Will the life insurance industry reach the penetration target of 25% in four years with only Nepal Life Insurance Company leading in seven indicators?

Mon, Aug 20, 2018 9:27 AM on Exclusive, Financial Analysis, Stock Market,

The rise in insurance industry showed a turn around after the dreading earthquake of 2015. The increasing awareness among people and their increasing living standard further benefitted the life insurance industry. Today, general public are more likely aware about the importance of insurance. Even the increased paid up capital could not put restrictions on this industry so, nine new life insurance companies got licensed and also came into operation after the paid up capital was hiked.

Among the insurance companies, there are nine life insurance companies that have been operating since a long period of time. For an investor, the fundamental analysis is more convincing when comparison can be made with companies of same range or operation period. Thus, the article revolves around only old life insurance companies.

Please note that the article bases all the analysis on unaudited quarterly reports of FY 2073/74 and FY 2074/75. Also, the industry average has been calculated considering only nine old life insurance companies in operation.

The overview of the life insurance industry shows a positive growth in terms of life insurance fund, net premium, net profit anf no. of life insurance policies. The details of which can be provided below:

Financial overview:

  1. Number of policies:

Once the paid up capital of insurance companies are in the same range, number of insurance policies identifies the company’s ability to market its schemes and products. Nepal Life Insurance Company (NLIC) had maintained a leading position in the third quarter of FY 2074/75. In the fourth quarter, NLIC is again seen with the highest number of insurance policies with 1,152, 860 insurance policies. It is further followed by National Life Insurance Company Limited (NLICL) (795,039) and Life Insurance Corporation Nepal (734, 608) as of fourth quarter of FY 2074/75. However, the executives of all life insurance companies should understand the quality of insurance policies is important rather than number of insurance policies as the component that these companies are dealing with is human life.

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  1. Net premium:

As of fourth quarter of last fiscal year, Nepal Life Insurance Company (NLIC) has the highest net premium amounting to Rs 16.02 arba. NLIC’s net premium increased by 32.83%. It is followed by Life Insurance Corporation (LICN) and National Life Insurance Company (NLICL) with a net premium of Rs 10.41 arba and Rs 6.13 arba. The positions among life insurance companies is consistent to the last quarter of last fiscal year.

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  1. 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 shock can an insurance company be able to absorb at times of crisis. If we analyze the insurance fund of fourth quarter of 2074/75, Nepal Life insurance Company (NLIC) has the highest insurance fund of Rs 50.49 arba. It grew the insurance fund by 25.33% from Rs 40.29 arba in the last year. Life Insurance Corporation Nepal (LICN) stands at the second position with a fund of Rs 43.21 arba. It has grown by 33.89% compared to last year. National Life Insurance Company (NLICL) is seen in the third position with Rs 21.83 arba in insurance fund. The fund increased from Rs 17.38 arba by 25.61% this year.

Even in terms of life insurance fund, the position among insurance companies is seen to be consistent to third quarter while other life insurance companies are still fighting to undertake a higher market share in life insurance industry.

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4.Paid up capital:

Nepal Life Insurance Company (NLIC) has the highest paid up capital (Rs 4.40 arba), followed by Prime Life Insurance Corporation (PLIC) with Rs 1.78 arba capital and National Life Insurance Company; NLIC (Rs 1.78 arba). The life insurance companies are required to meet the paid up capital of Rs 2 arba. As we can see, only one life insurance company has met the paid up capital requirement. This means a lot of bonus shares and right share can be expected from these companies this fiscal year.

Insurance companies such as Nepal Life Insurance, Surya Life Insurance, Asian Life Insurance and Prime Life Insurance Company has already conducted the AGM. Life Insurance Corporation Nepal has declared its dividend and yet to hold the AGM. However, no such notice has been received from the remaining companies.

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  1. Reserves and surplus:

Nepal Life insurance Company (NLIC) has the highest reserve of Rs 3.47 arba. It is further followed by Met Life Insurance Company (ALICO) with a reserve fund of Rs 1.54 arba. Finally, Prime Life Insurance Company (PLIC) is seen in the third position with a reserve of Rs 94.34 crores.

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  1. Net profit:

Among the life insurance companies, the fourth quarter report shows that Nepal Life Insurance Company (NLIC) has earned the highest net profit of Rs 47.93 crores. It is further followed by National Life Insurance Company Limited (NLICL) with net profit of Rs 29.84 crores. Met America Life Insurance Company Limited (ALICO) is in the third position with Rs 25.91 crores net profit. The company is not listed in the only stock exchange of the country.

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  1. Annualized EPS

The insurance company that has won the race of annualized EPS is National Life Insurance Company Limited (NLICL). The company’s annualized EPS stands at Rs 18.02. Prime Life insurance Company (PLIC) is seen in the second place with an EPS of Rs 12.12. Finally, Surya Life Insurance Company (SLICL) has an EPS of Rs 11.08. The EPS of these life insurance companies dwindled compared to the fourth quarter of the same fiscal year due to the issue of bonus/ right shares.

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  1. Net worth:

Analyzing the net worth per share, Nepal Life Insurance Company (NLIC) has the highest net worth of Rs 187.54 followed by Prime Life Insurance Company (PLIC) with net worth of Rs 159.14. In the third place, we have Life Insurance Corporation Nepal (LICN) with net worth per share of Rs 159.03.

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Comparison of 2074/75 vs 2073/74:

If a comparison between the unaudited report of fourth quarter of FY 2073/74 and FY 2074/75 is to be done, a positive growth is seen in net premium, life insurance fund, no. of policies and net profit.

In a nutshell:

 

Nepal Life Insurance Company Limited (NLIC) is leading in seven indicators whereas National Life Insurance Corporation (NLICL) is leading in two indicators.

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 insurance penetration will be increased by 10% this fiscal year? Have you insured your life?

KEEP UPDATED FOR THE COMPARATIVE ANALYSIS OF NEW LIFE INSURANCE COMPANIES

Disclaimer: The sources of provided information are quarterly reports, website and spokesperson. Any misinterpretation from the sources might be not adjusted in the analysis.