The year under review saw highest annual growth in the company's Written Premium in the insurance history in Pakistan. Net Premium Revenue increased by 52.3 percent to Rs 3.862 billion (2004: Rs 2.536 billion). The overall claim ratio (ie claims as a percentage of net premium revenue) was 70 percent as against 60 percent in the previous year.
The directors emphasized that EFU General Insurance Ltd has established itself as the market leader in insurance of leased motor cars. Motor insurance now represents over 50 percent of the company's total Written Premium.
The alarming increase in overall claims ratio has been attributed to high level of losses in the last quarter of the year.
Profit after tax for the year was recorded at Rs 506.3 million as compared to Rs 322 million last year.
In case of Fire and Property Business, the claims ratio increased by 56% as against 30% last year. The insurance industry faced a large number of medium size losses in cotton and textile risks in fourth quarter. Also earthquake 8-10-2005 contributed to losses to the company.
Nearly 74 years ago in September 1932, the company was incorporated. This is a public limited company having its registered office located at 11/4, Shahrah-e-Pehlavi Peshawar in NWFP. The addresses of its two main offices EFU General Insurance Ltd are EFU House, M.A. Jinnah Road Karachi in Sindh and Cooperative Insurance Building 23, Shahrah-e-Quaid-e-Azam Lahore in Punjab.
The company operates through 55 (including KEPZ Branch) branches in Pakistan and one branch in Jeddah Saudi Arabia. Its Principal Place of Business is also EFU House Karachi and its URL is www.efuinsurance.com
The company is engaged in general insurance business comprising fire and property, marine, motor, etc.
The company was listed at the Karachi Stock Exchange in 1949 and its shares are also quoted at Lahore Stock Exchange. The EFU General Insurance shares market value command very high premium at the stock exchange. On April 26, 2006 the closing price of the share was quoted at Rs 168.95 per share which works out to 17 times of the par value. During the last 52 weeks the highest price of the share was recorded at Rs 289.00 per share.
As regards ownership of its equity the company directors, their spouses own 19.03% of the company's total 30 million shares of Rs 10 each. Whereas its associated undertakings and related parties own 3.76% of its stock. Ebrahim Ali Bhai Foundation, a charitable institution owns 12.18% and its 976 individual investors own 13.39% of the company's stock. Foreign investors (repatriable basis) hold 6.27% of its stock. Remaining stocks are held by other institutional investors.
Six years key financial data published with the annual report of the company does not give 6 years historical data of profit distribution. The prime stakeholder is the shareholder but he is not being informed of the six years track record.
However, for the year under review the cash dividend is @ 30% which is same rate as of preceding year's. Additionally the company proposed bonus stock dividend at two bonus shares for every three shares held by the shareholders. As regards last year's bonus stock according to the KSE Daily Quotation Sheet, in 2004 Bonus Stock Dividend was at 42.85%. From these two years dividend data, it appears that the company has very attractive profit distribution policy.
The vision statement of the enterprise is embedded with high sounding words, "At EFU first choice means a sustained commitment to meet an exceed stakeholder expectations." So no harm in expecting that the shareholders be kept "well" informed. In the age of information technology basic data is required to be communicated to various stakeholders. Because this strategy provides competitive edge to an enterprise.
The company has dedicated a lot of space in the Directors Report regarding Information Technology. Many would agree that the company should review its strategic plan for long term ensuring that information technology application is compatible with modern and integrated operating system and architecture. In this case one can be absolutely certain that the modern technology must find its appropriate place. This 74 years old company should consider re-engineer its business processes to move forward in the age of globalisation. Because now the competition is with both local companies and foreign potential entrants.
The directors informed that JCR-VIS, its rating agency, has improved its Financial Strength Rating to AA and outlook to be "stable."
Its directors rejoiced because of another record year for the company with a Written Premium of Rs 6.64 billion. It grew by Rs 1.6 billion (ie 32%) over the previous year and is the highest annual growth recorded by any company in the insurance industry in the country.
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Performance Statistics (Million Rupees)
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December 31 2005 2004
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Share Capital-Paid-up: 300.00 210.00
Reserves & Profit: 818.88 465.61
Shareholders Equity: 1,118.88 675.61
Provision for Outstanding
Claims (including IBNR): 1,826.56 1,566.22
Provision for Unearned Premium-Not: 2,398.37 1,569.97
Commission Income Unearned: 192.39 181.01
Total Underwriting Provisions: 4,417.32 3,317.20
Deferred Liabilities: 6.56 13.87
Creditors & Accruals: 654.31 690.74
Other Liabilities: 137.57 86.17
Cash & Bank Deposits: 1,192.91 865.99
Loans to Employees: 5.84 6.32
Investments: 2,387.16 1,558.96
Investment Properties: 412.37 427.82
Deferred Taxation: - 6.00
Other Assets: 2,187.12 1,855.34
Fixed Assets: 149.24 63.16
Total Assets: 6,334.64 4,783.59
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Revenue Profit & Pay Out
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Net Premium Revenue From:
Fire & Property Damage: 437.55 +
Marine, Aviation & Transport: 543.65 +
Motor: 2,749.74 +
Others: 43.49 +
Treaty: 87.57 +
Aggregate Premium (Net): 3,862.00 2,536.09
(Net Claims): (2,694.35) (1,529.56)
(Expenses): (717.79) (538.37)
(Net Commission): (137.59) (47.87)
Underwriting Result: 312.27 420.29
Investment Income: 372.97 101.73
Rental Income: 64.32 55.06
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Profit on Sale of
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Fixed Assets: 7.82 7.96
Difference in Exchange: 1.03 1.55
Gen. & Admin (Expenses): (109.83) (112.42)
Amount Due from State Life
Insurance (Written off): (2.86) -
Profit Before Taxation: 645.72 474.17
Profit After Taxation: 506.27 322.45
Dividend Cash: 30.00 30.00
Dividend Bonus Stock (%): 66.67 42.85
Earning Per Share (Rs): 16.88 10.75
Share Price (Rs) on 26/04/06: 168.95 -
Gross Premiums Written: 6,644.00 5,043.00
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Financial Ratios
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Price/Earning Ratio: 10 -
Book Value Per Share: 37.30 32.17
Price/Book Value Ratio: 4.52 -
Net Profit/Underwriting Result Ratio (%):162.13 76.73
Net/Gross Premium Ratio (%): 58.12 50.29
R.O.E (%): 45.25 47.72
R.O.A. (%): 8.00 6.74
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COMPANY INFORMATION: Chairman: Rafique R. Bhimjee; President & Managing Director (Chief Executive): Saifuddin N. Zoomkawala; Corporate Secretary: Hasanali Abdullah; Directors: Hasanali Abdullah, Jahangir Siddiqui; Registered Office: 11/4, Shahrah-e-Pehlavi, Peshawar; Main Offices: EFU House, M.A. Jinnah Road, Karachi; Cooperative Insurance Building 23, Shahrah-e-Quaid-e-Azam, Lahore; Web Address: www.efuinsurance.com
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