Certainly, countrys life insurance sector is moving at a faster pace than the non-life sector. Here, the manifestation lies in the bolstering financial footing of life insurance companies. Where the non-life sector is struggling with muted top line growth, the life insurance sector is rejoicing double digit premium growth on a year-on-year basis.
Basing our analysis on the listed life insurance sector, which includes Jubilee Life, EFU Life, IGI Life and East West Life Insurance, the sectors upward trajectory continued in CY14 as well. Top line of the sector grew by a healthy 34 percent year-on-year. Here, EFU Life Assurance, emerged as the star performer boasting the highest top line growth of 48 percent to Rs28 billion, followed by Jubilee Life (36 percent).
Strong top line growth is attributable to burgeoning premiums and healthy income from investments. Mind you, the investment portfolios of life insurers are highly skewed towards government securities. Based on the latest financials, listed companies held over 80 percent in government securities (mainly PIBs). Hence, substantial revaluation gains led by interest rate cuts sweetened the kitties with a rise of 77 percent in investment and other income. Led by rising investment gains, the share of premiums in the revenue mix shot down by 700bps to 70 percent in CY14.
But for the smaller players, the situation was not cheery as falling premiums kept a lid on top line growth, thereby reinforcing the belief that size does matter for life insurance business. However, some support was provided by healthy investment gains here as well.
Claims expenses, however, stayed on the higher side thereby eating some of the top line gains. Yet, the healthy surplus available in revenue account is to be cherished which grew of 27 percent year-on-year.
While the sector is rejoicing sound financial performance, there is still considerable room for growth as insurance penetration is largely untapped in Pakistan. By capitalizing on technology to introduce alternative distribution channels, these insurers can raise their profitability further to new highs.
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Aggregate P&L of Life Insurance Sector
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Rs (mn) CY14 CY13 Chg
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Revenue 59,357 44,441 34%
Expenses (55,266) (41,226) 34%
Surplus available
in revenue account 4,091 3,215 27%
Profit before taxation 3,740 3,054 22%
Profit after taxation 2,602 2,100 24%
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