Nepal Life Insurance Company: Financial Analysis in 2076
June 23, 2019 | Investopaper
The financial analysis of Nepal Life Insurance Company as performed by Investopaper team is as follows:
Introduction of Nepal Life Insurance
Nepal Life Insurance Company Limited is the leading company in the life insurance sector of Nepal. It is the top life insurance company of Nepal with the highest paid-up capital of Rs. 5.49 Arba and total premium collection of Rs. 15.37 Arba (based on Q3 report of F.Y. 2075/76). The company occupies a 32 percent market share in the total premium collection in the life insurance sector.
Nepal Life Insurance was established on Baisakh 21, 2058 ( April 5, 2001). It was established under the Company Act 2053 and Insurance Act 2049 as a public limited company. It is promoted by a well-known businessman and business houses of Nepal.
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Board of directors and the Management team of Nepal Life Insurance
The board of directors of Nepal Life Insurance Company includes:
| S.N | Board Members | Post |
| 1 | Mr. Govind Lal Sanghai | Chairman |
| 2 | Mr. Ram Avatar Agrawal | Director |
| 3 | Mr. Kamlesh Kumar Agrawal | Director |
| 4 | Mr. Prakash Mundara | Director |
| 5 | Mr. Vivek Agrawal | Director |
| 6 | Mr. Bimal Prasad Dhakal | Director |
| 7 | Mrs. Parul Dhakal | Director |
The management team of Nepal Life Insurance is led by Mr. Vivek Jha. It includes:
| S.N | Management Team | Post |
| 1 | Mr. Vivek Jha | Chief Executive Officer |
| 2 | Mr. Sushil Kumar Chaudhary | Deputy CEO |
| 3 | Mr. Santosh Prashai | Deputy CEO |
| 4 | Mr. Om Prakash Pudasaini | Act. Assistant General Manager |
| 5 | Mr. Digvijay Singhal | Assistant General Manager |
Related: List of Insurance Companies In Nepal
Shareholders of Nepal Life Insurance
The promoters of the company possess 70 percent of NLIC while the general public possesses 30 percent of the company. The major shareholders include:
| Shareholders | Percentage (%) |
| Subhash Chandra Sanghai | 7.70 |
| Anuj Agrawal | 6.02 |
| Govind Lal Sanghai | 5.37 |
| Purushottam Lal Sanghai | 4.21 |
| Pawan Kuwar Golyan | 4.12 |
| Bishal Agrawal | 3.86 |
| Ram Chandra Sanghai | 3.85 |
| Bashudev Golyan | 3.26 |
| Kabita Sanghai | 2.35 |
| Sushil Gupta | 1.42 |
| Tulsi Ram Agrawal | 1.22 |
| Sanchita Agrawal | 1.22 |
| Nikunj Agrawal | 1.22 |
| Manju Agrawal | 1.22 |
Financial Analysis of Nepal Life Insurance: Last 5 Years
Paid-up Capital and Shareholders’ Fund of Nepal Life Insurance
Nepal Life Insurance is the largest life insurance company in Nepal in terms of paid-up capital and shareholders funds. Currently, the company has paid-up capital of Rs. 5.49 Arba until the third quarter of 2075/76. Nepal Life Insurance is increasing the capital steadily with the issue of bonus shares. In F.Y. 2070/71, the paid-up capital stood at Rs. 1.08 Arba which rose to Rs. 4.40 Arba until the end of F.Y. 2074/75. The capital has increased more than 5 times during the last 5 years period.
Nepal Life insurance is financially strong with more than Rs. 10 Arba of shareholders’ fund until the third quarter of F.Y. 2075/76. With the issue of Further Public Offering (FPO) at Rs. 1425 per share in the fiscal year 2073/74, the company collected Rs. 4.41 Arba. As a result, the shareholders’ funds drastically increased from Rs. 3.78 Arba in 2072/73 to Rs. 9.22 Arba in 2073/74.
Related: Current Status Of Insurance Business In Nepal
The paid-up capital and Shareholders’ Fund of Nepal Life Insurance in the last 5 years are shown in the table below:
| Fiscal Year | Paid-up capital (Rs. ‘ Arba’) | Shareholders Fund(Rs. ‘ Arba’) |
| 2070/71 | 1.08 | 1.77 |
| 2071/72 | 1.73 | 2.22 |
| 2072/73 | 2.17 | 3.78 |
| 2073/74 | 3.1 | 9.22 |
| 2074/75 | 4.4 | 9.77 |
Life Insurance Fund of Nepal Life Insurance
Nepal Life Insurance Company also has the highest life insurance fund among the companies in the life insurance sector. The company has gradually increased the life insurance fund from Rs. 17.05 Arba in 2070/71 to Rs. 49.60 Arba in 2074/75. Likewise, with the rise in the premium collection, the life insurance fund of the company has improved at a rapid rate. As of the third quarter of F.Y. 2075/76, the life insurance fund of NLIC stands at Rs. 59.46 Arba.
The Life Insurance Fund of Nepal Life Insurance Company in the last five years is shown in the table below:
| Fiscal Year | Life Insurance Fund (Rs. ‘ Arba’) |
| 2070/71 | 17.05 |
| 2071/72 | 23.29 |
| 2072/73 | 31.41 |
| 2073/74 | 39.45 |
| 2074/75 | 49.60 |
Investments and Policy Loans
Nepal life Insurance has a total investment (including long term + short term investment) of Rs. 58.95 Arba at the end of F.Y. 2074/75. With the rise in shareholders’ fund and life insurance fund, the investment amount has also increased at a rapid rate. As of F.Y. 2070/71, the total investment amounted to Rs. 16.59 Arba.
Likewise, Nepal Life Insurance has also increased its loans on the policies gradually. The amount of policy loan which stood at Rs. 1.45 Arba in F.Y. 2070/71 has grown to Rs. 8.42 Arba at the end of F.Y. 2074/75.
The investments and loans against policy made by Nepal Life Insurance Company in the last five years are shown in the table below:
| Fiscal Year | Investments (Rs. ‘ Arba’) | Policy Loan (Rs. ‘ Arba’) |
| 2070/71 | 16.59 | 1.45 |
| 2071/72 | 21.97 | 2.11 |
| 2072/73 | 34.69 | 3.82 |
| 2073/74 | 48.22 | 5.89 |
| 2074/75 | 58.95 | 8.42 |
Total Premium Income (TPI) and First Premium Income (FPI)
Nepal Life Insurance Company has the highest market share of 32 percent in terms of premium collection in the life insurance sector. The company is leading the industry in the total premium income and first-year premium income. The premium collection of Nepal Life Insurance has grown from Rs. 5.68 Arba in the F.Y. 2070/71 to Rs. 16.18 Arba in the F.Y. 2074/75. Based on the latest performance report of the company, Nepal Life has already collected the total premium of Rs. 15.37 Arba until the third quarter of F.Y. 2075/76.
Likewise, the first premium income has increased from Rs. 2.71 Arba in F.Y. 2070/71 to Rs. 5.95 Arba in F.Y. 2074/75. The total premium income and first premium income of Nepal Life Insurance Company in the last 5 years are shown in the table below:
| Fiscal Year | Total Premium Income (Rs. ‘ Arba’) | First Premium Income (Rs. ‘ Arba’) |
| 2070/71 | 5.68 | 2.71 |
| 2071/72 | 8.09 | 3.89 |
| 2072/73 | 10.26 | 3.85 |
| 2073/74 | 12.22 | 4.21 |
| 2074/75 | 16.18 | 5.95 |
Net Profit and Earnings Per Share (EPS) of Nepal Life Insurance
In the last five years period, the net profit of Nepal life insurance has increased by 81 percent. The net profit which stood at Rs. 61.41 crores in F.Y. 2070/71 has inclined to Rs. 111.28 crores in the F.Y. 2074/75. The Earnings Per Share (EPS) of the company has declined sharply into half in the last five years. This is due to the huge rise in the capital as compared to net profit. The net profit has almost doubled. However, the capital has increased by four-fold from F.Y. 2070/71 to F.Y. 2074/75.
The net profit and Earnings Per Share (EPS) of NLIC in the last 5 fiscal years are shown in the table below:
| Fiscal Year | Net Profit (Rs. ‘ crores’) | Earnings Per Share (Rs.) |
| 2070/71 | 61.41 | 56.67 |
| 2071/72 | 52.76 | 30.42 |
| 2072/73 | 90.66 | 41.83 |
| 2073/74 | 100.46 | 32.44 |
| 2074/75 | 111.28 | 25.31 |
Total Management Expenses and Solvency Margin
NLIC has kept the total management expenses at 8-11 percent of total premium income (TPI) during the last five years period. As per the directives by the Nepal Insurance Board, the insurance company is able to maintain its management expenses. Likewise, NLIC has maintained the solvency margin between 2.74 to 3.50 times in this period. Generally, a solvency margin greater than 1.5 times is considered good for the life insurance companies. The solvency margin is the excess of assets over liabilities of the insurance company.
The solvency margin and total management expenses to the total premium income of NLIC in the last five years period are shown in the table below:
| Fiscal Year | Total Mgmt Expenses to TPI (%) | Solvency Margin |
| 2070/71 | 8 | 3 |
| 2071/72 | 11 | 3.17 |
| 2072/73 | 9 | 2.74 |
| 2073/74 | 11 | 3.5 |
| 2074/75 | 9 | 3.13 |
Dividend History of Nepal Life Insurance
NLIC has provided satisfactory dividends to the shareholders. The company has distributed the dividend ranging from 26.31 percent to 70.53 percent in the past five years. The dividend payout of the company is more focused on the bonus share. NLIC has distributed 25 percent or more bonus share in each of the last five fiscal years.
The bonus share of F.Y. 2073/74 (42 percent) and 2074/75 (25 percent) is distributed through the reserve accumulated from the issue of the FPO. The company made a total collection of Rs. 4.41 Arba from the FPO, out of which Rs. 4.10 Arba is kept in the reserve. This amount can be distributed to the shareholders through the issue of bonus share only. Out of Rs. 4.10 Arba, Rs. 1.30 Arba of bonus share in 2073/74 and Rs. 1.10 Arba of bonus share in 2074/75 is already distributed. The remaining amount of Rs. 1.70 Arba will be distributed in the coming 1-2 years period. So, we can expect a healthy dividend including a bonus share for the next 1-2 years. After that, NLIC has to drastically improve its profit in order to sustain the current dividend rates.
The dividend provided by Nepal life insurance in the last five years period is shown in the table below:
| Fiscal Year | Bonus share | Cash dividend | Total dividend |
| 2070/71 | 60 | 8 | 68 |
| 2071/72 | 25 | 1.31 | 26.31 |
| 2072/73 | 25 | 1.31 | 26.31 |
| 2073/74 | 42 | 28.5 | 70.53 |
| 2074/75 | 25 | 23.5 | 48.5 |
Market Price and Market Capitalization of Nepal Life Insurance
NLIC has remained as a hot stock among Nepalese investors for several years. It was one of the highest-priced stocks in the Nepalese Share market. The investors have valued NLIC stock to above Rs. 4,000 per share in F.Y. 2070/71 and 2072/73. At the end of the F.Y. 2074/75, the market price of NLIC was Rs. 1,050. At that price, the market capitalization of Nepal Life Insurance is Rs. 46.20 Arba. In F.Y. 2072/73, NLIC had the highest market capitalization of Rs. 86.93 Arba.
The market price per share and the market capitalization of NLIC at different fiscal years are shown in the table below:
| Fiscal Year | Market Price Per Share (Rs.) | Market Capitalization (Rs. ‘Arba’) |
| 2070/71 | 4,351 | 46.99 |
| 2071/72 | 2,886 | 49.93 |
| 2072/73 | 4,006 | 86.93 |
| 2073/74 | 2,148 | 66.59 |
| 2074/75 | 1,050 | 46.20 |
Financial Analysis of Nepal Life Insurance: Third Quarter, 2075/76
Premium and Claim
In the third quarter of this fiscal year (2075/76), Nepal Life Insurance has shown decent growth in premium collection. The net premium collection in the 9 months has increased by 42 percent as compared to the corresponding quarter of the previous year. The net premium of NLIC until the third quarter is Rs. 15.19 Arba which was 10.70 Arba in the corresponding quarter of the previous year. However, with the rise in net premium, the net claim has grown massively by 78 percent. The Net claim until the third quarter is Rs. 6.57 Arba which was Rs. 3.70 Arba a year ago.
Paid-up Capital, Reserve and Life Insurance fund
The paid-up capital has remained constant at Rs. 4.40 Arba in the third quarter. However, if we adjust the 25 percent bonus share, the actual paid-up capital is Rs. 5.50 Arba. Reserve and Surplus have grown by 61 percent to Rs. 5.61 Arba. Likewise, Life Insurance Fund has grown to Rs. 59.46 Arba, a 25 percent rise from the corresponding quarter of the previous year. Nepal Life Insurance has increased its savings by 25 percent to Rs. 10.44 Arba.
Similarly, the total investments of NLIC have grown to Rs. 56 Arba. The net profit has increased marginally by 7 percent to Rs. 46.72 crores. This has improved the EPS to Rs. 14.17. Net-worth per share stands at Rs. 237.56, up by 33 percent.
| Headings | 3rd Qtr, 2075/76 | 3rd Qtr, 2074/75 | Percent Change |
| Paid up capital (Rs. ‘Arba’) | 4.40 | 4.40 | 0.00 |
| Reserve & Surplus (Rs. ‘crores’) | 5.61 | 3.48 | 61.21 |
| Life Insurance Fund (Rs. ‘Arba’) | 59.46 | 47.68 | 24.71 |
| Net Premium (Rs. ‘Arba’) | 15.19 | 10.70 | 41.96 |
| Net Claim (Rs. ‘Arba’) | 6.57 | 3.70 | 77.57 |
| Savings (Rs. ‘Arba’) | 10.44 | 8.36 | 24.88 |
| Total Investments (Rs. ‘Arba’) | 56.05 | 47.06 | 19.10 |
| Net Profit (Rs. ‘Crores’) | 46.72 | 43.58 | 7.21 |
| Earnings Per Share (Rs.) | 14.17 | 13.21 | 7.27 |
| Net-worth Per Share (Rs.) | 237.56 | 179.09 | 32.65 |
Conclusion
Nepal Life Insurance Company remains as a strong leader in the life insurance business despite the entry of ten new life insurance companies. The company is able to maintain its market share which is almost one-third of the industry. NLIC has shown a decent performance growth in the third quarter of this fiscal year. Despite the huge volume of premium last year and new market competitors, growing the premium by 42 percent is impressive. With the capable management, the company is likely to maintain its lead in the life insurance business of Nepal in the coming years also.
For the investors, the decision to invest or not in the shares of NLIC is entirely yours. We provide the facts. You are entitled to make your own decisions.
(Investments are subject to market risks and investors are advised to do personal homework before making any investment decision. This material is just a guideline for the investors to do further investigations)
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