Despite a high growth of 26 percent, witnessed in net claims due to turmoil following the assassination of Benazir Bhutto, the non-life insurance sector's profit grew by 102 percent in the year 2007 on the back of capital gains booked on investments.
The sector's combined profitability surged to Rs 27.2 billion in 2007 against Rs 13.4 billion earned in the corresponding period in 2006. On the other hand, the sector's net claims increased by Rs 2.8 billion to Rs 13.265 billion in 2007 as compared to Rs 10.505 billion in a year back.
"The significant growth of the sector was mainly due to high capital gains booked on investments so as to take advantage of the capital gain tax exemption, which might end in 2008", Usman Zahid, an analyst at JS Global Capital Limited said.
Total net premium of the sector soared by 12 percent to stand at Rs 18.7 billion in 2007 as against Rs 16.7 billion in 2006. However, this rise in premium could not translate into higher underwriting profits as they registered a decline of 71 percent primarily due to considerable rise in net claims, net commission and underwriting expenses which rose by 26 percent, 7 percent and 21 percent respectively.
The high growth of 26 percent, or Rs 2.8 billion, witnessed in net claims in 2007 can also be attributed to the turmoil that took place in the country following the assassination of Benazir Bhutto. The claim ratio rose by 800 bps to 71 percent against 63 percent in 2006, while expense ratio increased by 100 bps, to 19 percent. Consequently, the sector's combined ratio (expense ratio + claim ratio) rose to 90 percent in 2007 versus 81 percent in 2006.
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