Net Profit of Non-Life Insurance Companies Increased By 28.48% in Q2; Find Out the Performance of the 16 Listed Non-Life Insurance Companies
Wed, Feb 15, 2023 10:29 AM on Company Analysis, Stock Market, Exclusive,
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 second-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 second 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 and they have also published joint Q2 report of FY 79/80. Since, HEI and SGIC are newly merged companies, the net profit of previous year second quarter has been not taken into account for this analysis.
The following non-life insurance companies are also undergoing merger/acquisition procedure-
Ajod Insurance Limited and United Insurance Company (Nepal) Limited.
Lumbini General Insurance Company Limited and Sagarmatha Insurance Company Limited.
Siddhartha Insurance Limited and Premier Insurance Company (Nepal) Limited.
IME General Insurance Limited and Prudential Insurance Company Limited
Net Profit:
Rastriya Beema Company Limited (RBCL) posted the highest net profit of Rs.37.429 crores till Q2 of 2079/80. The second highest profit of Rs 24.07 crore was reported by Shikhar Insurance Company Limited (SICL). The industry average net profit stands at Rs 14.15 crore.
Among the 16 Non-life Insurance Companies companies, 2 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 Prudential Insurance Company Nepal Limited (PICL) whose earnings reduced by 43.24%.
Paid-Up Capital:
The board of directors of Insurance Authority 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 2.29 Arba. Himalayan Everest Insurance Company Limited (HEI) after the joint transaction has reported the second highest capital of Rs. 2.24 Arba.
Neco Insurance Company Limited (NIL) reported the third highest capital worth Rs. 2.01 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 3.57 arba which also impacts the industry average figure.
Following RBCL, SICL has the highest reserves of Rs 97 Crores.
Likewise, RBCL and SICL has the highest insurance fund of Rs 2.85 arba and Rs 1.53 arba respectively. The industry average insurance fund stands at Rs 1.04 Arba.
Likewise, SICL has the maximum amount of contingent fund which stands at Rs. 13.09 Crores for the second 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. 3.40 crores.
Likewise, Sagarmatha Insurance Company Limited (SIC) has reported highest amount of net claims paid. It shows that the company paid Rs. 44.60 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 154,620 policies. Likewise, Shikhar Insurance Company Limited (SICL) has issued the second highest number of policies reaching 124,875 policies.
Note:- Investors of all insurance companies should understand the quality of insurance policies is important rather than number of insurance policies. Moreover, these policies might include scheme such as foreign employment insurance policy which provides less net premium so some insurance companies do not prefer such policies. Hence, judging an insurance company based only on number of insurance policies would be absurd.
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 46.95 crore till Q2 of 2079/80.
Neco Insurance Company Limited (NIL) collected highest amount of Net Premium which stands at Rs. 87.26 Crores where as Shikhar Insurance Company Limited (SICL) collected highest total premium of Rs. 2.65 Arba.
On the other side, Prudential Insurance Company (PICL) managed to collect Net premium of only Rs. 20.48 Crores during the review period.
Unpaid Claims:
As per the report published by the companies, Lumbini General Insurance Limited (LGIL) has the lowest number of unpaid claims of 2,655.
On the other hand, IME General insurance Limited (IGI) has the lowest amount of unpaid claims worth Rs. 1.28 Crores.
In the same vein, SICL has the highest number of unpaid claims which stands at around 15,109.
Major Indicators:
Earning per share (EPS):
Rastriya Beema Company Limited (RBCL) has reported the highest annualized earnings per share in this quarter with Rs. 280.67 per share. Sagarmatha Insurance Company Limited (SIC) and Premier Insurance Company Limited (PIC) have reported an EPS of Rs. 26.20 per share and Rs. 22.27 per share respectively.
Net Worth per share:
The highest net worth per share is reported by Rastriya Beema Company Limited (RBCL) at Rs. 2,510.14 per share. RBCL is followed by Sagarmatha Insurance Company Limited (SIC) with a net worth per share of Rs. 244.05 per share. NLG Insurance Company Limited (NLG) has reported a net worth of Rs. 221.15 per share making it the third-highest.
The average Net worth per share stood at Rs. 334.41 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 22.40 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 Prudential Insurance Limited (PICL) which has P/E ratio of 70.11.
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 2.04 times and Rastriya Beema Company Limited (RBCL) has the highest P/B ratio of 5.58 times.
Finally, the below table illustrated the overall picture with the major indicators of 16 non-life insurance companies as of the second quarter of FY 2079/2080.
Note - All figures are in Rs. Crores, whereas the Capital figures are in Rs Arba.
