EFU General Insurance Limited (PSX: EFUG) was incorporated on September 2, 1932. The company provides a full range of insurance services to both the commercial and individual clients. It is part of the country's largest insurer group in the country - EFU, which also consists of EFU Life Assurance Limited and Allianz EFU Health Insurance Limited.
EFU General's product portfolio includes Fire and Property Damage, Marine, Aviation and Transport, Motor, Miscellaneous, Value Added Services, and Takaful. The firm's rated Insurer Financial Strength AA+ by the rating agencies with a stable outlook.
The insurance company provides a large variety of non-life insurance products and services of its industrial clients as well as individuals. Its clients include both large and medium sized organisations in all sectors of the economy. In addition to this, Window Takaful operations have also been started since 2015. EFU General also has a separate Risk Management Team and an Engineering Group who work closely with clients to identify various risk exposures.
Over the years, EFU General has also developed a full range of insurance services for large infrastructure projects including oil and gas exploration field. The firm has reinsurance arrangements with a number of European firms of international repute.
Pattern of shareholding and share price The shares of EFU General are quoted on Pakistan Stock Exchange. Over the last one year, it can be seen that the insurance company has largely outperformed the benchmark index. The company's shareholding pattern is such that 20.6 percent of the firm is held by Jehnagir Siddiqui and Co., while around 12.6 percent is held by charitable organisations and institutes. Directors, CEOs, their spouses and minors hold 17.69 percent. A breakup of the shareholding is given in the illustration.
Insurance sector overview Insurance sector penetration to GDP remains very low in Pakistan, only between 0.7-0.9 percent. This is largely due to lack of awareness as well as due to the existence of a large undocumented economy. The sector overall has seen a growth of around 9-10 percent in gross written premium, revenues for the insurance companies, during 2016, which is expected to continue, especially in the motor and property portfolios, while marine is likely to grow at a slower pace as commodity prices remain depressed.
Positive underwriting results in recent times have been due to better security and terrorism situation in the country. However, this has put pressure on premiums. Compared to non-life sector, life insurance companies have seen more growth recently.
A key rising trend in the non-life general insurance segment in the country is the rise of Takaful. And according to SBP's Financial Stability Review 2016, the most significant growth too has been reported by the Takaful segment in 2016 due to the influx of conventional insurers in the Takaful market in the form of Window Takaful Operators (WTOs).
In non-life insurance companies, it has been seen that the gross and net premiums have grown over the last few years. However, the decline in investment income and a rise in underwriting expenses have pushed the profitability of the sector down.
Financial and operational performance EFU General has come out well of the increased competition in the general insurance segment. The firm's past performance has seen improvement in its claim ratio continuously in the last five years, while its income has also surged in these five years.
For non-life insurance companies, investment income has a lot of significance in the firm's profitability. It usually makes up a larger proportion of the total income, acting as a buffer whenever the technical income falls short. This can be seen in the illustration; EFU General's income from investments was around 78 percent in 2015, as the insurance company witnessed a significant fall in underwriting profits.
The insurance giant saw a decline in its earnings after tax for CY16 decline by 40 percent, year-on-year. Written premiums, net premium revenues and the underwriting results all were seen increasing in 2016. Hence the decline in profit after tax came from a higher base in 2015 where the earnings included the one-time impairment charges.
Outlook EFU general enjoys 84 years of experience; it is a brand name for Insurance in Pakistan. The company expects to expand its Window Takaful Operations in the coming years. Another area of potential growth for EFU General and the non-life insurance in general, is the CPEC; new business opportunities related to CPEC for the insurance sector are likely to emerge.
EFU General's strategy for 2017 as highlighted in the Annual Report is to deliver sustainable, profitable growth in a changing and competitive business environment in order to maintain leading position in the industry.
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EFU GENERAL INSURANCE LIMITED
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Categories of shareholders Percentage held
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Associated Companies, Undertakings and Related Parties 37.85%
Directors, CEO, & their spouses and minor children 17.69%
Executives 0.26%
Public sector companies & corporations 2.16%
Joint Stock Companies 0.33%
Banks, Development Finance Institutions, Non-Banking
Finance Institutions, Insurers, Modarabas and Mutual Funds 1.46%
Charitable Institutions 12.10%
Individuals/Others 22.46%
Foreign Investors (repatriable basis) 5.69%
Shareholders holding 5 % or more voting interest
Jahangir Siddiqui & Co Ltd. 20.60%
Managing Committee of Ebrahim Alibhai Foundation 12.02%
Rafique R. Bhimjee 8.29%
Muneer R. Bhimjee 7.98%
Bano R. Bhimjee 6.92%
EFU Life Assurance Ltd. 6.81%
Castle Hill Limited 5.37%
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Source: Company accounts
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EFU GENERAL INSURANCE LIMITED-KEY FINANCIAL DATA
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Rs (mn) 2011 2012 2013 2014 2015 2016
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Written Premium
(including Takaful Contribution) 12,043 12,360 13,882 14,514 15,214 17,195
Earned Premium 11,433 12,001 13,270 14,269 14,648 15,435
Net Premium Revenue 6,224 6,009 6,342 6,532 6,677 7,243
Underwriting Result 693 679 772 1,316 1,053 1,860
Investment & Other Income 654 1,481 1,408 1,584 4,058 2,043
Profit/(Loss) before tax 842 1,614 1,623 2,262 4,809 3,781
Profit/(Loss) after tax 561 1,564 1,392 1,829 4,034 2,392
Paid-up Capital 1,250 1,250 1,250 1,600 1,600 2,000
Shareholders' Equity 9,996 11,131 11,908 13,111 15,847 16,901
Breakup Value per Share (Rs.) 79.97 89.05 9526 81.94 99.04 84.51
Investments & Properties 12,552 13,611 15,002 15,860 19,357 20,511
Cash & Bank Balances 1,758 1,670 2,083 1,521 1,749 1,867
Total Assets Book Value 24,378 29,057 28,939 29,227 32,264 36,204
Dividend % 27.5 50 50 60 75 100
Bonus % - - 28 - 25 -
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