q 3 - badri management consultancy

PAKISTAN’S LISTED NON-LIFEINSURANCE COMPANIES’PERFORMANCE ANALYSISQ3-2020

WWW.BADRICONSULTANCY.COM DECEMBER 23, 2020

Badri Management Consultancy is proud to have won the Strategic Partner of the

Industry at the 7th Middle East Insurance Industry Awards 2020 conducted by

Middle East Insurance Review.

The award is a reflection of the trust and loyalty of our esteemed clients, and the

hard work and dedication of all our people at Badri.

Apart from excellence in core actuarial services, Badri has raised the bar in providing

industry insights with market specific reports, trainings, newsletters, and data

analytics with an aim to benefit the insurance industry at large.

Thank you Middle East Insurance Review and the judges for acknowledging all

the efforts put in behind the scenes.

GLADTIDINGS

WWW.BADRICONSULTANCY.COM

ABOUTBADRI

MANAGEMENTCONSULTANCYBadri Management Consultancy is the

fastest growing Actuarial ConsultingFirm in the Middle East, recognized forits collaborative approach to workingwith its clients as Profit OptimizingPartners. We are serving as AppointedActuary for over 20 companies in theGCC. In addition, we are providingother services including IFRS17Implementations, Development of ERMFramework, Specialized services forMedical Insurance and TPAs, BusinessIntelligence solutions and End ofService Benefits Valuations.


We help our clients be the best version ofthemselves by fostering partnerships, challengingnorms and providing cutting edge solutions. Weinspire our people to constantly evolve and chaseexcellence with integrity in a diverse, exciting andgrowth-oriented culture.

VISIONS o l u t i o n a r c h i t e c t s s t r e n g t h e n i n g o u r

p a r t n e r s t o o p t i m i z e p e r f o r m a n c e

MISSION


Badri Management Consultancy2020-Q3 – Pakistan Non-Life Listed Insurance Companies

Table of

Content

5

6 INDUSTRY OVERVIEW

7 GROSS WRITTEN PREMIUM - MARKET

8 GROSS WRITTEN PREMIUM - COMPANIES

9 NET EARNED PREMIUM - MARKET

10 NET EARNED PREMIUM - COMPANIES

11 MARKET SHARE - CONVENTIONAL & TAKAFUL

12 CONVENTIONAL VS TAKAFUL

13 RETENTION RATIO

14 GROSS LOSS RATIO

15 NET LOSS & COMBINED RATIO

16 NET UNDERWRITING PROFIT

17NET UNDERWRITING PROFITPROFIT AS A % OF NEP

18 INVESTMENT INCOME

19 PROFIT BEFORE TAX

20 RETURN ON EQUITY

21COMMISSION EXPENSE & MANAGEMENT EXPENSE RATIO

22PREMIUM BENCHMARKED ON THE BASIS OF PROFITABILITY

23 PREMIUM & PROFIT ANALYSIS

24 ASSET MIX

25 INVESTMENT RETURN

26 CASH RATIO

27 TECHNICAL RESERVES

28 INSURANCE RECEIVABLES

29 PREMIUMS BY LINE OF BUSINESS

30 RETENTION RATIO BY LINE OF BUSINESS

31 COMMISSION RATIO BY LINE OF BUSINESS

32 LOSS RATIOS BY LINE OF BUSINESS

33 LOSS & COMBINED RATIO BY LINE OF BUSINESS

34 KEY TAKEAWAY POINTS

35 CONCLUSION

36 COMPANIES INCLUDED IN THE ANALYSIS


WWW.BADRICONSULTANCY.COM 6

INDUSTRY OVERVIEW - NON - LIFE


PKR 6.5 BillionGross Contribution Written – Window Takaful

Gross contribution written by the listed non-life insurance companies YTD 2020-Q3

PKR 49.8 BillionGross Premium Written - Conventional

Gross premium written by the listed non-life insurance companies YTD 2020-Q3

47%Gross Loss Ratio

The industry gross loss ratio YTD 2020-Q3 for listed non-life companies

54%Retention Ratio

The industry retention ratio YTD 2020-Q3 for listed non-life companies

89%Combined Ratio

The industry combined ratio YTD 2020-Q3 for listed non-life companies

49%Net Loss Ratio

The industry net loss ratio YTD 2020-Q3 for listed non-life companies

PKR 7.8 BillionPBT - Conventional & Takaful

Profit Before Tax of the listed non-life insurance companies YTD 2020-Q3.

PKR 4.5 BillionInvestment Income

Total Investment Income earned by the listed non-life insurance companies YTD 2020-Q3

11%Return on Equity

The industry ROE YTD 2020-Q3 for listed non-life companies

7%Investment Return

The industry investment return YTD 2020-Q3 for listed non-life companies

Disclaimer.*AICL includes business underwritten inside Pakistan only



GROSS WRITTEN PREMIUM - MARKET

On an overall basis, the 17 listed non-lifecompanies of the insurance industry ofPakistan showed negligible change in the grosswritten premium contribution for the ninemonths period ended September 2020. Thehighest growth for the last 4 years waswitnessed in 2017 when the industry grew by13% year-on-year nine months. Growth hasstalled for the industry but still remainspositive.

COVID-19 has impacted the economic activityin Pakistan and this was reflected in thegrowth of 2020-Q3 shown above which standsaround 0%.

Conventional business is the main contributorto the industry; almost PKR 50 Billion of thePKR 56 Billion market premium came from it.On the basis of written premium growth, thenine months period ended September 2020showed negligible change. The highest growthof 9% was seen for the nine months endedSeptember 2017.

The listed companies showed an overalldecreasing growth trend throughout the 4year period for takaful business. The ninemonths period ended September 2019showed a growth of 19% while the ninemonths period ended September 2020 showsa significantly lower growth of 3%. Growth intakaful seems to have stabilized now after themassive double-digit growth observed in theinitial years after inception.

0%

2%

4%

6%

8%

10%

12%

14%

0

10,000

20,000

30,000

40,000

50,000

60,000

2017-Q3 2018-Q3 2019-Q3 2020-Q3

PKR M

ILLIO

NS

TAKAFUL & CONVENTIONAL GWP GROWTH

TREND

Gross Premium Growth

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

2017-Q3 2018-Q3 2019-Q3 2020-Q3

PKR M

ILLIO

NS

GWC GROWTH TREND - TAKAFUL

Gross Contribution Growth

0%

1%

2%

3%

4%

5%

6%

7%

8%

9%

10%

0

10,000

20,000

30,000

40,000

50,000

60,000

2017-Q3 2018-Q3 2019-Q3 2020-Q3

PKR M

ILLIO

NS

GWP GROWTH TREND - CONVENTIONAL

Gross Premium Growth

7

Badri Management Consultancy2020-Q3 – Pakistan Non-Life Listed Insurance CompaniesBadri Management Consultancy2020-Q3 – Pakistan Non-Life Listed Insurance Companies


3% -1%-3%

2% 7%

21% -2% -16%-26% 4% 3%

0

1,000

2,000

3,000

ATIL

EW

IC

AG

IC

HIC

L

CEN

I

ASIC

PIN

L

RIC

L

SH

NI

UVIC

CSIL

PKR M

ILLIO

NS OTHERS

GWP 2019-Q3 GWP 2020-Q3

The top 5 companies contributed PKR 44 Billion outof the PKR 56 Billion premium which constitutes79% of the market.

EFU can be seen as the market leader in non-lifeinsurance based on GWP with a market share of31% for the nine months ended September 2020followed by AICL and JGICL at 21% and 15%respectively. EFU has shown a positive growthwhile the growth for both AICL and JGICL havebeen negative.

TPLI has shown a significant growth in premiums of59% when compared to the business underwrittenin first three quarters of 2019.

For Others, the highest growth was shown by ASICof 21% whereas the biggest decline was shown bySHNI with a drop of 26% in GWP. Most medium-sized companies exhibited single digit positive ornegative growth.

Overall, out of the 17 listed companies, 8companies showed an increase in premium whilethe remaining showed a decline of business.

Disclaimer:*PKGI have not written any business over the last 2 years**TPLI’s financial statements for 2019 were restated in 2020*** AICL includes business underwritten inside Pakistan only

2%

-8%

-1%

-8%59%

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

18,000

20,000

EFU AICL JGICL UNIC TPLI

PKR M

ILLIO

NS

TOP 5

GWP 2019-Q3 GWP 2020-Q3

8

GROSS WRITTEN PREMIUM - COMPANIES

Top 5

79%

Others

21%

2020 Q3 GWP

Top 5 Others



The total net earned premium for theconventional and takaful business combinedamounted to PKR 29 billion by September2020, an increase of 3% on 2019. The 4-yeartrend shows a consistent increase but at adecreasing rate. This corresponds with theslowing economic growth in Pakistan overrecent years.

The conventional insurance businesscontributed PKR 24 billion to the net earnedpremium of the market for the nine monthsended September 2020. The premiumgrowth has flattened to a level of 2-3% overthe past 3 years.

The takaful insurance business has beengrowing in terms of the net earned premiumwith the highest growth rate experienced forthe nine months ended September 2018.The growth rate has experienced a declinesince then. Early high growth in takaful whenit was first established is now seen tostabilize and mirror the trend observed forconventional.

0%

2%

4%

6%

8%

0

5,000

10,000

15,000

20,000

25,000

30,000

201

7-Q

3

201

8-Q

3

201

9-Q

3

202

0-Q

3

PK

R M

ILL

ION

S

TAKAFUL & CONVENTIONAL NEP TREND

NEP Growth

0%

2%

4%

6%

8%

10%

12%

0

5,000

10,000

15,000

20,000

25,000

30,000

2017-Q

3

2018-Q

3

2019-Q

3

2020-Q

3

PKR M

ILLIO

NS

CONVENTIONAL NEP GROWTH TREND

NEP Growth

-20%

-10%

0%

10%

20%

30%

40%

0

1,000

2,000

3,000

4,000

5,000

6,000

2017-Q

3

2018-Q

3

2019-Q

3

2020-Q

3

PKR M

ILLIO

NS

TAKAFUL NEP GROWTH TREND

NEC Growth

9

NET EARNED PREMIUM - MARKET



10%

0%

-5%

64%-9%

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

9,000

EFU AICL JGICL TPLI UNIC

PKR M

ILLIO

NS

TOP 5

NEP 2019-Q3 NEP 2020-Q3

-17% 6%

-9%

7% 4%18%

-18% -16% -17%14% 31% -100%

-100

400

900

1,400

1,900

AG

IC

EW

IC

ATIL

CEN

I

HIC

L

ASIC

RIC

L

PIN

L

SH

NI

CSIL

UVIC

PKG

I

PKR M

ILLIO

NS Others

NEP 2019-Q3 NEP 2020-Q3

10

The net earned premium for the top 5 companiesamounted to PKR 23 Billion having a market share of78% and showing an increase of 2% when compared to2019.

EFU leads the non-life insurance industry with a marketshare of 34% followed by AICL and JGICL with marketshares of 20% and 15% respectively for the nine monthsended September 2020.

TPLI was the top gainer in terms of net earned premiumwith a growth seen of 64% year-on-year between 2019and 2020.

For Others, the highest growth was seen for UVIC of31% while the biggest decline was seen in the financialsof RICL of 18%. PKGI have not earned any premiums in2020 as at September.

Disclaimer*TPLI financial statements for 2019 were restated in 2020.**AICL includes business underwritten inside Pakistan only

NET EARNED PREMIUM - COMPANIES

Top 5

78%

Others

22%

2020 Q3 NEP

Top 5 Others




EFU can be seen as the market leader in non-life insurance based on GWP with a market share of30.8% for the nine months ended September 2020 followed by AICL at 21.1% and JGICL at 15.5%respectively.

The non-life sector of Pakistan appears to be segmented into three types of companies; large oneshaving a double-digit market share, medium-sized which have a market share in the vicinity of 5%, andlastly a number of small companies having shares of less than 1%.

*PKGI have not written any business over the last 2 years*TPLI’s financial statements for 2019 were restated in 2020

11

MARKET SHARE - CONVENTIONAL & TAKAFUL

30.8%

21.1%

15.5%

6.8%

5.3%4.6%

4.4%

4.0%

2.2%

2.1%

0.9%

0.9%

0.7%

0.4%

0.2%

0.1%3.2%

GWP MARKET SHARE

EFU AICL JGICL UNIC TPLI ATIL EWIC AGIC HICL CENI ASIC PINL RICL SHNI UVIC CSIL



Out of the 17 listed companies, 14 operate window takaful operations following the approval given bySECP in 2014. While most of the business is still in conventional, the takaful proportion can beobserved to show a consistent increase throughout the 5 year period. The share of takaful stands at12% for the nine months period ended September 2020.

Most of the growth in takaful has come from the conversion of conventional business to Takaful andmotor policies written on the leasing portfolios of Islamic banks.

95% 92% 90% 89% 88%

5% 8% 10% 11% 12%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

GWP 2016-Q3 GWP 2017-Q3 GWP 2018-Q3 GWP 2019-Q3 GWP 2020-Q3

CONVENTIONAL & TAKAFUL BUSINESS DISTRIBUTUON

Conventional Takaful

12

CONVENTIONAL VS TAKAFUL



The retention ratio has been calculated as the ratio of net earned premium to gross earned premium.The market retention ratio is the weighted average ratio for the nine months period ended September2020 and serves as a reference point for comparison in our analysis.

The highest retention ratio of around 100% is reflected for CSIL while the lowest ratio was reflected byHICL at 47%. Retention ratios are generally reflective of the portfolio mix; Motor and Health generallytend to have higher retention ratios, while commercial lines such as Fire and Engineering have lowerretention ratios. Thus, a company’s retention ratio is also a function of their mix of business.

13

RETENTION RATIO

54%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

CSIL TPLI ASIC SHNI CENI AGIC UVIC JGICL UNIC RICL EWIC AICL PINL ATIL EFU HICL

RETENTION RATIO

Retention Ratio 2020-Q3 Market Average 2020-Q3


Overall the gross loss ratio is higher for most listed companies for the nine months ended September2020 when compared to 2019. AGIC, UNIC and EWIC were able to maintain their gross results. Thehighest ratio was depicted by HICL with a ratio of 77% while CSIL had the lowest gross loss ratio at5%. JGICL and AICL both saw big drops in gross profitability.


The gross loss ratio has been calculated as the ratio of gross incurred claims over the gross earnedpremium.The market gross loss ratio exhibits a decreasing trend till 2019 while it picked up in 2020 with anincrease of 9%. This increase is due to large textile fire losses and flash floods that were witnessed insome parts of the country especially the metropolitan city of Karachi. Fire business is a major portionof the total market premium thus these losses were noticeably reflected in the market loss ratio.Profitability of the business written during the COVID-19 lockdown will be fully ascertained by mid of2021.

48%

42% 41%38%

47%

0%

10%

20%

30%

40%

50%

60%

2016-Q3 2017-Q3 2018-Q3 2019-Q3 2020-Q3

GROSS LOSS RATIO TREND

Loss Ratio

14

GROSS LOSS RATIO

47%38%

-60%

-40%

-20%

0%

20%

40%

60%

80%

100%

HIC

L

JGIC

L

TPLI

ASIC

AIC

L

AG

IC

UN

IC

CEN

I

PIN

L

ATIL

EFU

UVIC

SH

NI

RIC

L

EW

IC

CSIL

GROSS LOSS RATIO

GROSS LOSS RATIO 2019-Q3 GROSS LOSS RATIO 2020-Q3

MARKET AVERAGE - 2020-Q3 MARKET AVERAGE - 2019-Q3




The net loss ratio has remained at a stable level over the last 5 years whereas the combined ratio hasgradually increased from 79% to 89% over the same period.

It can be observed that the impact of the gross loss ratio did not translate to the net loss ratio. This wasmainly because of the Motor line of business which contributes nearly half of the market net premiumsaw a 2% decline in the net loss ratio. Secondly, Health which is the second largest contributor to themarket net premium witnessed no change in the net loss ratio. Fire which experienced large lossescontributes only 15-20% of the market net premium thus the spike in the market gross loss ratio did notimpact the net loss ratio much.

15

NET LOSS & COMBINED RATIO

46% 45% 47% 48% 49%

79% 79% 86% 88% 89%

0%

20%

40%

60%

80%

100%

2016-Q3 2017-Q3 2018-Q3 2019-Q3 2020-Q3

NET LOSS & COMBINED RATIO - CONVENTIONAL

Net Loss Ratio Net Combined Ratio


The net loss ratio is the ratio of net incurred claims over the net earned premium while the combined ratioincludes management expenses and net commission as well.

The market net loss ratio is the weighted average net loss ratio which stands at 49% while the marketcombined ratio stood at 89% for the nine months period ended September 2020.

JGICL has the highest net loss ratio of 63% while CSIL has the lowest net loss ratio of 5%. UVIC, PINL, ASICand JGICL have combined ratios in excess of 100%. Any combined ratio greater then 100% translates into anet underwriting loss.

Disclaimer: PINL & UVIC have combined ratio in excess of 190%.Hence they have been excluded from the graph.

49%

89%

0%

15%

30%

45%

60%

75%

90%

105%

AG

IC

AIC

L

ASIC

ATIL

CEN

I

CSIL

EFU

EW

IC

HIC

L

JGIC

L

RIC

L

SH

NI

TPLI

UN

IC

NET LOSS & COMBINED RATIO - CONVENTIONAL

NET LOSS RATIO 2020-Q3 NET COMBINED RATIO 2020-Q3

MARKET AVERAGE NET LOSS RATIO MARKET AVERAGE COMBINED RATIO



-200

0

200

400

600

800

EFU

UN

IC

ATIL

AIC

L

EW

IC

AG

IC

CEN

I

TPLI

HIC

L

SH

NI

RIC

L

CSIL

ASIC

PKG

I

UVIC

JGIC

L

PIN

L

PKR M

ILLIO

NS NET UNDERWRITING PROFIT - CONVENTIONAL

Net UW profit 30-Sep-2019 Net UW profit 30-Sep-2020

The net underwriting profit for the market has consistently fallen since 2017. This corresponds withthe combined ratio trend mentioned previously where the figure has increased from 79% to 89% forthe same period.

The total net underwriting profit of the conventional non-life listed companies accounts to PKR 2.6billion. The bar graph shows EFU as the top company with an underwriting profit of PKR 702 millionwhile PINL shows the highest loss at PKR 153 million.

A noticeable observation can be made for JGICL which has moved from a profit of PKR 318 million forthe nine months period ended September 2019 to a loss of PKR 76 million for the correspondingperiod in 2020. This can be explained by higher than normal claims due to the damages caused byrecent heavy rainfall as well as an increase in fire incidents.

Furthermore, AICL experienced a noticeable decline as well due to higher than normal claims on theFire and Marine line of business which can also be reflected in the adverse movement loss ratios forthe company

16

NET UNDERWRITING PROFIT

-30%

-25%

-20%

-15%

-10%

-5%

0%

5%

10%

0

1,000

2,000

3,000

4,000

5,000

2017-Q3 2018-Q3 2019-Q3 2020-Q3

PKR M

ILLIO

NS

NET UNDERWRITING PROFIT TREND - CONVENTIONAL

Net Underwriting Profit Growth




ATIL has the highest profit margin which amounts to 40% in the current period while the lowest ratio isreflected in PINL's financials of -106% (not shown in the chart). Most companies have experienced afall in net profit margin in the current period when compared to the same period in 2019. There werea few big market losses in Q2 and Q3.

The net underwriting margin has fallen over the 5 year period and currently stands at 11%. Thiscorresponds with the trend observed for net underwriting profit which has also fallen consistentlysince 2017 in nominal terms. Flood events have become more frequent in Pakistan in recent years.

0%

5%

10%

15%

20%

25%

2016-Q3 2017-Q3 2018-Q3 2019-Q3 2020-Q3

NET UW PROFIT AS A % OF NEP - TREND

17

NET UW PROFIT AS A % OF NET EARNED PREMIUM


-24%

-12%

0%

12%

24%

36%

48%

ATIL

UN

IC

SH

NI

CEN

I

EW

IC

CSIL

HIC

L

AG

IC

EFU

RIC

L

TPLI

AIC

L

ASIC

JGIC

L

NET UW PROFIT AS % OF NET EARNED PREMIUM

NET UW PROFIT MARGIN 2019-Q3 NET UW PROFIT MARGIN 2020-Q3

MARKET AVERAGE 2019-Q3 MARKET AVERAGE 2020-Q3


The total investment income earned for the listed non-life conventional market amounts to PKR 4.5billion.

The graph shows the relative levels of net underwriting profit and investment income for theconventional business. The bar chart for the top 5 companies shows that the investment income is asignificant driver of their performance. EFU leads the market with an investment income of PKR 1.56billion while ATIL, the fifth largest in terms of investment income, earned PKR 156 million.

It is interesting to note that the UW income of ATIL is almost double their investment income. Theother top 5 companies depict an opposite trend.

The relative levels of UW profit and investment income for the other companies shows thesignificance of investments for non-life insurers. For companies making an underwriting loss, theinvestment income has helped them recoup some of that loss.


INVESTMENT INCOME

-200

-100

0

100

200

300

400

500

600

700

ASI

C

TPLI

EWIC

RIC

L

CEN

I

SHN

I

UN

IC

HIC

L

PIN

L

UV

IC

PK

GI

CSI

L

PK

R M

ILLI

ON

S

PROFIT COMPOSITION - UW & INVESTMENT INCOME OTHERS

Net UW Profit 2020-Q3 Investment Income 2020-Q3

-200

0

200

400

600

800

1,000

1,200

1,400

1,600

EFU JGICL AICL AGIC ATIL

PKR M

ILLIO

NS

PROFIT COMPOSITION - UW & INVESTMENT INCOME TOP 5

Net UW Profit 2020-Q3 Investment Income 2020-Q3



The profit before tax shows a decreasing trend from 2017 to 2019. However, the period endingSeptember 2020 showed a sharp increase of 32% compared to the corresponding period of 2019.

Even though the net underwriting profit of the market fell by 12%, a significant growth of 85% wasseen in the investment income. This drove the PBT up in 2020.

EFU leads the non-life market with the highest profit before tax of PKR 2.56 Billion followed by JGICL atPKR 1.63 Billion and AICL at PKR 1.40 Billion. The highest growth in profit is by reflected in thefinancials of ASIC which showed a growth of 1,553%.

Disclaimer: AICL includes business underwritten inside Pakistan only


PROFIT BEFORE TAX

27%

61%

5%

10% -3%

15%38% 244%

1,553% 207% 48% 955% -28% -40%

71%-139% 55%

-500

0

500

1,000

1,500

2,000

2,500

3,000

EFU

JGIC

L

AIC

L

UN

IC

ATIL

AG

IC

EW

IC

CEN

I

ASIC

TPLI

CSIL

RIC

L

SH

NI

HIC

L

PKG

I

UVIC

PIN

L

PKR M

ILLIO

NS

PBT - CONVENTIONAL & TAKAFUL

Profit Before Tax 2019-Q3 Profit Before Tax 2020-Q3

-30%

-20%

-10%

0%

10%

20%

30%

40%

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

9,000

10,000

2017-Q3 2018-Q3 2019-Q3 2020-Q3

PKR M

ILLIO

NS

PBT GROWTH TREND - CONVENTIONAL & TAKAFUL

Profit Before Tax Growth



The ROE is calculated as the ratio of PBT for the period ended to the total of share holder's equity atthe end of the period.The return on equity shows how well a company is using its’ capital to generate profit. The weightedaverage return on equity shows a decreasing trend till 2019 while it has improved to 11% in 2020.improved investment income drove the ROE up this year.

AGIC shows the highest return on equity of 20% while UVIC had the lowest return on equity of -11%.CENI, TPLI and ASIC healthy improvements observed.

ROE calculations are based on the published equity figures which are highly sensitive to capital marketfluctuations. Capital markets have been quite unstable in Pakistan in the last two years.


0%

4%

8%

12%

16%

20%

2016-Q3 2017-Q3 2018-Q3 2019-Q3 2020-Q3

RETURN ON EQUITY TREND

20

RETURN ON EQUITY

10%

11%

-20%

-15%

-10%

-5%

0%

5%

10%

15%

20%

AG

IC

JGIC

L

UN

IC

ATIL

EW

IC

EFU

CEN

I

TPLI

ASIC

SH

NI

AIC

L

CSIL

RIC

L

HIC

L

PKG

I

UVIC

RETURN ON EQUITY FOR LISTED COMPANIES

ROE 2019-Q3 ROE 2020-Q3 Market Average - 2019-Q3 Market Average - 2020-Q3




The commission expense ratio is calculated as net commission divided by the net earned premium. Hence, anegative ratio signifies that the commission earned outweighs the commission paid. The market ratio is the weightedaverage which stands at 6% for the nine months ended 2020. The highest commission expense ratio can be observedfor ASIC at 24% while ATIL has the lowest ratio of -12%. Companies usually cede out a large proportion ofcommercial lines business and benefit from the reinsurance commission which results in an overall lower netcommission expense.

The management expense ratio expresses management expenses over the net earned premium for a particularperiod. The market ratio calculates to 34% for the period ended September 2020.

UVIC and PINL have the highest management expense ratios of 133% and 134% respectively which are the maincontributors to the loss before tax incurred by these companies.

JGICL, EFU, AICL, SHNI & EWIC have expense ratios below the market average.

21

COMMISSION EXPENSE & MANAGEMENT EXPENSE RATIO

6%

-15%

-10%

-5%

0%

5%

10%

15%

20%

25%

30%

ASIC

SH

NI

UVIC

EW

IC

RIC

L

PIN

L

TPLI

EFU

JGIC

L

AIC

L

CSIL

UN

IC

CEN

I

AG

IC

HIC

L

ATIL

COMMISSION EXPENSE AS A % OF NET EARNED PREMIUM

Commission Expense Ratio 2020-Q3 Market Average - 2020-Q3

34%

0%

20%

40%

60%

80%

100%

120%

140%

160%

PIN

L

UVIC

CSIL

RIC

L

ASIC

ATIL

HIC

L

CEN

I

TPLI

UN

IC

AG

IC

JGIC

L

EFU

AIC

L

SH

NI

EW

IC

MANAGEMENT EXPENSE AS A % OF NET EARNED PREMIUM

Management Expense Ratio 2020-Q3 Market Average - 2020-Q3



This table ranks companies based on gross written premium and profit before tax. The Indic column indicateswhether the profit ranks above or below the premium rank.

EFU, AICL and JGICL have built up large and profitable books of business over the years. CSIL ranks the lowestin terms of premium but it’s rank in terms of profit is much higher. TPLI, HICL and PINL have high premiumrankings but much lower profit ones.

Disclaimer: PKGI have not written any business over the last 2 years. Hence excluded from the table.


CompanyRanking

IndicGWP PBT

22

PREMIUM BENCHMARKED ON THE BASIS OF PROFITABILITY

EFU 1 1 -

AICL 2 3 (1)

JGICL 3 2 1

UNIC 4 4 -

TPLI 5 10 (5)

ATIL 6 5 1

EWIC 7 7 -

AGIC 8 6 2

HICL 9 14 (5)

CENI 10 8 2

ASIC 11 9 2

PINL 12 16 (4)

RICL 13 12 1

SHNI 14 13 1

UVIC 15 15 -

CSIL 16 11 5



The graph shows gross written premium (GWP) growth on the x- axis and profit before tax growth onthe y-axis. The profit before tax growth is capped at ± 100% while the GWP growth is capped at ±50%. The growth is calculated on a year-on-year basis for nine months ended Sep 2020 vs 2019.Companies in the top right quadrant show positive growth for both profit before tax and GWP which isdesirable. Presence in the top left quadrant might indicate an improved underwriting performance orinvestment income whereas presence in the bottom right quadrant can indicate worseningunderwriting profitability all else being equal.

EFUAICL

JGICL

UNIC

TPLI

ATIL

EWIC

AGIC

HICL

CENI ASIC

PINL

RICL

SHNI

UVIC

CSIL

-100%

-80%

-60%

-40%

-20%

0%

20%

40%

60%

80%

100%

-50% -40% -30% -20% -10% 0% 10% 20% 30% 40% 50%

GW

P G

row

th

Profit Before Tax Growth

23

PREMIUM & PROFIT ANALYSIS



The chart shows the Industry's Invested Assetbreakdown and how the contribution is made byeach asset class. Majority of the investments aremade in equity securities followed by debtsecurities and then term deposits.

General Insurers prefer investment in liquidassets like debt securities and term deposit.Investment in equities can yield higher returnbut their market value is more volatile and thusleads to a higher capital charge.

The bar graph shows the investments ofcompanies by asset class.

AICL has a major proportion invested in theequity market whereas EFU & JGICL havefocused more on the debt side.

CSIL & PINL have invested primarily only in theequity market while the other companies havediversified their portfolios across the three assetclasses.

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

AIC

L

EFU

TPLI

ASIC

UN

IC

SH

NI

EW

IC

CEN

I

JGIC

L

RIC

L

PKG

I

AG

IC

ATIL

CSIL

HIC

L

PIN

L

UVIC

ASSET MIX

Term Deposits Equity Securities Debt Securities

24

ASSET MIX

Term Deposits

13%

Equity Securities

51%

Debt Securities

36%

TOTAL INVESTMENTS AS AT 2020-Q3

Total fund size: PKR 71.1 billion




The investment return is computed as investment income over total investments.

The investment returns of the industry averaged around 7% for the nine months ended Sep 2020whereas it was 4% for the corresponding period in 2019.

ASIC had the highest level of investment return at 12% and the majority of their investments lie interm deposits. The lowest investment returns were achieved by PINL of 2% and their portfoliocomprises primarily of equity securities.

10% 10% 3% 9%3%

12%

9% 7%4% 3% 5% 7% 3%

2%3%

7% 11%

7%4%

-30%

-20%

-10%

0%

10%

20%

30%

EFU

JGIC

L

AIC

L

AG

IC

ATIL

ASIC

TPLI

RIC

L

EW

IC

CEN

I

UN

IC

SH

NI

HIC

L

PIN

L

UVIC

PKG

I

CSIL

INVESTMENT RETURN - CONVENTIONAL & TAKAFUL

Investment Return - 2019-Q3 Investment Return - 2020-Q3

Market Ratio 2020-Q3 Market Ratio 2019-Q3

25

INVESTMENT RETURN



The cash ratio has been taken as the ratio of cash & bank to total invested assets including cash.General insurers aim to keep a minimum level of cash to meet unexpected requirements which mayarise due to a large loss or a catastrophe. Cash generally earns a lower return compared to other assetclasses.

The market average is calculated to be 11%.

CSIL has the highest level of 81% maintained as cash, while the lowest ratio of 1% was observed forSHNI.

26

CASH RATIO

11%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

CSIL

TPLI

UN

IC

RIC

L

ASIC

CEN

I

ATIL

JGIC

L

AG

IC

AIC

L

UVIC

EFU

PIN

L

PKG

I

EW

IC

HIC

L

SH

NI

CASH RATIO 2020-Q3

Market Average 2020-Q3

Badri Management Consultancy2020-Q3 – Pakistan Non-Life Listed Insurance CompaniesBadri Management Consultancy2020-Q3 – Pakistan Listed Insurance Companies


The bar graph represents the gross technical reserves as at Sep 20 over the gross premium written incalendar year 2019.

PINL ranks the highest with a ratio of 226% while EWIC has the lowest ratio at 59%. This ratio is driven by acompany’s reserving philosophy and mix of business.

Insurers try to avoid both under-reserving as well as over-reserving. Over-reserving would lead to a deferralof profits and taxes while under-reserving can result in a premature payout of dividends.

The pie chart shows that unearned premium reserve forms the biggest proportion of technical reserves forlisted non-life insurance companies of Pakistan followed closely by the outstanding claims reserve whichincludes IBNR reserves as well.

Reserves are backed by assets which earn investment income for the company.

27

TECHNICAL RESERVES

Outstanding claims

Including IBNR

47%

Unearned Premium

Reserve

51%

Other

2%

GROSS TECHNICAL RESERVES AS AT 2020-Q3

Total Technical Reserves : PKR 72.8 billion

87%

0%

50%

100%

150%

200%

250%

PIN

L

JGIC

L

HIC

L

ASIC

TPLI

EFU

UN

IC

CSIL

ATIL

RIC

L

CEN

I

SH

NI

AG

IC

UVIC

AIC

L

EW

IC

GROSS TECHNICAL RESERVES AS A % OF GWP

Gross Technical Reserves Market Average 2020-Q3



The ratio is computed using insurance receivables as at 2020-Q3 and the gross written premium forcalendar year 2019.The market ratio is the weighted average which is computed to be 28%. CSIL hasthe highest ratio of 158% while EFU has the lowest ratio at 17%.

The ratio depicts the collection performance of each company. This is particularly important forgeneral insurance which has a short tail. Quicker collection can also improve the liquidity position andfavorably impact the investment income.

28

INSURANCE RECEIVABLES

28%

0%

20%

40%

60%

80%

100%

120%

140%

160%

CSIL

PIN

L

UVIC

ASIC

SH

NI

HIC

L

CEN

I

RIC

L

AG

IC

AIC

L

ATIL

JGIC

L

UN

IC

TPLI

EW

IC

EFU

INSURANCE RECEIVABLES AS A % OF GWP

Insurance Receivable Market Average 2020-Q3



The Gross Premium trend for the conventional and takaful business combined shows a decrease for themotor, marine, aviation and transport line for the nine months ended 2020 when compared with thecorresponding period in 2019. This can be explained by the uncertainty created by COVID-19 lockdownswhich decreased overall business activity. While the health line shows an increase in gross premiums.Furthermore, it can be seen that the highest premium of PKR 112 Billion was reported for the period endedSeptember 2019.

It can be observed that a significant proportion of the Fire & Property Damage line has been reinsuredwhich is due to the nature of the risk profile for this line. The highest net premium has consistently beenearned in the Motor line of business. Health & Accident continues to be a primarily retained line.

29

PREMIUMS BY LINE OF BUSINESS


0 2,000 4,000 6,000 8,000 10,000 12,000

Others

Health & Accident

Marine, Aviation & Transport

Motor

Fire & Property Damage

Millions

NET EARNED PREMIUM/CONTRIBUTION BY LOB

2016-Q3 2017-Q3 2018-Q3 2019-Q3 2020-Q3

0 5,000 10,000 15,000 20,000 25,000

Others

Health & Accident

Marine, Aviation & Transport

Motor

Fire & Property Damage

Millions

GROSS WRITTEN PREMIUM/CONTRIBUTION BY LOB

2016-Q3 2017-Q3 2018-Q3 2019-Q3 2020-Q3



27%

94%

58%

91%

49%

27%

94%

62%

95%

50%

21%

96%

63%

95%

44%

22%

92%

64%

92%

44%

22%

91%

61%

92%

42%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Fire & Property Damage Motor Marine Aviation & Transport Health & Accident Others

RETENTION RATIO BY LOB

2016-Q3 2017-Q3 2018-Q3 2019-Q3 2020-Q3

The retention ratio is the percentage of business earned by insurance companies that is not reinsured.High frequency/low severity lines like Motor and Health have a high retention ratio as expected. Onthe other hand, volatile lines like Fire and Marine where the risk sizes may be bigger have a lowretention ratio. Capital and capacity issues mean most large property risks in Pakistan are ceded out tothe foreign reinsurance market.

30

RETENTION RATIO BY LINE OF BUSINESS



The direct commission ratio is the commission paid for acquiring business through agents and brokersas a % of written premium. The trend shows lower 2020 ratios for Fire and Health when compared to2018 & 2019. Whereas, this trend is opposite for Motor, Marine and Others. High loss ratio linesaccommodate a lower commission as can be seen for Health here. Marine continues to be a profitablebusiness in Pakistan and abroad and thus can be seen here offering the highest commission rates.

31

COMMISSION RATIO BY LINE OF BUSINESS

0.00%

2.00%

4.00%

6.00%

8.00%

10.00%

12.00%

Fire & Property

Damage

Motor Marine, Aviation &

Transport

Health & Accident Others

DIRECT COMMISSION RATIO BY LOB

2018-Q3 2019-Q3 2020-Q3



52%

48%

31%

89%

53%

35% 4

8%

28%

80%

51%

24%

50%

30%

83%

50%

22%

51%

38%

80%

33%

48%

51%

42%

80%

37%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Fire & Property Damage Motor Marine Aviation &

Transport


GROSS LOSS RATIO BY LOB

2016-Q3 2017-Q3 2018-Q3 2019-Q3 2020-Q3

58%

50%

28%

109%

63%

37%

40%

24%

73%

53%

20%

115%

26%

80%

64%

19%

59%

38%

73%

21%

36%

85%

46%

84%

37%

0%

20%

40%

60%

80%

100%

120%

Fire & Property Damage Motor Marine Aviation &Transport


RI LOSS RATIO BY LOB

2016-Q3 2017-Q3 2018-Q3 2019-Q3 2020-Q3

The gross loss ratios have trended up for Fire, Marine and Others in 2020. Motor and Health have remainedfairly stable over the years. In addition, these two lines might have benefited from the COVID-19 lockdownwhen less cars were on the road and hospital visits for non-urgent care were also on a decline.

RI loss ratios have moved up in 2020 for all lines of businesses. This coupled with a hardening market canmean upward pressure on prices at the January 2021 renewals. Apart from this, there is no clear trendseen in the above ratios. This is expected since reinsurance is bought to absorb volatility enabling thecedant to smoothen their results across years.

32

LOSS RATIOS BY LINE OF BUSINESS


Badri Management Consultancy2020-Q3 – Pakistan Non-Life Listed Insurance CompaniesBadri Management Consultancy2020-Q3 – Pakistan Listed Insurance Companies


The bar chart shows the net loss and combined ratios across the various business lines for conventionaland takaful combined. The net loss ratios were higher for Fire and Marine for the nine months periodended Sep 2020 when compared to 2019. While they were lower for Motor and other lines.

The combined ratios have increased for Fire, Marine and Others in 2020. While Health & Accident hasshown an improvement for the same period.

Expense ratios have not changed much year-on-year for all lines as can be seen in the difference betweennet and combined ratio bars.

33

LOSS & COMBINED RATIO BY LINE OF BUSINESS

61%

135%

48%

85%

41%

94%82%

97%

40%

100%

0%

20%

40%

60%

80%

100%

120%

140%

160%

Net Loss Ratio 30-Sep-2020 Combined Ratio 30-Sep-2020

NET LOSS & COMBINED RATIO BY LOB - 2020 - Q3

Fire & Property Damage Motor Marine, Aviation & Transport Health & Accident Others

30%

107%

50%

85%

38%

86%82%

103%

47%

94%

0%

20%

40%

60%

80%

100%

120%

Net Loss Ratio 30-Sep-2019 Combined Ratio 30-Sep-2019

NET LOSS & COMBINED RATIO BY LOB - 2019 - Q3

Fire & Property Damage Motor Marine, Aviation & Transport Health & Accident Others


Highest GWP Recorded by

EFUat

PKR17.3bn

Highest Growth in GWP Recorded by

TPLIat

59%

Highest Retention Ratio Recorded by

CSILat

100%

Highest NEP Recorded by

EFUat

PKR7.8bn

Highest ROE Recorded by

AGICat

20%

Highest PBT Recorded by

EFUat

PKR2.5bn

Highest Growth in PBT Recorded by

ASICat

1,533%

Lowest Combined Ratio Recorded by

ATILat

60%

Highest Investment Income Recorded

by

EFUat

PKR1.6bn

Highest Investment Return Recorded

by

ASICat

12%

Lowest Receivables as a % of GWP Recorded

by

EFUat

17%

INDUSTRY NEP GROWTH TIMELINE - CONVENTIONAL & TAKAFUL

PKR 29.4bn

2019-Q32016-Q3 2017-Q3 2018-Q3 2020-Q3

PKR 24.0bn

PKR 28.5bn

PKR 25.8bn

PKR 27.4bn

PKR 56.3bn

2019-Q3

INDUSTRY GWP GROWTH TIMELINE - CONVENTIONAL & TAKAFUL

2016-Q3 2017-Q3 2018-Q3 2020-Q3

PKR 43.6bn

PKR 56.3bn

PKR 49.1bn

PKR 51.9bn

INDUSTRY PBT GROWTH TIMELINE - CONVENTIONAL & TAKAFUL

PKR 7.8bn

2019-Q32016-Q3 2017-Q3 2018-Q3 2020-Q3

PKR 9.0bn

PKR 5.9bn

PKR 8.7bn

PKR 7.9bn


KEY TAKEAWAY POINTS


35WWW.BADRICONSULTANCY.COM

• The COVID-19 pandemic has severely impacted many economies of the world. Pakistan is currently battling with the second wave of the virus and the economic outlook seems uncertain.

• As of September 2020, any significant impact of the pandemic could not be recognized by the listed insurance companies of Pakistan. However, the full impact of the business underwritten during the lockdown period can only be ascertained by Q2 of 2021.

• The GWP has witnessed an increase but at a decreasing rate throughout the last 4 year period and showed negligible change for the period ended September 2020.

• GWP for the conventional and takaful business combined increased in the Fire & Property and Health & Accident line while the other lines of business saw a decline.

• The proportion of business underwritten by the takaful segment is consistently on the rise and currently stands at 12% of the total market.

• The gross loss ratio for the industry increased by 9% for the period ended September 2020.• Investment income was a major contributor towards the performance of conventional

insurers and stood at PKR 4.5 Billion in aggregate, an 85% increase on the 2019 level• Profit before tax for the market increased by 32% and stood at PKR 7.83 billion for the first

three quarters of 2020.

35

CONCLUSION



Listed Insurance CompaniesSr. No. Symbol Name Market

1 AICL Adamjee Insurance Co. Ltd PSX

2 ASIC Asia Insurance Company Limited PSX

3 AGIC Askari Gen. Ins. Co. Ltd PSX

4 ATIL Atlas Insurance Limited PSX

5 CENI Century Insurance Co.Ltd PSX

6 CSIL Crescent Star Insurance Ltd PSX

7 EWIC East West Insurance Co. Ltd PSX

8 EFU EFU General Ins. Ltd PSX

9 HICL Habib Insurance. Co. Ltd PSX

10 JGICLJubilee General Insurance Company Limited

PSX

11 PINL Premier Insurance Limited PSX

12 RICL Reliance Insurance Co. Ltd PSX

13 SHNI Shaheen Ins. Co. Ltd PSX

14 PKGI The Pakistan Gen. Ins. Co. Ltd PSX

15 TPLI TPL Insurance Limited PSX

16 UNIC United Ins. Co. of Pak. Ltd PSX

17 UVIC Universal Insurance Company Ltd PSX

36

COMPANIES INCLUDED IN THE ANALYSIS



• We have undertaken an analysis of the Key Performance Indicators (KPIs) of the listed non-life insurance companies for the period ended September 2020. The data has been extracted from the financial statements of these companies.

• For the scope of our analysis, we have only taken business underwritten inside Pakistan for AICL.

• We have taken the data from the financial statements for the respective quarters. Any reinstatement in later years has not been adjusted.

• The reporting presentation changed from 2018 which means that some items available in 2017 accounts are not exactly available from 2018 onwards.

• Based on GWP of YTD 2020-Q3, the report covers 74% of the general insurance market. Quarterly accounts of most unlisted companies are either not available or are published very late.

• While we have tried to ensure accuracy in the data input and evaluation process, in view of the natural scope for human and/or mechanical error, either at input or during analysis, we accept no liability whatsoever for any loss or damage resulting from errors, inaccuracies or omissions affecting any part of this publication. If you come across an error or have a query, do write to us.

DISCLAIMER

37

[email protected]

UAE/Oman

Actuarial

KSA Actuarial Medical

Business

Intelligence

End of Service HR Consulting

28 Staff 22 Staff 4 Staff

11 Staff 5 Staff 2 Staff

12 Support and admin staff

About our team

Total Strength = 84

Take extra care ofhygiene

Don't forget to wearprotective mask

Maintain safedistance

Avoid touching eyes,nose and mouth

SOME SAFETY TIPS FROM TEAM BADRIYou’re braver than you believe and stronger than you seem, and

smarter than you think - so follow guidelines & stay safe.

feedbackBadri Management Consultancy is proud to present

the 2020-Q3 report. We have a dedicated team that is

working to bring you research reports. Our doors are

open for feedback, and we welcome them. Feel free to

inquire about the report.

Hatim Maskawala

Omar Khan

Contact us!

Get in touch with us!

+971-4-3207-250

www.linkedin.com/company/badri-management-consultancy

www.badriconsultancy.com/

[email protected]

Dubai Head Office

Karachi Office

2107 SIT Towers, PO

Box 341486, Dubai

Silicon Oasis, Dubai, UAE

5B-2/3, 5th Floor, Fakhri

Trade Center, Shahrah-e-

Liaquat, Karachi 74200,

Pakistan

Ali Bhuriwala

Maira Qadar Afnan Shaukat

q 3 - badri management consultancy

Documents