Have Life Insurance Companies Performed As Expected In The First Quarter? Find Out With The Major Financial Indicators

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 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 till this quarter.

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 2078/2079 of life insurance companies.      

Net Profit:

Prime Life Insurance Company Limited (PLIC) has reported the highest amount of net profit amounting to Rs. 12.25 crores against its competitors. PLIC is followed by Surya Life Insurance Company Limited (SLICL) which has reported a profit of Rs. 11.36 crores. Asian Life Insurance Company Limited (ALICL) has reported a profit of Rs. 9.63 crores making it the third-highest.

In terms of non-listed companies, Reliable Nepal Life Insurance Company Limited (RENLICL) has reported the highest net profit amounting to Rs. 7.45 crores. This is followed by  Met-Life American Life Insurance Company Limited (ALICO) with a net profit of Rs. 6.75 crores.

Out of 19 life insurance companies, only 4 companies have reported a decline in their net profit.

Note that the Q1 net profit excludes the profit that the companies will earn after actuary valuation of life Insurance fund. So the profit earned from actuary valuation will change the figure of net profit and its net worth.

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. 9.74 Arba. Life Insurance Corporation Nepal Limited (LICN) has reported a net premium of Rs. 5.22 Arba making it the second-highest.

Among non-listed companies, Rastriya Beema Sanstha (RBS) has reported the highest net premium of Rs. 4.53 Arba. This is followed by Met-Life American Life Insurance Company Limited (ULICL) with a net premium of Rs. 1.30 Arba.

Share Capital:

Nepal Life Insurance Company Limited (NLIC) has the highest paid-up capital among its peers which amounts to Rs. 7.19 Arba. National Life Insurance Company Limited (NLICL) has the second-highest paid-up capital amounting to Rs. 3.39 Arba. Similarly, Prime Life Insurance Company Limited (PLIC) has the third-highest paid-up capital which amounts to Rs. 2.41 Arba among the listed companies.

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, Union Life Insurance Company Limited (ULI) has reported the highest reserve and surplus which amounts to Rs. 1.12 Arba. Similarly, Asian Life Insurance Company Limited (ALICL) has a reserve of Rs. 98.59 crores.

Met-Life American Life Insurance Company Limited (ALICO) among the non-listed has reported the highest reserve of Rs. 2.74 Arba.

NOTE: Investors should always compare companies with which it is applicable to compare. Reliance is a relatively smaller company that 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. 1.18 Kharba. NLIC is followed by Life Insurance Corporation Nepal Limited (LICN) which has a fund of Rs. 83.40 Arba. Similarly, National Life Insurance Company Limited (NLICL) has the third-highest insurance fund amounting to Rs. 44.89 Arba.

The total insurance fund of all the life insurance companies combined is Rs. 4.05 Kharba till the fourth quarter.

Net Claim:

Among the listed companies, Prabhu Life Insurance Limited (PLI) has the least amount of net claim payment in this quarter which amounts to Rs. 3.70 crores. This is followed by Sanima Life Insurance Company Limited (SLI) which has a net claim payment of Rs. 4.51 crores. Similarly, Jyoti Life Insurance Company Limited (JLI) has the third-lowest claim payment in this quarter with an amount of Rs. 5.36 crores.

In this quarter, life insurance companies paid out a total of 14.51 Arba of claims combined.

Number of Policies:

Major Indicators:

Earnings per share:

As per the reports published by the companies for this quarter, Prime Life Insurance Company Limited (PLIC) has the highest EPS of Rs. 20.28 per share. Surya Life Insurance Company Limited (SLICL) has the second-highest EPS of Rs. 20.08 per share.

Out of 19 companies, 9 companies have reported their EPS above the industry average of Rs. 12.36 per share.

Net Worth per share:

In terms of Net worth per share, Union Life Insurance Company Limited (ULI) has reported the highest number with Rs. 158.21 per share. Asian Life Insurance Company Limited (ALICL) has reported a net worth per share of Rs. 154.03 per share making it the second-highest.

Among non-listed companies, Rastriya Beema Sanstha (RBS) has the highest net worth per share with Rs. 297.65 per share.

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

Price to Earnings ratio:

Jyoti Life Insurance Company Limited (JLI) has reported the lowest P/E ratio of 33.50 times against its competitors. Surya Life Insurance Company Limited (SLICL) has reported a P/E of 40.34 times. Similarly, Prime Life Insurance Company Limited (PLIC) has a P/E of 41.31 times.

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 2078/2079.

* Capital, Reserve, Fund, Profit, Net Premium, Net Claim are in Rs in crores. EPS and BVPS in Rs. And P/E in times. 

Conclusion:

While the second wave of pandemics has hit most of the sectors in the economy, some of the sectors have done exceptionally well. Life Insurance is one of them has seen growth in a number of policies which has led to growth in premium collection in this quarter compared to the last quarter. This signifies that the importance of life insurance has penetrated higher than it was before i.e. 25%. This will bring about a positive impact on the overall business in the near future.

Similarly, when we observe the bottom-line figure, we can see that all the listed companies have reported increment on that front compared to the corresponding quarter of the previous year.