KARACHI, May 14: The impact of unrest which erupted after the assassination of Benazir Bhutto is still being felt by the non-life insurance companies which have been paying huge claims to their insured clients.The first quarterly results show a 34 per cent rise in the payment of claims by the non-life insurance companies between January and March.

Most shocking were the annual results of non-insurance companies as entire profits for 2007 wiped out on a mass scale after the assassination.

The non-insurance companies depicted a decline of 30 per cent in their earnings in the first quarter mainly on account of higher claims, said Atif Malik, head of research at JS Company.

These huge claims increased the ratio to 72 per cent as against 60 per cent during the same period last year.

The loss of assets and properties were not calculated by any official or non-official organisation, which mainly hit Karachi and other parts of Sindh on the day of assassination of Benazir Bhutto.

The gravity of unrest was partly reflected by huge payments of non-life insurance companies to their insured clients which eroded their profits.

Analysts said it was surprising that destruction on Dec 27 was simply ignored by the authorities and other related key elements of the government.

“During the first quarter, the non-life insurance sector’s earnings depicted a decline of 30 per cent as the sector’s combined profitability stood at Rs933 million versus Rs1.3bn during the corresponding period of last year,” said Atif.

The incident had cleaned the balance-sheets of non-insurance companies from profits, but they survived entirely through earnings from shares market which was booming at that time.

“Many non-insurance companies could have collapsed had the investment earnings not supported their balance-sheets,” said Akbar Ali, another analyst.

He said the impact of the unrest-related claims will also be reflective in the balance-sheets of 2008.

The non-life insurance industry collectively earned a profit of Rs27.2 billion in 2007 against Rs13.4 billion in 2006. However, the industry earned an investment income of Rs27.7 billion in 2007, which means that the entire profit of the non-insurance industry came from the booming stocks business.

In 2007, the companies collectively paid Rs13.265 billion as net claims against Rs10.505 billion in 2006.

During the quarter, total net premium of the sector showed a growth of 11 per cent to stand at Rs4.7bn as against Rs4.3bn previously.

However, this rise in premium could not translate into higher underwriting profits as they registered a decline of 81 per cent primarily due to considerable rise of 34 per cent, 11 per cent and 19 per cent in net claims, net commission and underwriting expenses respectively.

“The high growth of 34 per cent (or Rs869m) witnessed that net claims can be attributed to deteriorating law and order situation that plagued the country in the first quarter,” said Atif.

As far as key sector ratios are concerned, claim ratio rose to 72 per cent in Jan-March versus 60 per cent during the same period last year.