Profitability Figures of Life Insurance Companies Painted a Greener Picture in Q3; Summary of the Key Factors for Each of the 17 Companies

The Nepalese life insurance industry got momentum in the last decade. The growth of the market has improved as compared to the previous decade, especially after the Earthquake in 2015 and the coronavirus outbreak-2019.

Life insurance sector is characterized as an oligopoly market where only a few companies dominate the entire market. The major factor to be considered by the customers and authorities that whether the market players are doing business in fair competition or not. 

The concentration ratio shows that decade-old insurance companies have more than two third the market share while rest of the companies have occupied lower market share. Also, there is the domination of the Nepal Life and LIC-Nepal over rest of the companies.

In this article, we will be focusing on the key parameters from the quarterly report published by all the life insurance companies which helps you decide which company fits in your investment criteria

So, let’s study the third-quarter performance of the fiscal year 2079/2080 of life insurance companies. 

Note: Surya Life Insurance Company Limited and Jyoti Life Insurance Limited have started joint transaction after successful merger at a swap ratio of 100: 82.45.

Likewise, Sanima Life Insurance Company Limited and Reliance Life Insurance Limited have also started joint integrated transaction and published joint report for this period.

Prime Life Insurance Company Limited, Gurans Life Insurance Company Limited and Union Life Insurance Company Limited have also completed merger procedure, however the companies have published separate quarterly reports for this period.

Prabhu Life Insurance Limited and Mahalaxmi Life Insurance Company Limited is also undergoing merger/acquisition procedure.

Net Profit:

Nepal Life Insurance Company Limited (NLIC)  has reported the highest amount of net profit amounting to Rs. 44.65 crores against its competitors. NLIC is followed by National Life Insurance Company Limited (NLICL) which has reported a profit of Rs. 29.69 crores. SuryaJyoti Life Insurance Company Limited (SJLIC) has reported a profit of Rs. 25.32 crores making it the third-highest.

In terms of non-listed companies, Sun Nepal Life Insurance Company Limited (SNLICL) has reported the highest net profit amounting to Rs. 44.52 crores. 

Out of 17 life insurance companies, 1 company viz Rastriya Beema Sanstha have reported a decline in their net profit. 

Likewise, as per the reports, Life Insurance Corporation Limited (LICN) has collected the highest growth in net profit of 1294.92% as compared to the relevant quarter of previous fiscal year, 2078/79. 

This is to be noted that the net profit figure of all companies is without the profit generated from the actuarial valuation of assets and liabilities. Which is reflected only in the audited report of the company. 

Paid-up Capital:

Nepal Life Insurance Company Limited (NLIC) has the highest paid-up capital among its peers which amounts to Rs. 8.20 Arba. National Life Insurance Company Limited (NLICL) has the second-highest paid-up capital amounting to Rs. 4.6 Arba. Similarly, Surya Jyoti Life Insurance Company Limited (SJLIC) has the third-highest paid-up capital which amounts to Rs. 4.5 Arba among the listed companies.

In terms of non-listed companies, Reliable Nepal Life Insurance Company Limited (RENLICL) has the highest paid-up capital amounting to Rs. 2.8 Arba.  

Reserve & Surplus and Contingent Fund:

In the third quarter of this fiscal year, Surya Jyoti Life Insurance Company Limited (SJLIC) has reported the highest reserve and surplus which amounts to Rs. 2.58 Arba. Similarly, Nepal Life Insurance Company Limited (NLIC)  has a contingent Fund of Rs. 83.37.

Met-Life American Life Insurance Company Limited (ALICO) among the non-listed has reported the highest reserve of Rs. 2.81 Arba. ALICO also has the highest contingent fund amounting to Rs. 39.24 Crores.

NOTE: Investors should always compare companies with which it is applicable to compare.  So, investors are requested to compare companies of relatively similar size.

Life 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. 1.57 Kharba. NLIC is followed by Life Insurance Corporation Nepal Limited (LICN) which has a fund of Rs. 1.04 Kharba. Similarly, National Life Insurance Company Limited (NLICL) has the third-highest insurance fund amounting to Rs. 58.3 Arba.

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 and competition, 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. 26.8 Arba. Life Insurance Corporation Nepal Limited (LICN) has reported a net premium of Rs. 12.9 Arba making it the second-highest.

Among non-listed companies, Rastriya Beema Sanstha (RBS)  has reported the highest net premium of Rs. 7.2 Arba. This is followed by  Citizen Life Insurance Company Limited (CLICL) and Metlife (ALICO) with a net premium of Rs. 3.7 Arba each.

Net Claim:

Among the listed companies, Gurans Life Insurance Limited (GLICL)  has the least amount of net claim payment in this quarter which amounts to Rs. 10 Crores. This is followed by Sanima Reliance Life Insurance Limited (SRIL) which has a net claim payment of Rs. 47 Crores. On the other hand, Nepal Life Insurance Company Limited (NLIC) has the highest claim payment in this quarter with an amount of Rs. 11.82 Arba.

Likewise, out of non-listed life insurance companies, Mahalaxmi Life Insurance Company Limited (MLICL), has the least amount of net claim payment in this quarter which amounts to Rs. 18 Crores.

Number Of Policies:

Among the listed insurance companies, NLICL is leading the chart with 17.29 lakh policies, whereas, from the unlisted ones, RENLICL has sold maximum 35.14 Lakh Policies.  

Investors of all life 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.

Provisions for Unexpired Risk, Unpaid Claims, and Losses (Investment):

As per the provisions for unpaid risk for the third quarter of 2079/80, NLICL is in the lead with an unpaid risk of Rs. 38.97 Crores. Also, from the non-listed insurance companies, RENLICL has the highest unpaid risk of Rs 50.18 Crores in the same quarter. 

In terms of unpaid claims for unlisted companies, RBS has the highest amount of unpaid claims which amounts to Rs. 72.46 Crores and for listed companies, NLIC has has the highest unpaid claims of Rs. 1.03 Arba.

Similarly, SRIL reports lowest investment losses of Rs. 21 Crores in the listed sector, where as MLICL in the non listed sector has investment losses of Rs. 37 Crores.

Major Indicators:

Earnings per share:

As per the reports published by the companies for this quarter, Gurans Life Insurance Limited (GLICL) has the highest EPS of Rs. 9.60 per share. Asian Life Insurance Limited (ALICL) has the second-highest EPS of Rs. 8.93 per share from the listed company category.

Out of 17 companies, only 4 companies have reported their EPS above the industry average of Rs. 9.22 per share.

Net worth Per Share:

In terms of Net worth per share, SuryaJyoti Life Insurance Company Limited (SJLIC) has reported the highest number with Rs. 164.36 per share. Life Insurance (LICN) has reported a net worth per share of Rs. 139.09 per share making it the second-highest.

Among non-listed companies, Rastriya Beema Sanstha (RBS) has the highest net worth per share with Rs. 335.85 per share.

Price to Earning (PE) Ratio:

Among the data provided by life insurance companies for Q3, Life Insurance Corporation Nepal Limited (LICN) has reported the highest P/E ratio of 317.09 times against its competitors.  Gurans Life Insurance Company Limited (GLICL) has reported lowest P/E of 39.59 times. 

Finally, the table below shows the overall picture with the major indicators of 17 life insurance companies as of the third quarter of FY 2079/2080.