Insurers’ profits grow despite decline in core business

Despite declines in the core business, listed non-life insurance companies posted a higher profit in the July-September quarter this year riding on a healthy return from their capital market investments.

Usually, general insurers provide services to their clients in fire, marine, engineering, motor, and miscellaneous areas.

Industry insiders said the marine insurance business declined around 10% in the third quarter although the economy got back to almost normal.

They said currently, marine business especially the shipment of equipment for megaprojects and machinery for factories at the export processing zones are settled abroad, depriving the local insurance companies of these businesses.

But well-known insurers made an impressive profit from their core business, they added.

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

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

The core business of Agrani Insurance Company Limited declined 26% although the net profit jumped 265% in the three months to September 2021.

The company has received a return of Tk45 lakh from the capital market during the period.

Chinmoy Chakrabarty, chief operating officer of Agrani Insurance, said, "Our core business declined as the marine insurance came down during the period."

He said LCs (letters of credit) dropped 5-10% in the Chinese market.  

As a result, local insurers lost their business, he added.

In the July-September period, the Bangladesh National Insurance Company made a profit of Tk2.54 crore from its core business, which is 37% lower than the same period of 2020.

Although the company has made positive growth during the period, it also received a return of Tk2.68 crore from its stock investments.

A company official, seeking anonymity, said the profit from the core business declined due to an increase in administrative costs.

"We are trying to maintain good business despite a slight decline in the marine business," he added.

United Insurance Company Ltd posted a net profit of Tk2.62 crore, which was 45% down compared to the same period of 2020.

A company official, wishing not to be named, said some well-known companies have been able to maintain good core business after the economy reopening.

Currently, there are 79 insurance companies – 33 life and 46 non-life – in the insurance sector of Bangladesh. Of them, 52 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 0.40% in 2020 – the lowest among emerging Asian countries.