General insurers’ profit jumps on higher investment returns

When most businesses were dealing with Covid-19 pandemic blows, listed non-life insurance companies posted a higher profit in the second quarter (April-June) of 2021 riding on a jump in return from their investments in the capital market.

Sixteen of the 37 general insurers listed on the Dhaka Stock Exchange (DSE) have published their reports. Of them, 14 have posted positive growth, with seven companies reporting over a 50% rise in profit.

Insurers said the firms have been able to make a higher profit due to an increase in investment returns and a reduction in operational costs.

The companies have moved their investment to the capital market instead of parking it into fixed deposit receipts (FDRs).

The Bangladesh capital market generated a return of 13.85% during the first half of 2021.

Dhaka Stocks Exchange (DSE) ended the first half of 2021 at 6,150.48 points. Now it stands at the highest 6,535.87 points despite worries over the Covid-infused shock to the country's economy. 

According to industry insiders, the companies are trying to strictly follow a regulatory circular halting a 15% commission for agents.

The import of raw materials in the pharmaceuticals sector has increased during the pandemic.

Many companies in this sector are being able to reduce the management expenses, other costs, and claims amid the pandemic and thus, they are making more profits.

In the January-June period, general insurance contributed the highest 15.3% to the DSE in terms of turnover. During the period, investors have received a return of 42.07% from this sector.

From April to June of the current year, Paramount Insurance Company posted 370.27% higher profit compared to the corresponding period of 2020.

According to financial statements of the company, its gross premium jumped 51.56% to Tk9.70 crore.

On the other hand, its investment income stood at Tk7.35 crore, which was Tk994 negative in the same period of 2020.

Zharna Parul, company secretary of Paramount Insurance, said the insurers are making better profit amid the pandemic year, especially because they got a big return from the capital market.

Consequently, Green Delta Insurance reported its highest growth in profit in the stipulated period.

The company's earnings per share jumped 243.08% where its return on investment upped 269.33% to reach Tk17.84 in the second quarter of 2021.  

The key driver of the growth is a decrease in agency costs and expenses in both claims and management. 

Md Moniruzzaman Khan, head of Digital Business and Communication of Green Delta, said the earning of the company has increased due to an increase in investment income mainly and a reduction in net claim in the period.

Besides, the growing health insurance business has also contributed to the company's profit.

Reliance Insurance Ltd posted 54.33% net profit while it generated Tk10.75 from the investment income.

Besides, Provati Insurance reported a growth in profit of 106%, Paragati Insurance 80%, Peoples Insurance 58%, and City General Insurance riding on the investment income in the second quarter of 2021.

Currently, there are 78 insurance companies – 32 life and 46 non-life – in the insurance sector of Bangladesh. Of them, 51 companies are listed on the stock exchanges. 

Experts have been saying for a long time that Bangladesh is one of the most untapped insurance markets in terms of penetration rate.

Awareness and a strong culture of insurance service behind economic activities can help the industry thrive.

According to the Swiss Re Group, a leading global reinsurer, shows that the overall insurance penetration in Bangladesh stood at a meagre 0.49% in 2019 – the lowest among emerging Asian countries.