How did life insurance sector perform during the Corona virus outbreak?

Fri, Jun 5, 2020 9:33 AM on Exclusive, Financial Analysis,

The life insurance companies have published their third quarter financial reports. Let’s look on the basis of each indicator.

Financial overview:

Number of policies:

Number of insurance policies reflects the company’s ability to market its schemes and products. Metlife - American Life Insurance Company Limited maintains a lead position with 13.66 lakhs insurance policies followed by Nepal Life Insurance Company Limited (NLIC) with 12.80 lakhs policies and National Life Insurance Company Limited (NLICL) with 7.84 lakhs policies as of third quarter of FY 2076/77.

Among the newly licensed insurance companies, Reliable Nepal Life Insurance Company (RENLICL) is in the lead with 21.63 lakhs policies. Reliable Nepal’s number of insurance policies is high due to inclusion of Foreign Employment insurance policies. Citizen Life Insurance Company Limited (CLICL) has the second highest number of insurance policies i.e. 1.18 lakhs followed by IME Life Insurance Company (IMELICL)  with 1.07 lakh policies.

However, investors of all life insurance companies should understand the quality of insurance policies is important rather than number of insurance policies. Moreover, these policies might include scheme such as foreign employment insurance policy which provides less net premium so some insurance companies do not prefer such policies. Hence, judging an insurance company based only on number of insurance policies would be absurd.

Net premium:

As of third second quarter of this fiscal year, among the old life insurance companies, Nepal Life Insurance Company (NLIC) has the highest net premium of Rs 18.41 arba. It is followed by Life Insurance Corporation Nepal Limited (LICN) with net premium of Rs 10.31 arba.

 

Among the newly registered companies, Reliable Nepal Life Insurance Limited (RENLICL) has the highest net premium amounting to Rs 1.20 arba. It is followed by Citizen Life Insurance Company Limited (CLICL) and Jyoti Life Insurance Company Limited (JLICL) with a net premium of Rs 1.16 arba and 1.10 arba.

Life insurance fund

Life insurance fund is considered to be one of the most important factors in the financial statement. This indicator provides an estimate on how much advance preparation has an insurance company done for crisis. If we analyze the insurance fund in third quarter of 2076/77, Nepal Life insurance Company (NLIC) has the highest insurance fund of Rs 81.37 arba. Life Insurance Corporation Nepal (LICN) stands at the second position with a fund of Rs 63.67 arba. National Life Insurance Company Limited (NLICL) is seen in the third position with Rs 31.52 arba in insurance fund.

 

In context of insurance funds, Jyoti Life insurance Company (JLICL) has the highest insurance fund of Rs 1.40 arba followed by Citizen Life Insurance Company (CLICL) and IME Life Insurance Company Limited (IMELICL). They have insurance funds of Rs 1.26 arba and Rs 1.18 arba respectively.

Paid up capital:

Nepal Life Insurance Company (NLIC) has the highest paid up capital (Rs 5.50 arba), followed by National Life Insurance Company (NLICL) (Rs 3.08 arba) and Surya Life Insurance Company Limited (SLICL) (Rs 2.16 arba). The old life insurance companies need to meet the paid up capital of Rs 2 arba at the soonest possible.

Among the newly licensed life insurance companies, the company with highest paid up capital is Citizen Life insurance Company (CLICL) with Rs 1.75 arba. Jyoti Life Insurance Company (JLICL), in the second position has the paid up capital of Rs 1.54 arba. Finally, Union Life Insurance Company (ULICL) has a paid up of Rs 1.51 arba. All 10 newly licensed life insurance companies are yet to issue IPO shares to the general public to make minimum paid up capital of Rs 2 arba.

Reserves and surplus:

Nepal Life insurance Company Limited (NLIC) has the highest reserve of Rs 2.73 arba. It is further followed by MetLife American Life Insurance Company (ALICO) with a reserve fund of Rs 2.29 arba. Finally, Prime Life Insurance Company (PLIC) is seen in the third position with a reserve of Rs 1.05 arba.

 

Reliable Nepal Life Insurance Company (RENLICL) has highest reserve with Rs 59.76 crores followed by Citizen Life Insurance Company Limited (CLICL) (45.94 crores). In the third place stands Jyoti Life Insurance Company (JLICL) with a reserve of Rs 37.39 crores.

Net profit:

Among the life insurance companies, the third quarter report shows that Nepal Life Insurance Company (NLIC) has earned the highest net profit of Rs 46.76 crores. It is further followed by National Life Insurance Company Limited (NLICL) with net profit of Rs 31.56 crores. Finally,  Metlife - American Life Insurance Company Limited (ALICO) has a net profit of Rs 21.68 crores.

Among the new life insurance companies, Reliable Nepal Life Insurance Company (RENLICL) with net profit of Rs 16.70 crores. Secondly, Citizen Life Insurance Company Limited (CLICL) reported net profit of Rs 14.39 crores. Jyoti Life Insurance Company Limited (JLICL) has a net profit of Rs 11.51 crores.

The provided net profit figure is not the complete picture. Usually, net profit figure is increased once actuarial valuation has been completed. Amount from life insurance fund is transferred to net profit after such valuation. Hence, the amount is likely to escalate.

EPS:

The insurance company that has won the race of EPS is Rastriya Beema Sansthan (RBS). The company’s EPS stands at Rs 36.34. National Life Insurance Company Limited (NLICL) is seen in the second place with an EPS of Rs 13.65. Finally, Prime Life Insurance Company Limited (PLIC) has an EPS of Rs 12.16.

 

Among the new life insurance companies, Reliable Nepal Life Insurance Company (RENLICL) has the highest EPS of Rs 15.91 followed by Citizen Life Insurance Company Limited (CLICL) with an EPS of Rs 10..97. In the third position, we have Jyoti Life Insurance Company Limited (JLICL) with an EPS of Rs 9.97.

Net worth:

Analyzing the net worth per share Rastriya Beema Sansthan (RBS) has the highest net worth of Rs 252.55 followed by Prime Life Insurance Company (PLIC) with net worth of Rs 159.06. In the third place, we have Nepal Life Insurance Company (NLIC) with net worth per share of Rs 158.37.

Reliable Nepal Life Insurance Company Limited (RENLICL) has a net worth of Rs 146.43. Citizen Life Insurance Company Limited (CLICL) has the net worth per share of Rs 129.08.

P/E ratio:

The insurance company with least P/E ratio is Gurans Life Insurance Company Limited (GLICL). Its P/E ratio is 33.87 times. Similarly, National Life Insurance Company Limited (NLIC) has a P/E ratio of 40.95 times.

 

In a nutshell:

Given the study on these life insurance companies, what strengths and opportunities do you think they have in the highly dominated insurance industry? Do you think the new insurance companies will match the pace of the big giant insurance companies? Would you prefer investing in these new insurance companies if the opportunity of investment is granted? Please write in the comment section below.