The economic health of Pakistan has improved considerably during 2006-2007. This upswing has also been confirmed by the State Bank of Pakistan in its annual report for the fiscal year 2006-2007. The annual report states: "Pakistan's economy recorded one of the fastest growth rates in Asia during fiscal year 2006-2007. Its real GDP growth accelerated to seven percent that was surpassed only by China and India."
This improvement is also appreciated by the World Bank in its world development indicators database of April 2007.
ITS HIGHLIGHTS ARE: Pakistan's GDP in US dollars was 73.3 billion in 2000, which increased to $128.8 billion in 2006; the annual GDP growth rate in 2000 was 4.3 percent, which rose to 6.2 percent in 2006; agriculture is shown as 26.2 percent of GDP in 2000 which was 20.5 percent in 2006; Industry was 22.6 percent of GDP in 2000 and it shot up to 26.7 percent in 2006; services and miscellaneous was 51.2 percent of GDP in 2000 and in 2006 it rose to 52.9 percent; exports and services increases to 15.5 percent of GDP in 2006 from 13.6 percent in 2000; imports increased to 24.4 percent in 2006 from 14.8 percent in 2005; workers' remittances totalled $5.4 billion in 2006 as compared to $1.1. billion in 2000; market capitalisation of listed companies enhanced to 35.3 percent of the GDP in 2006 from 9.6 percent in 2000; only 24.3 per thousand had mobile phones in 2000, whereas in 2005, it went up to 115.9 per thousand; 2.2 per thousand people had access to internet in 2000 which rose to 67.4 in 2004.".
The above analysis about the economy of the country by the State Bank of Pakistan and the World Bank shows that the overall performance of the economy was more than satisfactory and it would have been much better if the country was not suffering from frequent power breakdowns, shortage of water, intermittent suicide bombings, and frequent strikes called by the political parties against the government.
Unfortunately, the entire country is in the grip of crisis. Law and order situation, which was limited to Karachi and Sindh, has encircled Islamabad, Punjab, and the NWFP. There is no sign of it subsiding. On top of it, the imposition of emergency has further aggravated its impact. The business community has been deeply hurt on account of this adverse law and order menace. The accelerated element of uncertainty has further pummelled the apprehensions of traders and industrialists about the continuation of vertical growth of the economy.
Dismal law and order situation has played havoc with motor insurance. The scourge of hijackings of vehicles and cell phones has crossed all proportions. The average is about 25 to 27 vehicles per day and cell phone snatchings is more than 200 per day.
Since March 2007, due to the turmoil of the judiciary and subsequent lawyers' protest marches, the newspapers have stopped reporting about the crimes which used to be headlines of the dailies. All these adverse factors will not only affect the growing trade and industry of the country but it will also make a big dent on the results of insurers for the year 2007.
Surprisingly, the insurance industry, private as well as public, during 2006 was not daunted by the horrid scenario. It has on account of its resilience maintained its rising growth. The private sector insurers wrote direct gross premia of 29 billion rupees in 2006 as compared to 22.8 billion rupees in 2005.
Despite the alarming law and order situation in the province of Sindh and steep rise in motor claims, private sector insurers are not daunted in insuring motor vehicles but surprisingly motor business had surpassed all other classes of business premium wise. Out of the total premia of 2006, the motor premium was rupees 11.18 billion, ie 40 percent of total business.
Other classes of insurance business were lower than motor premia. Fire, including engineering was Rs 8.8 billion, miscellaneous and health was Rs 3.5 billion and marine cargo and aviation etc could reach only Rs 4.2 billion. If this trend continues, then after a couple of years motor insurance will be more than 50% of total premia.
Major factors behind this growth were the growing economy, insurance sector reforms, sanguine trade activities in the country, improvement in per capita income and competition among insurance companies to innovate new products for their customers, higher rates of interest offered by banks and capital gains tax exemption.
Increase in motor business has also increased motor claims simultaneously. But overall performance of all insurers has been satisfactory; and if it had not been so, the insurance companies would not have declared the following dividends:
-- EFU General - 30% cash and 100% bonus
-- Atlas - 70% cash and 30% bonus
-- Habib - 65% cash and 35% bonus
-- IGI - 40% cash and 20% bonus
-- New Jubilee - 40% cash and 20% bonus
-- Central - 50% cash
-- Shaheen - 70% bonus
-- Century - 10% cash and 25% bonus
-- Premier - 20% cash and 20% bonus
-- Askari - 30% bonus
-- Reliance - 33% bonus
-- Adamjee - 28% cash and 12.5% bonus
The total gross non-life premia of private and public sector insurers in 2006 increased to Rs 38.45 billion from Rs 31.25 billion in 2005, which is a record growth of the indigenous insurance industry. The gross premium of Pakistan Reinsurance Co Ltd (PRCL) and National Insurance Co Ltd (CL) in 2006 was Rs 4.49 billion and Rs 4.45 billion respectively.
PRCL and NICL in 2006 earned profits of Rs 783 million and Rs 2,380 million, respectively. Income tax paid by PRCL and NICL during 2006 was Rs 111 million and Rs 837 million. Private sector insurers paid tax of an amount of Rs 612 million in 2006.
Total tax paid by non-life insurance sector towards income tax amounts to Rs 2.16 billion in 2006 as compared to Rs 1.68 billion in 2005. Private Life insurance companies along with State Life Insurance Corporation (SLIC) also performed very well. In 2006, EFU Life topped among the private life insurers. EFU's net written premium was Rs 3.04 billion and profit was 236 million; New Jubilee's net premium was Rs 2.07 billion and profit was Rs 82.65 million. ALICO's net premium was Rs 655.04 million and profit was Rs 40.44 million; Metropolitan's net premium was Rs 69.25 million and profit was Rs 15.97 million.
The results of SLIC were very impressive during 2006. Life fund has risen to Rs 137 billion in 2006 from Rs 122 billion in 2005. Premium income shot up to Rs 15 billion in 2006 from 13 billion in 2005 (includes first year premium, renewal premium, and group and pension premium).
The investment portfolio soared to Rs 142 billion in 2006 from Rs 124 billion in 2005. Investment income in 2006 increased to Rs 14 billion from 13 billion in 2005, and number of policies (life) were 2,183,783 and group life 3,915,529 in 2006 against 2,044,015 (life) and 3,731,002 (group) in 2005. Total business in force (sum assured and bonus) enhanced to Rs 1.143 trillion in 2006 from 1.040 trillion in 2005.
The insurance industry has made spectacular progress in all spheres during the last 60 years. Not only the volume of business has increased, but the technical knowledge has also kept pace with the progress. Main reason of this excellent performance of insurance industry has come about because companies are evolving new products to cater to the needs of the customers, which was non-existent a couple of decades ago.
Recently, a public sector insurer, NICL, has come forward to cover the main crops, livestock and personal injuries of farmers and it is hoped that private sector would not lag behind in this welfare venture which has been the crying need of Pakistan.
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