A look into the comparative analysis of important metrics of life insurance industry of third quarter; Which company fits in your investment criteria?

The global pandemic sure has brought a lot of opportunities for the insurance business. Life Insurance business has an opportunity to sell the best-suited policies to their clients in this crisis. We saw that before the pandemic hit Nepal, almost all the insurance companies had started paying their premium through an online payment gateway such as Khalti, Esewa, IME Pay, which laid a better foundation for them to tackle this situation.

When we observe the premium collection of last quarter, there has been a major increment till this quarter.

In this article, we will be focusing on the key parameters from the quarterly report published by all the life insurance companies. So, let’s study the third-quarter performance of the fiscal year 2077/2078 of life insurance companies.                                                               

Net Profit:

Nepal Life Insurance Company Limited (NLIC) has reported the highest amount of net profit amounting to Rs. 50.66 crores against its competitors. NLIC is followed by National Life Insurance Company Limited (NLICL) which has reported a profit of Rs. 32.25 crores. Surya Life Insurance Company Limited (SLICL) has reported a profit of Rs. 29.10 crores making it the third-highest.

In terms of non-listed companies, Met-Life American Life Insurance Company Limited (ALICO) has reported the highest net profit amounting to Rs. 25.88 crores. This is followed by  Reliable Nepal Life Insurance Company Limited (RENLICL) with a net profit of Rs. 20.34 crores.

Out of 19 life insurance companies, only 2 companies have reported a decline in their net profit.

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

Net Premium:

Net premium is a core business revenue for life insurance companies after ceding some portion of the premium to Re-insurer.

Despite many challenges along the way in this global pandemic, insurance companies have been able to increase their business volume. Among listed companies, Nepal Life Insurance company Limited (NLIC) has reported a net premium worth Rs. 24.95 Arba. Life Insurance Corporation Nepal Limited (LICN) has reported a net premium of Rs. 13.59 Arba making it the second-highest.

Among non-listed companies, Rastriya Beema Sanstha (RBS) has reported the highest net premium of Rs. 6.77 Arba. This is followed by Union Life Insurance Company Limited (ULICL) with a net premium of Rs. 5.05 Arba.

Share Capital:

Nepal Life Insurance Company Limited (NLIC) has the highest paid-up capital among its peers which amounts to Rs. 7.19 Arba. National Life Insurance Company Limited (NLICL) has the second-highest paid-up capital amounting to Rs. 3.39 Arba. Similarly, Prime Life Insurance Company Limited (PLIC) has the third-highest paid-up capital which amounts to Rs. 2.41 Arba among the listed companies.

In terms of non-listed companies, Citizen Life Insurance Company Limited (CLICL) has the highest paid-up capital amounting to Rs. 1.75 Arba.  

Reserve and Surplus:

In the third quarter of this fiscal year, Nepal Life Insurance Company Limited (NLIC) has reported the highest reserve and surplus which amounts to Rs. 1.12 Arba. Similarly, National Life Insurance Company Limited (NLICL) has a reserve of Rs. 81 crores.

Met-Life American Life Insurance Company Limited (ALICO) among the non-listed has reported the highest reserve of Rs. 2.67 Arba.

NOTE: Investors should always compare companies with which it is applicable to compare. Reliance is a relatively smaller company that started its operation only a few years ago. So, investors are requested to compare companies of relatively similar size.

Insurance Fund:

Insurance Fund is a total fund collected from the premium paid by the clients for certain coverage. Unlike non-life insurance companies, the insurance fund of life insurance has to be paid back after the expiry date of the coverage. This fund can be invested in a low-risk investment.

Among the listed companies, Nepal Life Insurance Company Limited (NLIC) has the highest insurance fund of Rs. 1.07 Kharba. NLIC is followed by Life Insurance Corporation Nepal Limited (LICN) which has a fund of Rs. 77.54 Arba. Similarly, National Life Insurance Company Limited (NLICL) has the third-highest insurance fund amounting to Rs. 40.21 Arba.

The total insurance fund of all the life insurance companies combined is Rs. 3.64 Kharba till the third quarter.

Net Claim:

Among the listed companies, Prabhu Life Insurance Limited (PLI) has the least amount of net claim payment in this quarter which amounts to Rs. 5.34 crores. This is followed by Jyoti Life Insurance Company Limited (JLI) which has a net claim payment of Rs. 6.49 crores. Similarly, Reliance Life Insurance Company Limited (RLI) has the third-lowest claim payment in this quarter with an amount of Rs. 21.48 crores.

In this quarter, life insurance companies paid out a total of 27.04 Arba of claims combined.

Major Indicators:

Annualized Earnings per share:

As per the reports published by the companies for this quarter, Rastriya Beema Sanstha (RBS) has the highest annualized EPS of Rs. 35.82 per share. Reliable Nepal Life Insurance Company Limited (RENLICL) has the second-highest EPS of Rs. 19.38 per share.

Out of 18 companies, 11 companies have reported their EPS below the industry average of Rs. 10.97 per share. Note: MetLife has not published its EPS figure. 

Net Worth per share:

In terms of Net worth per share, Surya Life Insurance Company Limited (SLICL) has reported the highest number with Rs. 142.05 per share. Asian Life Insurance Company Limited (ALICL) has reported a net worth per share of Rs. 140.84 per share making it the second-highest.

Among non-listed companies, Rastriya Beema Sanstha (RBS) has the highest net worth per share with Rs. 284.77 per share.

10 companies have reported below industry average net worth per share in this quarter.

Price to Earnings ratio:

Surya Life Insurance Company Limited (SLICL) has reported the lowest P/E ratio of 48.93 times against its competitors. Prime Life Insurance Company Limited (PLIC) has reported a P/E of 69.38 times. Similarly, Jyoti Life Insurance Company Limited (JLI) has a P/E of 70.22 times.

7 companies have reported below the industry average P/E ratio in this quarter.

NOTE: Above P/E is calculated by taking the price of quarter-end price. Investors are requested to calculate the P/E with the current market price before making an investment decision.

Finally, the table below shows the overall picture with the major indicators of 19 life insurance companies as of the third quarter of FY 2077/2078.