EFU General (PSX: EFUG) is the largest non-life insurer in the country. It commenced operations before partition in Kolkata as Eastern Federal Union Insurance Company (EFU), making it one of the oldest companies in Pakistan. Later, it was split into separate life and non-life firms.
For the local insurance sector, EFU had a pioneering role. During 1960s, the EFU brand name was recognised around the world, especially for its life business. After 1972, when the government nationalised life businesses, the company changed name to EFU General. The firm offers property, marine/aviation, motor and other miscellaneous insurance products.
In comparison to life insurance, general insurance has been much sluggish in growth, courtesy of unimpressive economic expansion. In the past five years (till CY14), the compound annual growth rate (CAGR) of net premiums for non-life sector is seven percent as opposed to life's 31 percent. For general insurance products, growth is linked tightly with economic activity; for life insurers, growth is more of a function of distribution efforts.
Another key difference in the two sectors is competition. There are over 35 general insurance companies in Pakistan compared to only seven in the life segment. Still, life accounts for the most business - gross premiums of Rs 122 billion compared to non-life's Rs 64 billion in 2014.
Performance in recent years
Top line performance for EFU General, like many of its peers, hasn't been particularly impressive. The firms' gross and net premiums have experienced a five-year CAGR (through CY15) of eight and 2.7 percent respectively - both lower than the sector average. Soaring competition has hurt EFU General in this regard, with players like Jubilee General and IGI having much steeper trajectories.
Despite premium revenue not depicting positively for the market leader, other operational metrics have gone from strength to strength over the years. EFUG's claims, underwriting income and after-tax profits have all moved favourably as a percentage of premiums in the past half decade.
Claims, which make up a significant chunk of insurers' payouts, have trended downwards over the years. The firm's claims ratio has gone from strength to strength in recent years. In CY14, claims made up 45.5 percent of EFU General's net premiums. In the same period, the sector's average was 50.3 percent. In CY15, the ratio eased further to 44.9 percent. For reference, the firm had a claims ration of 67.4 percent in 2010 - 430 bps more than the sector's average.