October 22, 2002	Tuesday	Sha’aban 15,1423

KARACHI, Oct 21: Metropolitan Life Assurance Company of Pakistan Limited — the smallest of the four private sector life insurance companies — said on Monday that the Board of Directors had recommended issue of right shares in the ratio of 2:3.

The decision to make the cash call had been taken at the meeting of the board on September 26. The offer is to be made at 66.7 per cent, at par, on stocks held by shareholders on October 22.

The company expects to raise Rs40 million through the current right, which it said would enable the company to meet the statutory requirement of minimum paid-up capital. According to section 28 of Insurance Ordinance, 2000, the “required minimum capital for insurer authorized to carry on life insurance business shall not be less than one hundred million rupees by December 31, 2002”.

Metropolitan currently holds paid-up capital of Rs60 million and the right, if fully subscribed would lift the capital to the minimum paid-up capital ceiling. The 10-rupee share in Metropolitan Life is at the moment trading spot at discount of over 70 per cent, while the right is to be at par value. Possibility of under-subscription cannot therefore, be ruled out, in which case, the underwriters would of course pick up the un-subscribed portion. Metropolitan Life, nonetheless was the first company in the sector to have disbursed cash dividend. The company had paid dividend last year at 5 per cent to the minority shareholders “out of interest free loan by the sponsor directors”.

The company said on Monday that the funds raised from the right offer would be utilized to launch new products, improve training/marketing aspects of the company and increase promotion of the organization. The company also stated that the right would create additional source of funding for utilization in government securities and other investments, which would improve solvency of the company.

Incidentally, the three other public sector life insurance companies are already in compliance with the minimum capital requirement. Paid-up capital of Commercial Union Life Assurance (CU) is the largest, amounting to Rs402 million; followed by American Life Insurance Company’s (Alico) Rs325 million and EFU Life Assurance’s Rs150 million.

The recently released financial results by the private sector life insurance companies showed that the sector is embroiled in intense competition with the public sector giant — State Life Insurance (SLIC). And though a consistent flow of profit and disbursement of dividends to shareholders from the private companies still look to be distant, their balance sheets are beginning to paint less gloomier pictures. For the latest half year ended June 30, 2002, Alico and the EFU life posted improved profit, while losses at CU stood reduced, compared with the corresponding period of the earlier year.