State of Life Insurance Sector: Net profit decreases by 20%, EPS drops by 49% & 5% increase in long term investment
This study analyzes Nepal Life Insurance Co. Ltd. (NLIC), National Life Insurance Co. Ltd (NLICL), Life Insurance Corporation (Nepal) Ltd., (LICN), Asian Life Insurance Co. Ltd. (ALICL), Surya Life Insurance Co. Ltd. (SICL), Gurans Life Insurance Co. Ltd. (GLICL), Prime Life Insurance Co. Ltd. (PLIC), Rastriya Beema Sansthan (Rastriya), and MetLife American Life Insurance Co. Ltd. (MetLife).
Among these companies, Rastriya Beema Sansthan and MetLife insurance have not issued Public share.
Let’s put some of the fundamentals of Life insurance under microscope:
- Paid Up Capital
The highest paid up capital is of Nepal life insurance which stands at Rs 1.73 arba. Average paid up capital of Life Insurance Company has also increased as compared to the Q1 of last fiscal year. The paid up capital of Rastriya Beema Sansthan is Rs 93Lakhs.
2. Reserve
On an average Life insurance reserve has decreased by 12%. Reserve of Meta life insurance has increased by 477% in comparison to last corresponding quarter. Reserve of NLICL has decreased by 89%. This decrease in reserve of NLICL is justified by the distribution 60% bonus share in last fiscal year.
3. Insurance Fund
The average Insurance fund of Life Insurance Company stands at Rs 10.46 arba. After the earthquake on April 25, life insurance Company has increased its insurance fund. Average insurance fund increased by 21% compared to last corresponding quarter. NLIC has highest insurance fund among the life insurance company. Although, Surya life insurance has increased its insurance fund by 54% it still has the lowest insurance fund. Insurance fund of Rastriya Beema Sansthan has decreased by 16%.
4. Long Term Investment
Nepal life insurance has the highest long term investment among Life Insurance Company. The Average long term investment has increased slightly by 5%. Rastriya Beema Sansthan has increased its long term investment by 69% whereas Surya life insurance has decreased its long term investment by 25%.
5. Net Profit
Life Insurance Company has decreased its average net profit by 20% as compared to the corresponding quarter of the last fiscal year. National life insurance has highest net profit but its net profit has decreased by 6%. Net profit of NLIC has decreased by 64% which can be attributed to the 35% decrease in income. Net profit of MetLife insurance has surged by 70%.
6. Number of Policies
Life insurance industry has seen steady increase in n umber of policies. Surya life insurance has managed to increase its number of policies by more than 100%! The average increment in number of policies stands at 25%.
7. Earnings Per share (EPS)
The average Earning per share o f life insurance company has decrease by 49% as compared to corresponding Q1 of last fiscal year. The prime life insurance has managed to increase EPS by 56% as it has not given any stock dividend or called for right shares for the past few years.
8. Net Worth Per Share
There has been steady increase in the Net Worth per Share among Life insurance Companies in Nepal. Rastriya Beema Sansthan has the highest Net Worth per Share as it has relatively lower number of share (93 thousands units).
Although some of the indicators are positive, our study shows that rapid increase in the recent share prices is not strongly supported by the fundamentals published in the Q1 report of the life insurance companies in Nepal. On average Life Insurance companies net profit has decreased by 20% and EPS has dropped by 49%. Meager increase of 5% in long term investment shows lacking capacity of life insurance companies to invest in bigger projects which often requires long term commitment.
On the bright side, the numbers of policies are expected to rise exponentially as many people will insure themselves in the aftermath of disastrous earthquake. This will put a better prospect for increase in net profit (may be dividend too!!) in years to come.
