Non-life insurers record 32pc fall in profit

KARACHI: Non-life insurance sector recorded a 32 percent year-on-year decline in its profitability to Rs1.9 billion during the July-September quarter due to a sharp fall in its investment income, a brokerage said on Friday.

Topline Securities, in a report based on accounts of 18 listed non-life insurers, said their investment income fell 54 percent year-on-year to one billion rupees in 3Q2017. Since IGI Insurance didn’t announce the financials, the company was not included.

Adamjee Insurance (AICL) witnessed the highest decrease in investment income, which was down 50 percent to Rs725 million in July-September over the three-month period a year earlier as the company’s capital gains slid to Rs311 million from Rs934 million a year ago.

AICL registered a 58 percent decline in its earnings. EFU General Insurance and Jubilee General Insurance also recorded dip in investment income, down 45 percent and 58 percent, respectively.

Topline Securities further said the sector’s underwriting income remained flat at Rs1.6 billion in 3Q2017 as claims and expense ratios were on the higher side during the quarter. The sector’s net premium grew three percent to nine billion rupees, driven by higher premiums recorded by Adamjee Insurance and EFU General Insurance (EFUG) in 3Q2017.

“This is mainly attributed to higher motor insurance owing to increase in car sales and imports,” analyst Umair Naseer at Topline Securities said. Claims of non-life insurers rose 15 percent to Rs4.6 billion, taking claims ratio to 50 percent in 3Q2017 as compared to 49 percent a year earlier.

EFU General Insurance’s expenditure related to claims climbed 47 percent to Rs0.8 billion, bringing its claim ratio to 38 percent in September 2017 as compared to 30 percent in the same month of 2016.

EFU General Insurance reported flat earnings growth during the quarter. United Insurance also recorded a 56 percent increase in claims, clocking in at Rs329 million. The sector’s underwriting expenses were also up 11 percent, impeding growth in underwriting income.

Non-life insurance companies also saw higher effective tax rate during the quarter, which stood at 31 percent versus 24 percent a year ago. Naseer said the imposition of 31 percent corporate tax increased tax burden on the sector. Previously, insurers were enjoying tax concession on capital gains and dividend income.