the third-lowest claim payment in this quarter with an amount of Rs. 17.59 crores.

In this quarter, life insurance companies paid out a total of 10.75 Arba of claims combined.

Major Indicators:

Annualized Earnings per share:

As per the reports published by the companies for this quarter, Rastriya Beema Sanstha (RBS) has the highest annualized EPS of Rs. 22.70 per share. Prime Life Insurance Company Limited (PLIC) has the second-highest EPS of Rs. 21.39 per share.

Out of 18 companies, 9 companies have reported their EPS below the industry average of Rs. 13.53 per share.

Net Worth per share:

In terms of Net worth per share, Rastriya Beema Sanstha (RBS) has reported the highest number with Rs. 263.58 per share. Nepal Life Insurance Company Limited (NLIC) has reported a net worth per share of Rs. 177.79 per share making it the second-highest.

Among non-listed companies, Reliable Nepal Life Insurance Company Limited (RENLICL) has the highest net worth per share with Rs. 154.53 per share.

12 companies have reported below industry average net worth per share in this quarter.

Price to Earnings ratio:

Prime Life Insurance Company Limited (PLIC) has reported the lowest P/E ratio of 29.97 times against its competitors. Surya Life Insurance Company Limited (SLICL) has reported a P/E of 31.92 times. Similarly, Asian Life Insurance Company Limited (ALICL) has a P/E of 38 times.

4 companies have reported below the industry average P/E ratio in this quarter.

NOTE: Above P/E is calculated by taking the price of quarter-end price. Investors are requested to calculate the P/E with the current market price before making an investment decision.

Finally, the table below shows the overall picture with the major indicators of 19 life insurance companies as of the first quarter of FY 2077/2078.

Wrapping up:

It is interesting to observe the indicators of life insurance companies of this quarter mainly because there was heavy speculation as to how the insurance companies will perform and what their bottom line would come out. But here, the financial numbers tell a different story because the business volume has increased for all the insurance companies; most of them reporting double-digit growth compared to the corresponding quarter of the previous year. Almost all the companies have reported an increment in their net profit. In fact, the companies are also able to increase their policies in this quarter.

Despite the challenges, insurance companies were able to establish the online payment system to cope up with the so-called “new normal” in less time effectively for their clients. However, one of the most concerning challenges for the insurance companies might be the return on their investment. As per the guidelines, 90% of the funds must be kept as a fixed deposit, but in the low-interest-rate environment, the investment will yield lower interest for the insurance companies which might pressurize the bottom line.

So, how do you think the insurance company will play out in this scenario? What do you think the management has to do to yield higher returns on their investments?