The latest chatter in life insurance business in Pakistan is that the government-owned State Life Insurance Company of Pakistan is no more holding monopoly in the sector. SLIC has been steadily losing its grip over the market share since decades.
Two years ago SLIC still had a leading share (57pc) in the pie; today it is divided equally: 50pc with SLIC and 50pc is held by the private insurance companies with varying percentage of market share.
The imposition of an advance tax on life insurance premium would drive away small savers, having an adverse impact on the penetration of life insurance — Javed Ahmed
Asked if that was the case, Javed Ahmed, managing director of Jubilee Life Insurance Co. told that it was indeed so. He presides over Pakistan largest private sector life insurer in terms of gross written premium.
Formerly the New Jubilee Life Insurance Company Limited, Jubilee Life has been in the business for over 18 years as a life and health insurance company. Engaged in both individual life insurance and group insurance business, Jubilee has ventured into several new fields. The company’s initiatives include Bancassurance, Credit Life and Micro-Insurance. The company also started the Takaful business by opening up its Shariah-compliant ‘Window Takaful Operations’ towards the end of June 2015.
Most of the private sector life insurance companies, like banks, have started Takaful alongside their conventional business, hoping to add value and revenue by attracting the segment of the population that is wary of conventional banking and insurance products.
“Jubilee Life has launched 20 – 30 Takaful products through different distribution channels such as Banca Takaful arrangements with the company’s banking partners, direct sales from own branches, and corporates (employee benefits)”, says Javed Ahmed, adding that the results have been encouraging.
“Besides Life, Jubilee is also the largest provider of health insurance in Pakistan”, the company MD tells me and talks about the latest initiative of launching health insurance cover, mainly for the salaried class.” The company is also catering to the lower segment through micro-insurance products, designed to be affordable for the underprivileged section of society.
Jubilee Life Insurance Co. is a subsidiary of the Aga Khan Fund for Economic Development S.A, Switzerland, which holds 57.87pc stake in the company, representing 41.7m shares. Adding the shareholding with associated companies and related parties, the holding company together commands 83.03pc of the company’s capital. The general public holds 8.90pc shares, while foreign shareholders have a 4.71pc stake in the company.
The market price of the Jubilee Life Insurance stock, of a par value of Rs10, which stood at Rs290 two years ago, has currently climbed up to Rs530. The company’s market capitalisation amounts to Rs38bn against the paid-up capital of Rs721m. Total assets of the firm according to last released figures amounted to Rs721m on June 30.
The Jubilee Life MD complains of several measures decreed in the budget 2016-17. These include the imposition of an advance tax on life insurance premium which exceed Rs200,000 per annum.
Mr Javed believes that, although for non-filers, the new measure would drive away small savers, having an adverse impact on the penetration of life insurance in Pakistan, which already is a dismal 0.51pc of the GDP. Life insurance penetration in neighbouring countries such as Bangladesh is 1pc and India 4pc, while in the developed world the penetration goes beyond 10-15pc of the country’s GDP.
The other disconcerting step for insurance companies is the clamping of a uniform corporate tax rate of 31pc on all sources of income; a departure from different tax rates that were applicable for profit on the underwriting business; and considerable lower rates for other sources of income such as dividends and capital gains.
As insurance companies derive much of their income from the investment of surplus funds, the overall effective tax rate had been significantly lower when compared to the current measure; one which will dent the bottom lines of insurance companies. To further add to the burden, the Sindh Revenue Board has withdrawn its earlier exemption and imposed a sales tax on life and health insurance, treating them as ‘services’.
At the ceremony held on Sept 19 by the Pakistan Stock Exchange, Jubilee Life bagged the award of one of the Top 25 Companies for 2014.
For the latest released financial results for the half-year ended June 30, the company wrote gross premium revenue amounting to Rs17.6bn, which was 22pc higher than the premium of Rs14.4bn for the corresponding half year of the previous year.
The combined revenue account of all classes yielded a surplus of Rs1.54bn during the half year, representing growth of 30pc over the same period last year.
The profit after tax for the latest half year amounted to Rs808m, which was 20pc higher than PAT at Rs674m at the same time a year ago. The board of directors have declared an interim cash dividend at Rs3 per share for the year to end on Dec 31.