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Fire insurance is the most loss-making segment in the underwriting operations of Islami Commercial Insurance Company Limited (ICICL), a new publicly traded company.
In this segment, the company reported a loss of Tk 4.3 crore and Tk 4 crore in 2020 and 2021 respectively.
According to an equity note prepared by EBL Securities Limited, ICICL will need to increase its revenue in other segments and also have to reduce the losses in the fire insurance revenue account to improve its earnings.
The general insurance company has had a combined ratio of more than 90 per cent in the last three years, which indicates it has not been able to earn a sufficient net premium in recent years.
However, the risk retention ratio has decreased from 69 per cent in 2019 to 64 per cent in 2021, which indicates a slight decrease in business risk exposure for the company, said the equity note.
EBL Securities' analysis showed that future growth and profitability of non-life insurance companies largely depend on growth in imports, exports, and the prospects of industrialisation in the overall economy.
Hence, a macroeconomic slowdown due to the global geopolitical crisis and other adversities on the macroeconomic front may adversely impact the performance of the company in the future.
Moreover, since marine cargo insurance is the largest source of underwriting profit for the company, the recent decline in imports may also affect the profitability of the company, it said.
On Sunday, ICICL made its debut trading on the country’s twin bourses under the ‘N’ category. On the day, general insurance share prices increased by 9.92 per cent to Tk 13.30 per share.
In November, ICICL raised Tk 20.26 crore from stock markets through an initial public offering (IPO) using a fixed price method.
With the IPO proceeds, ICICL is going to invest Tk 13 crore in FDR, Tk 2.3 crore in treasury bonds and Tk 4 crore in the capital market. Upon the full utilisation of the IPO proceeds, ICICL’s investment portfolio will increase by 84.7 per cent from its Sep’22 balance.
Investment income currently contributes around 30 per cent of the company’s total revenue earned. Hence, such investment will eventually increase the income from non-operating sources and ensure diversification of its income sources.
ICICL’s gross premium and the net premium have grown at the compound annual growth rates (CAGRs) of 6.2 per cent and 8.6 per cent respectively from 2017 to 2021, which indicates the continuous expansion of its core business operations.
Islami Commercial Insurance began commercial operations in 2000 and provides insurance services to the fire, marine, motor, and miscellaneous business areas. The insurance company provides its services through 36 branches across the country.
As per the company's latest audited financial statements for the year ended December 31, 2021, its net asset value (NAV) per share with revaluation stood at Tk 20.96 and NAV per share without revaluation at Tk 17.48.
The company's earnings per share (EPS) stood at Tk 1.82 for the year through December 2021. Its six-month EPS is Tk 0.77 for January-June 2022.
According to the Bangladesh Securities and Exchange Commission's approval, the company will not be allowed to declare, approve, or distribute any kind of dividend before listing in the stock market.
The company’s profit after tax was Tk 1.75 crore and basic EPS was Tk 0.58 for the three-month period Jul-Sep'22, according to the unaudited Q3 financial statements, compared to Tk 1.57 crore and basic EPS of Tk 0.52 for the same period of the previous year.
However, post-IPO basic EPS for the three-month period Jul-Sep’22 was Tk 0.35. Moreover, profit after tax was Tk 3.19 crore and basic EPS was Tk 1.05 for the nine-month period Jan-Sep’22 as against profit after tax of Tk2.62 crore and basic EPS of Tk 0.86 for the same period of the previous year.
