Platinum Insurance Company Limited (PICL) was incorporated as a public limited company in 1981 to carry on all kinds of General Insurance business and commenced its business in 1982.
PICL shares are quoted on Karachi and Lahore stock exchanges. The company is engaged in general insurance business comprising of fire and property, marine, motor, etc through a network of three branches in Sindh Zone, six branches in Punjab Zone and two branches in NWFP Zone. Number of company employees at the end of 2006 was 18 (2005: 18 employees).
The authorised capital of PICL is Rs 80 million, comprising eight million shares of Rs 10 each. As on December 31, 2006 the paid up capital was Rs 80 million, which was held by 374 individuals. No other details on the company ownership have been provided. The notice of next AGM included a proposal to raise the authorised capital from Rs 80 million to Rs 120 million.
The Auditors in their Report to the Members, before expressing an opinion, make an exception for the effect of the matters referred to in the preceding paragraphs (i) to (iv), which read:
"i) As stated in Note 11 to the financial statements, no provision for amount due against degree in the sum of Rs 31,614, 808 has been made in these accounts. The matter has been referred to Assistant Session Judge, Islamabad for the execution of degree amount. ii) As stated in Note 8 to the financial statements, no details for leased vehicles has been provided to us. Accordingly the amount of the leased vehicles and related liabilities could not be ascertained.
iii) The company has not carried out actuarial valuation to determine the present value of defined benefits obligations relating to gratuity, in accordance with International Accounting Standard - 19 [Employee Benefits]. Consequently we are unable to report on the amount of Provision for Gratuity required as at December 31, 2006.
iv) The company has not adopted IAS 12 [Income Taxes] relating to provision for deferred taxation. Accordingly we were unable to report on short fall if any on the provisions for deferred taxation."
According to Note 11, the Degree amount [M/s High Ways Bridge, contractors International (Pvt) Limited] represents claim paid to Daewoo Corporation against performance and mobilisation advance guarantee. The company filed counter suit and got the degree in their favour. On Staff retirement benefits, according to Note 4.10, the company operates an unfunded retirement gratuity scheme. Gratuity is accounted for as and when paid. The requirement of IAS-19, Employee Benefits (revised) has not been complied with.
In their Review Report, the Auditors on Statement of Compliance with Best Practices observed that the implementation of Code of Corporate Governance was still in process.
The Directors in their Report state that the board of Directors remained engaged in performing their duties as required under the code of corporate governance, which has been adopted for compliance.
Total assets of PICL decreased slightly (by 2%) to Rs 101 million on December 31, 2006 compared to Rs 103 million on December 31, 2005. The increases or decreases in assets or liabilities are relatively small. Shareholders Equity on December 31, 2006 as percentage of Total Assets was 73% (2005: 71%), which reflects PICL's financial strength.
During the year ended December 31, 2006, PICL has Written Premium of Rs 8.3 million. The net premium revenue for the year however saw 9% increase to Rs 5.002 million as compared to Rs 4.576 million in 2005. As percentage of Net Premium Revenue, Net Claims have dropped from 45% in the previous year to 34% in the year 2006. However, for the year under review there was big increase in Net Commission over the previous year and consequently, underwriting profit for the year was at Rs 2.153 million (43% of net premium revenue) compared to Rs 2.159 million (47% of the net premium revenue) for the previous year. PICL closed the year with Loss after tax at Rs 0.488 million as compared to Rs 0.588 million Loss after tax for 2005, a decrease of 17%. Performance statistics are given below.
The Directors in their Report, in the context of Regulatory Authority, state that there is the need for SECP to fix limits on insurance companies generating premium income. According to them, the mad rush for generating premium income be better tied to an agreed uniform method of indexation, its net solvency margins, paid up capital and free reserves etc. Such a prudent policy adopted by SECP is deemed necessary for the industry to grow on healthy lines which would help and guide the insurance companies to undertake proper risk analysis, adopt risk management techniques and rate the risk adequately. Insurance companies with good arrangements must not waste their automatic reinsurance capacities due to arbitrary fixation of single risk limits imposed by the banks. Here again there is no uniform policy adopted by the banks and it is expected of SECP to play its due part in resolving the issue.
============================================================
Performance Statistics (Audited)
(Rs in 000)
============================================================
Balance Sheet (as on Dec. 31) 2006 2005
============================================================
Cash, bank and deposits: 754 989
Premium due but unpaid: 1,680 1,640
Amounts due from re-insurers: 240 240
Other current assets: 33,783 33,212
Total Current Assets: 36,457 36,081
Total Fixed Assets: 64,690 67,295
Total assets: 101,147 103,376
Paid up capital: 80,000 80,000
Reserves & Retained earnings: -6,593 -6,104
Shareholders Equity: 73,407 73,896
Underwriting provisions: 5,079 4,707
Total Creditors, accruals: 22,661 24,773
Total Liabilities: 27,740 29,480
Total Liabilities & Equity: 101,147 103,376
------------------------------------------------------------
Ratios: 2,006 2,005
------------------------------------------------------------
Cash and bank/Total Assets: 1% 1%
Premium due but unpaid/Total Assets: 2% 2%
Total Current Assets/Total Assets: 36% 35%
Fixed Assets/Total Assets: 64% 65%
Shareholders Equity/Total Assets: 73% 71%
Underwriting Provisions/Total Assets: 5% 5%
Total Liabilities/Total Assets: 27% 29%
Book Value (Par Rs 10/share)-Rs: 9.18 9.24
Quoted Price (20-7-2007)- Rs: 5.50 -
Quoted Price/Book Value Ratio - X: 0.60 -
------------------------------------------------------------
Revenue Account (Y end Dec. 31) 2006 2005
------------------------------------------------------------
Net premium revenue: 5,002 4,576
Net claims: 1,688 2,044
Expenses, net commissions, etc: 1,161 374
Total, claims, expenses, commission: 2,849 2,418
Underwriting result: 2,153 2,158
Other income: 95 95
Total Income: 2,248 2,253
Total Gen. and Admn. Expenses: 2,711 2,816
(Loss) before tax: -463 -563
Provision for Taxation: 25 25
(Loss) after tax: -488 -588
------------------------------------------------------------
Ratios: 2006 2005
------------------------------------------------------------
Underwriting result/net premium revenue: 43% 47%
Underwriting result/Total Assets: 2% 2%
Underwriting result/Total income: 96% 96%
(Loss)]/Total Assets: -0.5% -0.6%
(Loss)/Total Equity: -0.7% -0.8%
EPS (Year end capital)-Rs: -0.06 -0.07
Price Earning Ratio-Times: Loss -
------------------------------------------------------------
Cash Flow Summary 2006 2005
------------------------------------------------------------
Total cash flow from
Operating activities: -329 47
Total cash flow from Investing activities: 95 95
Total cash flow from Financing activities: 0 0
Net cash from All activities: -234 142
Cash at beginning of period: 989 847
Cash at end of period: 755 989
============================================================