September 21, 2003	Sunday	Rajab 23, 1424

KARACHI, Sept 20: With State Life Insurance Company of Pakistan (Slic) still clinging on to the lion’s share of 82 per cent of the life insurance market in Pakistan, the four private sector life insurance companies are struggling to wrest their portion of the business, with mixed success.

Ten years down the road, following the re-opening of life insurance business to the private sector in 1993, progress, albeit slow, is noted in the four companies — all listed at the stock market.

At the close of last financial year ended December 31, 2002, the total gross industry premium stood at Rs10,288 million, of which Slic commanded 81.5 per cent. Among the private companies, EFU Life took the lead with 10.64 per cent; Commercial Union followed with 5.2 per cent; American Life Assurance held 2.42 per cent and Metropolitan Life — the tinniest of the companies — eked out just about 0.22 per cent of the gross premium. Total premium underwritten by the private sector companies during the year was up by 23.7 per cent over the earlier year.

Not many equity analysts at large brokerage houses follow life insurance companies, since the scrips are unattractive, due to their small market capitalizations and poor liquidity. Competition with the public sector giant is fierce, but private sector life assurance companies are banking upon their ability to introduce packages and innovative products through their branch and sub-office network, supported by direct sales force. Going forward, they hope to explore the largely untapped potential in both rural and urban Pakistan. And the potential looks to be enormous. For according to industry experts just one in four families in Pakistan are currently covered under individual and group life insurance.

Till 1972 when life insurance was nationalized, EFU Life stood out as the largest company writing more than a half of the country’s life insurance business. Following the re-opening of the business for private sector, the company was the first to take the plunge. Metropolitan Life started business in February 1993 and the two foreign companies came a little later: American Life Insurance Company (Alico) started in 1995 and Commercial Union (CU) in July 1996.

The recently released financial results for the half year ended June 30, 2003, showed that Alico and EFU life posted improved profit and CU swung to an after-tax profit of Rs9.8 million, from loss of Rs10.1 million in the corresponding period of the previous year. The taxed profit was arrived at after an appropriate adjustment for

surplus transfer to shareholders’ fund. Metropolitan also posted profit of Rs5 million. The company was the first in the sector to have disbursed cash dividend at 5 per cent for the year 2001, to the minority shareholders “out of interest free loan by the sponsor directors”. Alico also paid at that rate for 2001. EFU disbursed cash dividend at 10 per cent for 2002.

All four companies have come up to the statutory requirement of minimum paid-up capital. According to section 28 of Insurance Ordinance, 2000, the “required minimum capital for insurer authorised to carry on life insurance business shall not be less than one hundred million rupees by December 31, 2002.”

Metropolitan managed to raise its capital from Rs60 to 100 million through the right offer at 66.7 per cent. The remaining three companies were already in compliance with the minimum capital requirement. Paid-up capital of CU was the largest, amounting to Rs402 million; followed by Alico’s Rs325 million and EFU’s Rs150 million.

The financial results by the private sector life insurance companies show that a consistent flow of profit and disbursement of dividends to shareholders still look to be distant, though their balance sheets were beginning to paint less gloomier pictures. At the stock exchange, the 10-rupee share in EFU now bears the price tag of Rs66.50; Alico is worth Rs26 a share; CU follows with market price of Rs18.75 but Metropolitan trades at discount of 40 per cent.