THE famous scientist Albert Einstein once said, “Try not to become a man of success, rather try to become a man of value”. Some people and corporates are lucky to be both. The not-so-strong business ethics of modern corporate houses still pervades local groups and companies known over the generations for sound business practices. The House of Habib is one among them.

Incorporated in 1942, the Habib Insurance Company Ltd has grown up to be a strong, profitable company. A significant feature that catches the eye is its board’s policy of maintaining a fair balance between the retention of earnings and distribution of dividends to shareholders.

A cursory glance at five-year figures shows a progressive increase in profitability, with the company reporting its highest profit-after-tax (PAT) of Rs244m for the year ending December 31, 2013.

For all these years, the company shared the bounties with shareholders, with cash dividends ranging from 25 to 35pc for shares of par value of Rs5. Even in the fateful year 2008, when corporates in Pakistan suffered the repercussions of the global economic crisis and the company went into red to the tune of Rs391m, its board did not deny investors a return and paid cash and stock dividends at the same rate of 12.5pc. The bonus payouts have been intermittent, with the recent high of 25pc paid for 2013.

Habib Insurance has extended the scope of the traditional fire, marine and motor insurance business in an innovative way to include allied perils such as riot and strike, malicious damage, explosion, earthquake and burglary in the fire segment

Unlike many other profitable companies that prefer to keep all of their paid-up shares in the hands of their sponsors, Habib Insurance has maintained a free float of over 25pc of total shares. At the close of trading on Thursday, its stock carried a premium of over 300pc over par value.

“We have won the KSE Top-25 companies awards nine times, including six in a row from 1981 to 1986, since the inception of the award in 1981,” the company’s chief operating officer and executive director Zeeshan Raza tells Dawn.

For the quarter ending March 31, Habib Insurance posted underwriting earnings of Rs25.1m, up from Rs19.46m in the corresponding period last year. Its PAT for the quarter stood at Rs56.6m, translating into earnings-per-share (eps) of Re0.57, up from PAT of Rs53.1m and eps of Rs0.54 last year.

All but one line of business recorded an underwriting profit in the three months. Insurance companies, to a great extent, depend on income from investments to augment their bottom lines. During the quarter, the company earned investment income of Rs57.7m, which included dividend income of Rs38m and gain on sale of available-for-sale securities of Rs19m. Its investments stood at Rs1.14 billion. The company reaped rich gains from prudent investment in equities to capture the benefits of a booming stock market. Its total assets stood at Rs2.27bn and total equity at Rs1.08bn at March 31.

“Against the paid-up capital of Rs495m, the company had a cushion of retained earnings and reserves of Rs58.6m, which gives it ample strength to absorb unforeseen shocks,” says Mohammad Zeeshan, an investment analyst at Topline Securities.

Habib Insurance has extended the scope of the traditional fire, marine and motor insurance business in an innovative way to include allied perils such as riot and strike, malicious damage, explosion, earthquake and burglary in the fire segment. It also covers damages to goods during transit not just through sea, but also through air, truck, trailer and rail in the marine line.

Zeeshan Raza says, “The company has been able to progress with its ability to fully satisfy customers at the point of sale. And secondly, it has moved to achieve proximity and trust through consistent delivery and being close to customers”.

According to industry sources, about a dozen companies in Pakistan offer ‘terrorism’ related policies at the moment. Mr Raza says Habib Insurance offers such policies to selected customers. He also endorsed a recent statement by Mohammad Asif Arif, Commissioner (Insurance) at the Securities and Exchange Commission of Pakistan that terrorism-related claims in the country were no more than 5pc. He believes that the Terrorism Insurance Pool is a good option to allay the fears of insurance companies.

Yet, Habib Insurance has no immediate plans to enter the life insurance or Takaful business. “We have to look before we leap,” he says.

Besides its forward-looking approach, the company perhaps has the advantage of a beeline of ready customers. In its annual report 2013, Habib Insurance lists as many as 17 associated companies, which include the House of Habib (Pvt) Ltd and at least six major public sector corporates: Bank Al-Habib, Habib Metropolitan Bank, Habib Sugar Mills, Shabbir Tiles, Thal Limited and Indus Motors.

Published in Dawn, Economic & Business, July 14th, 2014