Due to legal complexities, the country’s listed life insurers are failing to deliver updated financials on time which has put stock investors into a sombre state as they cannot take investment decisions in absence of necessary updated price-sensitive disclosures.
Even, an insurer cannot release its annual financial report in six months after the end of a calendar year, that’s why investors remain in dark about the company’s progress or regress, which may lead them to wrong investment decisions, analysts said.
As per the regulations set by the Dhaka Stock Exchange (DSE), companies except mutual funds, must publish their financial report within 120 days from the conclusion of the calendar year. Failure to comply with this timeline results in a penalty of Tk 5,000 per day.
However, as per the stipulations outlined in the Insurance Development and Regulatory Authority (IDRA) Insurance Act-2010, life insurance companies are obligated to submit their financial reports for the previous year to the authority within six months from the closure of the calendar year.
Furthermore, insurance companies with their head offices located internationally or outside the borders of Bangladesh also have the opportunity to extend the time for an additional three months.
As a result, if a company listed in the capital market conducts insurance business outside the country or the foreign head office, they can inform ordinary investors about the business profit and loss of the previous year after nine months from the end of the calendar year.
Speaking to The Business Post, capital market analyst Debbrata Kumar Sarkar said, “The share price in the capital market fluctuates mainly based on financial reports. Now a company is legally allowed to release its financial statements for the previous year after six or nine months, there is a greater chance that the company's share price will rise through manipulation.”
DRA should consider this matter in the case of companies listed in the capital market. One law for all companies and a different law only for life insurance is inconsistent for the capital market, he said.
57 companies in the general and life insurance sectors are listed in the capital market. Among them, 42 companies in the general insurance sector and 15 companies in the life insurance sector are listed, all of which have a calendar year ending in December.
Out of 42 companies in the general insurance sector, 41 have already published their final financial reports for 2022. Companies in the life insurance sector have started publishing financial reports for 2022 as of July.
Only nine out of 15 life insurance companies published their 2022 financial reports until Monday.
Rupali Life Insurance Company Secretary Amirul Islam Mukith said, “As per Bangladesh Securities and Exchange Commission (BSEC) rules; we have to declare dividends within four months of the end of the calendar year. But there is a rule of IDRA up to six months. We take extra time to inform BSEC about the IDRA Act.”
Chief Executive Officer of National Life Insurance Kazim Uddin said even though our financial year ends in December, account has to be valued by an actuary. In our country, only one actuary audits the financial statements of all life insurance companies. This is why life insurance companies take longer to declare dividends than other companies.
It's true that this is a problem for capital market investors. Investors will know what we're doing in 2022, six months into 2023. Other companies know within two to three months of the end of the calendar year. It is possible to reduce the time by changing the law, he added.
Statement of the regulatory body
BSEC Chairman Professor Shibli Rubayat-Ul-Islam said, “This is not our issue. Why life insurance companies can't pay dividends on time should be looked into by IDRA. If life insurance companies apply to us, their time is extended accordingly.”
Insurance Development and Regulatory Authority (IDRA) Member (Life) Quamrul Hasan said companies publish financial reports according to what is said in the law. If common investors have problems, then there is an opportunity to discuss the matter.
What is in the law
Sub-section 3 of the Insurance Act, 2010, 26 states that every insurance company shall send to the authority duly certified by the auditor as per the regulations within 6 months of the end of the calendar year.
Accounts, statements, etc. under section 27 and audited accounts, summaries and statements of liability-valuation reports under section 30 will be printed. Accounts and statements under sub-section (5) of Section 30 will be sent within 6 months of the end of the calendar year and liability assessment reports, summaries and statements under Section 30 will be sent within 9 months.
However, this timeframe of 6-month, as mentioned earlier, can be extended by an additional 3-month in the event of insurance companies with their headquarters or permanent residence located outside the boundaries of Bangladesh, as well as insurers established and based in Bangladesh but conducting insurance operations beyond the country's borders.
As per the guidelines outlined in Section 17 of the DSE Listing Regulations for the year 2015, it is mandated that a company shall disclose its audited or unaudited financial statements within 45 days subsequent to the conclusion of the initial quarter of the fiscal year.
For the second and third quarters, it is incumbent upon companies to release this report within 30 days. For companies, excluding mutual funds, the requirement mandates the disclosure of their quarterly reports within 120 days after the fiscal year's culmination. It's important to highlight that a penalty of Tk 5000 per day is stipulated for any delays in the publication of the report.