Formed in 1932, under the leadership of Mr Ghulam Muhammad, EFU General Insurance stands as the leading insurer in the private non-life insurance sector of Pakistan. The company was incorporated with the financial support of Agha Khan III and the Nawab of Mughal. The company is offering insurance servicing in areas of property, marine/aviation, motor and other miscellaneous products.
Equities still hold the largest share of the pie, standing at 80 percent (September 2014). This also takes into account its investment in its associate, ie EFU Life Assurance. This is considered to be on higher side. Given the fluctuating nature of equity markets, a balance between equity and fixed income should be the ideal approach. Besides, a higher inclination towards government bonds and other fixed income instruments to secure a stable income stream is the strategy adopted by many insurers in the industry. Nonetheless, it all depends on individual insurer's risk appetite and return preferences. Yet, one cannot overlook the highly volatile nature of stock market.
Though, the bottom line growth did not stem from the top. Top line growth remained modest, inching up a tad by 3 percent year-on-year. Perhaps, the company is more focused on maintaining a quality portfolio than on building its premiums. This is evident as claims have improved. From a claims ratio of 54 percent in the preceding year, it has now dropped to 46 percent, hence leading to a massive 71 percent growth in underwriting profits.
However, it is yet to be seen if the drastic improvement in claims expenses is the outcome of some one-off event or management's constant endeavours to create an efficient claims management process. If it's the later, then improved underwriting profits and healthy bottom line growth would be the outcomes.
Besides, the revisit of its investment portfolio also fared well for the bottom line growth. With the drastic rise in the share of government securities during the period, the firm was able to churn healthy yields on its PIB holdings. Also, the decline in PIB yields towards the end of year is likely to have contributed substantial revaluation gains on firm's high yielding PIB portfolio. Investment ratio surged by a healthy 200bps to 14 percent during the year. As interest rates are expected to slide further, revaluation gains will continue to treat the bottom line well. With this, the company also announced a cash dividend of Rs 5 per share. This is in addition to 10 percent interim dividend paid out by the company during the year.
The evolution of microinsurance regulations together with the allowance of window takaful operations for conventional insurers offers an opportunity for insurers to expand their product lines by targeting diverse market segments. But these developments are likely to bear fruits in the long run.

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EFU General Insurance - Financial Highlights
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Rs (mn)                              CY12        CY13        CY14
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Net premium revenue                 6,009       6,341       6,532
Net claims                        (3,297)     (3,406)     (2,973)
Management expenses               (1,285)     (1,375)     (1,482)
Net commission                      (748)       (788)       (760)
Underwriting result                   679         772       1,317
Investment income                     851         772         915
Share of profit of an association     390         398         404
General& administrative expenses     (512)       (524)      (592)
Profit before taxation              1,615       1,623       2,263
Profit after taxation               1,566       1,392       1,830
Net claims to Net premium ratio       55%         54%         46%
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