Look at the fundamental and technical analysis of National Life Insurance Company Limited

~Aakash Capital Limited

Introduction

National Life Insurance Company Limited formerly known as National life & General Insurance Co. Ltd. was incorporated in 1988 A.D. under Nepal Company Act 1964 and the Insurance Act 1968 of Nepal with main objective to meet growing insurance requirements of the country. This insurance Company enjoys the status of the joint venture promoted life insurance Company currently operating in Nepal. For more than two decades, it has built reputation as a company that believes in highest level of customer’s service to all who do business with NLICL. This has been reinforced by National Life’s commitment to the highest standards of ethics and integrity through company’s core values of professionalism, transparency, trust worthiness and honesty that are central to the company’s efforts to achieve its vision of building financial freedom for all. It offers product like Endowment Assurance, Children Plan, Money Back Plans, Whole Life Plans, Terms Assurance Plans and Retirement Plans targeting different categorization of people having different aspiration and requirement.

It has its head office at Lazimpat, Kathmandu with 836 branches spreading over the 7 province of Nepal.  Its annual premium collection stands at around Rs. 1.5 Billion and the company has provided insurance cover to more than 350,000 people.

Board of Director

The Board of Director of National Life Insurance Company Limited consists of 3 from promoters group, 3 from public shareholders and 1 Independent Directors. The Board of Director is chaired by Mrs. Prema Rajya Laxmi Singh and Mr. Bharat Basnet is the current CEO of the company.

Current Share Holding Composition

National Life Insurance Co. Ltd. has paid up capital of Rs. 3007 million. It has 65:35 promoter-public shareholdings ratio where 35 per cent of issued capital has been allotted to the public through IPO. It has approximately 5431 public shareholders.

Snapshot of performance

Financial Performance

Operations

Based on the data presented above, it can be seen that the company has been growing at a satisfactory rate. Paid up capital, has been increased by CAGR of 34.81 per cent from 2012/13 to 2017/18*. It has increased from Rs.501 million to Rs.1.65 billion. However, Reserve and Surplus, has increased by just 8.74% The net profit of the company has decreased in the first year of comparing period; however, the profit increased each year onwards by CAGR of 17.45 per cent till 2016/17 remaining at an average net profit of 343.5 million. However, as per unaudited report of 2017/18 the net profit has decreased to Rs.298 million.  

The business of the company is increasing in a decent rate. The total number of policies saw number go up by 16.79 CAGR in the comparing periods.  As a result, the total premium collected has also grown in a fair way at an average of 340.6 million. Similarly, net premium has increased by CAGR of 24.42 per cent. The earning per share of the company has plummeted continuously except in the year 2015/16. It has shrink by 72.02 per cent till the end of comparing periods; however EPS has stood at an average of Rs 39.5 each year. Net worth for share has continuously decreased. It has declined by 23.45 per cent till the end of 2016/17 staying net worth of Rs.131.99.

The return on assets has always been more than 1.97 till 2016/17. It has declined continuously except in 2015/16. Nevertheless it’s has ROA of an average 2.67 over comparing period. Similarly, Dividend per share has declined constantly from Rs.88.32 to Rs.14.21 at an average of Rs 36.6 which is satisfactory. P/E ratio has dwindled over the periods. It decreased in the third and fourth year while has increased in the remaining year being highest in the fourth year. Solvency ratio has always been greater than two indicating low risk.   

Quarter to quarter comparison

(*Industry average includes only of 7 old life insurance companies)

Quarterly comparison based on above data, the company has performed robust business. During the third quarter of 2018/19, Paid up capital has increased to 3007.4 million from 1656 million by whooping 81.06 per cent compared to corresponding period of previous quarter. It’s Insurance fund accumulation increased by 23.96 per cent from 20,391 million to 25,220.8 million. Similarly, Net profit increased by 37.81 per cent standing at 306 million. In fact, all these three indicator are above industry average.

Similarly, Reserve and Surplus has increased by staggering 56.91 per cent from 438.19 million to 687.5 million. Total premium and net premium both have increased by 18.36 and 20.84 per cent respectively. However these all three indicator are below industry average. More importantly, above all six indicator has increased by double digit with no less than 18 per cent signaling steady growth.

Likewise, Income from Insurance Commission, Income from loan, investment and other has increased by 20.84 per cent and 29.02 per cent respectively in comparison of previous quarter of corresponding quarter. On return side, ROE has decreased from 14.14 to 11.04. Similarly, ROA increased from 1.21 per cent to 1.31per cent. And both are above industry average.

Looking from above indicators, it is clear from the quarter-to-quarter analysis that the company has done really well in comparison to previous quarter and majority of the fundamental variables are above industry average.

Technical Analysis

(Source: SS PRO, sharesansar.com)

Based on above chart, the share price of NLICL seems to be in downtrend since July 2016. Currently, the price seems to be in a short term support zone and moving in a sideways making support around Rs.538 and resistance at around Rs.670. There seems unstable transaction of shares which have resulted high volatility in its share price.

Technical Indicators

The company has long track record of more than two decades which has believed in highest level of customer service. Along it, the company has satisfactory business growth; however Reserve and Surplus need to be maintained along with the pace of paid up capital. The company has a highest market share in the insurance industry in terms of total premium collection, accounting to 4.03% of the total industry after Nepal Life Insurance Company, Prime Life Insurance Company, Life Insurance Corporation Nepal and Gurans Life Insurance with 68.2%, 11.49%, 7.15 %  and 5.7 % respectively. With new life insurance companies in the pipeline in the market, the way forward for the company would be to tackle competition by scaling up the operations while maintaining the solvency ratio, investment quality, profitability ratio and diversifying its business including wide spectrum and walks of life.

Disclaimers: This document has been prepared by Aakash Capital Limited for information and illustration purpose only. The information provided in this document is subject to change. While this information has been obtained from sources believed to be reliable, Aakash Capital is not liable for erroneous information obtained from the sources. Aakash Capital, its directors and employees are not liable/responsible for any direct, indirect or consequential loss arising from the use of this document or its contents. Past performance is no indication of future results. Aakash Capital is regulated by Securities Board of Nepal.