Profitability Of Life Insurance Industry Declined By Huge Margin In Q3; How Did Company Perform Individually?

The insurance sector has seen improvement in its business volume amid the Covid-19 crisis.

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 2078/2079 of life insurance companies.      

Net Profit:

National Life Insurance Company Limited (NLICL) has reported the highest amount of net profit amounting to Rs. 25.56 crores against its competitors. NLICL is followed by Jyoti Life Insurance Company Limited (JLI) which has reported a profit of Rs. 20.65 crores. Prime Life Insurance Company Limited (PLIC) has reported a profit of Rs. 18.95 crores making it the third-highest.

In terms of non-listed companies, Reliable Nepal Life Insurance Company Limited (RENLICL) has reported the highest net profit amounting to Rs. 21.06 crores. This is followed by  Met-Life American Life Insurance Company Limited (ALICO) with a net profit of Rs. 18.10 crores.

Out of 19 life insurance companies, 8 companies have reported a decline in their net profit.

This is to be noted that the net profit figure of all companies is without the profit generated from the actuarial valuation of assets and liabilities. Which is reflected only in the audited report of the company. 

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. 25.99 Arba. Life Insurance Corporation Nepal Limited (LICN) has reported a net premium of Rs. 13.62 Arba making it the second-highest.

Among non-listed companies, Rastriya Beema Sanstha (RBS) has reported the highest net premium of Rs. 7.27 Arba. This is followed by Met-Life American Life Insurance Company Limited (ALICO) with a net premium of Rs. 3.83 Arba.

Share Capital:

Nepal Life Insurance Company Limited (NLIC) has the highest paid-up capital among its peers which amounts to Rs. 8.20 Arba. National Life Insurance Company Limited (NLICL) has the second-highest paid-up capital amounting to Rs. 4.03 Arba. Similarly, Prime Life Insurance Company Limited (PLIC) has the third-highest paid-up capital which amounts to Rs. 2.77 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, Union Life Insurance Company Limited (ULI) has reported the highest reserve and surplus which amounts to Rs. 1.09 Arba. Similarly, Life Insurance Corporation Nepal Limited (LICN) has a reserve of Rs. 70.90 crores.

Met-Life American Life Insurance Company Limited (ALICO) among the non-listed has reported the highest reserve of Rs. 2.64 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. 1.31 Kharba. NLIC is followed by Life Insurance Corporation Nepal Limited (LICN) which has a fund of Rs. 90.30 Arba. Similarly, National Life Insurance Company Limited (NLICL) has the third-highest insurance fund amounting to Rs. 49.04 Arba.

The total insurance fund of all the life insurance companies combined is Rs. 4.48 Kharba till the third quarter.

Net Claim:

Among the listed companies, Jyoti Life Insurance Limited (JLI) has the least amount of net claim payment in this quarter which amounts to Rs. 19 crores. This is followed by Sanima Life Insurance Company Limited (SLI) which has a net claim payment of Rs. 26 crores. Similarly, Prabhu Life Insurance Company Limited (PLI) has the third-lowest claim payment in this quarter with an amount of Rs. 27 crores.

In this quarter, life insurance companies paid out a total of 37.39 Arba of claims combined.

Number of Policies:

Among the listed insurance companies, NLIC is leading the chart with 13.99 lakh policies, whereas, from the unlisted ones, Reliable Nepal Life Insurance has sold maximum of 46.94 lakh Policies.  

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.

Major Indicators:

Earnings per share:

As per the reports published by the companies for this quarter, Jyoti Life Insurance Company Limited (JLI) has the highest EPS of Rs. 11.38 per share. Asian Life Insurance Company Limited (ALICL) has the second-highest EPS of Rs. 9.66 per share.

Out of 19 companies, only 5 companies have reported their EPS above the industry average of Rs. 9.73 per share.

Net Worth per share:

In terms of Net worth per share, Union Life Insurance Corporation Nepal Limited (ULI) has reported the highest number with Rs. 156.47 per share. Life Insurance Corporation Nepal Limited (LICN) has reported a net worth per share of Rs. 140.31 per share making it the second-highest.

Among non-listed companies, Rastriya Beema Sanstha (RBS) has the highest net worth per share with Rs. 316.44 per share.

Price to Earnings ratio:

Jyoti Life Insurance Company Limited (JLI) has reported the lowest P/E ratio of 51.67 times against its competitors. Sanima Life Insurance Company Limited (SLI) has reported a P/E of 60.31 times. Similarly, Reliance Life Insurance Limited (RLI) has a P/E of 67.71 times.

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 2078/2079.

* Capital, Fund, and Net Premium are represented in arba while other particulars are represented in crores.