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Chartered Life Insurance Company Limited (CLICL), a new publicly traded company, is going to invest Tk 6 crore and Tk 7.9 crore in Treasury bonds and listed securities respectively.
The amount will be invested from Initial Public Offering (IPO) funds, which will increase its investment by 32 per cent and 84.3 per cent in Treasury bonds and listed securities.
This investment will positively impact the company’s earnings and it will make them capable to offer handsome dividend, says an equity note prepared by the EBL Securities Ltd.
EBL Securities analysis showed that gross premium and life insurance fund of Chartered Life has grown at a compound annual growth rate (CAGR) of 56.9 per cent in 2017 and 132.5 per cent in 2021. This is because of continuous investment in business expansion.
As the company is enlisted with the Dhaka and Chittagong stock exchanges, it will improve its brand value and image. These will help to gain trust of people paying ways to capture more client , it said.
On Sunday, Chartered Life Insurance made its debut trading on country’s twin bourses under the “N” category. Share prices of Chartered Life increased by 10 per cent to Tk 12.10 each on Mondday.
Chartered Life raised Tk15 crore from stock markets through IPO using fixed price method.
The company will use the IPO funds to invest in government and publicly listed securities, alongside meeting the expenses for the IPO.
The life insurance company has been consistent in diversifying its sources of income since net premium as a percentage of total income had been reduced to 65.6 per cent in FY ‘21, which was above 90 per cent in FY ‘17, the equity note said.
It also said that the insurance company has been efficient in controlling its operating expenses in the past 5 years since the expense ratio was reduced to 46.9 per cent in FY ‘21, which was 86 per cent in FY ‘17.
It has also been efficient in utilizing its assets to generate revenue during this period since the asset turnover ratio has increased to 0.84 times in FY ‘21, which was only 0.36 times in FY’17, EBL Securities said. According to the actuarial valuation report, the company had a surplus in its life insurance fund of around Tk 4.8 crore in FY ‘21.
Moreover, according to the dividend policy mentioned in the IPO prospectus, the company is expected to have a net distributable surplus of around Tk 20 crore in FY ‘22, out of which around 10 per cent will be distributable to the shareholders as dividends. The company also doesn’t have any contingent liabilities, it said.
The life insurance already has an investment in the capital market worth Tk 9.4 crore as of Dec’21. The additional investment of Tk 7.9 crore from the IPO proceeds will further increase the capital market exposure of the company.
As a result, maintaining the company’s desired financial performance may be challenging given that a decline in investment value could put pressure on its balance sheet, especially amidst the current bearish outlook of the market, EBL Securities said.
Chartered Life Insurance was incorporated in 2013 and its paid-up capital stood at Tk37.5 crore.
Chartered Life provides a wide range of life insurance products to its customers, with 18 different plans currently available through its 51 branches across the country.
More than 60 per cent of CLICL’s revenue is generated from ordinary life insurance premium which has two components - First year premium and renewal premium.
As per audited annual financial statements and actuary valuation report, Surplus of Life Insurance Fund attributable to Shareholders was Tk 45.10 lakh and basic earnings per share ( EPS) of Tk 0.20 for the year ended on 31 December 2021.
