Non-life insurance sector had to face a 32 per cent decline

In Pakistan, Non-life insurance sector had to face a 32 per cent decline in profits during 3rd quarter of 2017 mainly because of sharp decline in investment income.

A research report of Topiline Research said profitability was down 32pc to Rs1.9 billion due to worst response of equity market during the same period.

“Investment income of the sector that remains a major contributor to sector’s profitability was down by 54pc year-on-year basis to Rs1bn in 3rd quarter 2017,” the report said.

Major contributor to this decline was Adamjee Insurance as its investment income was down 50pc to Rs725 million as capital gains on equities dropped to Rs311m compared to Rs934m in same period last year. The KSE-100 index is so far down 15pc in 2017.

Pakistan Insurance Industry: An Overview

There are two types of insurance business in Pakistan: life insurance and general insurance. Life insurance business is concentrated in two major areas: individual and group life insurance.

Individual life insurance has greatest share in the life insurance business (i.e.79%). Both  individual and group life insurance constitutes about 99% of total life insurance business in the  country. Other types of life insurance products like annuity plan, pension plan, children  education plan and accident & health insurance are not much popular and have negligible share  of about 1% share in total life insurance business (IAP, 2006).

Historically, life insurance business is dominant by state owned company in Pakistan. State Life  Insurance Corporation (SLIC) of Pakistan is the only state owned company in the country that  was created from the consolidation of 41 insurance companies during the process of  nationalization in the early 1970s (SBP Report, 2005). Since then, SLIC has continued to remain  a dominant insurance company in the country and contains 76% of the total life insurance  business in 2005 (IAP, 2006).

Contrary to life insurance sector, general insurance sector is largely dominated by private  companies. National Insurance Corporation Limited (NICL) constitutes 14% share of total general insurance. The business is highly skewed towards few private companies that account for 82% share of general insurance as seen in the chart above. Among  these private companies, there are top ten companies that account for about 80% share of total  private business (SECP, 2007). Among these ten companies, two companies i.e. EFU General Insurance Ltd. and Adamjee Insurance Company constitute about 67% share of total private  business.