KARACHI, Oct 7: The recently released financial figures of insurance companies for the half year ended June 30, 2003, showed that the trend of improved profitability had continued. But performance of some of the larger companies for the balance of the year, may be shadowed by claims on loss of crude oil consignment that was carried by the doomed oil tanker “Tasman Spirit”.

The loss had not been quantified by companies by the time they drew up the half term accounts, but directors of one of the insurers, Habib Insurance Company Limited in their six months report observed that there was “potential loss that the company may have to pay as a co-insurer of the crude oil consignment that the vessel was carrying.” Directors, nonetheless, quickly assuaged investors’ fears by adding: “This loss will of course, to a large extent, be shared by our Reinsurers.”

Overall, the fundamentals of insurance companies have, since last year, strengthened due to surge in their investment incomes and improvement in values of their portfolios, thanks to a booming stock market and higher yields. Expectations were in the air that the Government would yield to the industry demand of exempting tax on capital gains made by them on sale of listed securities, through the Finance Act 2003. That, however, was not to be.

Underwriting profit of a sample of 24 listed insurance companies had increased by 30 per cent to Rs489 million during the year ended December 31, 2002, compared with the earlier year. “The underwriting performance, which is the core business of insurance companies, has also improved due to boost in external trade and car financing activity,” says Kashif Artani, analyst at InvestCap.

Underwriting business of insurance companies is directly affected by the economic activity in the country, which provides growth opportunity for their marine business. The earnings from marine business had been impacted due to decline in exports in February, owing to regional situation over Iraq, but exports had started picking up from March. Rising car sales had also enabled companies to boost their income from motor insurance businesses, though motor insurance was still a bane of business for many insurance firms.

In their first half review, Directors of Century Insurance Company observe: “The amount of claims paid has increased during the period, the main reason of this being the motor claims which is due to law and order situation in the country resulting in increase in theft and snatching of vehicles.” And the directors add: “However, to counter this problem, the company is now installing anti theft/tracker devices in all vehicles insured by it.” The step was said to be proving a deterrent and was also effective in the recovery of vehicles.

Besides the core income from underwriting business, insurance companies also saw their profits grow as a result of larger share of dividend income due to increased payouts by corporates. Rise in equity prices allowed several companies to book handsome amounts in capital gains, while many insurance firms also wrote- back previously booked provisioning for diminution in value of investments.

Among some of the actively stock market traded insurance equities, net earnings at Pakistan Reinsurance jumped 143 per cent to Rs303.6 million, while profit at Premier Insurance soared 187 per cent to Rs38.4 million. After-tax profit at Askari Insurance slipped 4 per cent to Rs7.3 million.

But for many insurance companies— such as the giant, Adamjee Insurance — hard days are far from over. About a dozen of the 27 listed general insurance companies continue to trade at varying discounts to their par value.