Sagarmatha Insurance: Financial Analysis Based On Recent Performance

June 27, 2019 | Investopaper

Sagarmatha Insurance Company (SIC) is one of the leading non-life insurance companies of Nepal. It is the first joint-venture insurance company in Nepal. The company has a wide network of 80 branches and an additional extension counter all over Nepal. The company is going to organize its 22nd Annual General Meeting on Ashad 13, 2076. The meeting will take place in Amrapali Banquet, Bhatbhateni.

Sagarmatha Insurance (SIC) has shown a decent performance in the F.Y. 2074/75. In case you missed, here are the major financial highlights of Sagarmatha Insurance in 2074/75.

Growth of Premium by 30.44%

Sagarmatha Insurance premium collection increased by 30.44 percent in the F.Y. 2074/75. The company collected a total premium of Rs. 183.79 crores in a year. This is 30.44 percent higher than the premium collection of the previous year. In F.Y. 2073/74, Sagarmatha Insurance premium collection stood at Rs. 140.91 crores.

Motor Insurance contributed to almost 45 percent of the total premium collection. SIC collected Rs. 82.08 crores from the motor insurance premium. The motor insurance premium grew by 36 percent. Likewise, engineering insurance showed the highest growth rate in premium. Premium from an engineering insurance business climbed by 60 percent. Similarly, Fire Insurance remained as the second to the motor insurance in terms of premium collection amount. The premium from Fire Insurance stands at Rs. 46.76 crores.

The total premium generated by Sagarmatha Insurance from its different types of insurance products is shown in the table below:

S.N.	Type of Insurance	F.Y. 2074/75 (Rs. ‘in crores’)	F.Y. 2073/74 (Rs. ‘in crores’)	Percent change
1	Fire Insurance	46.76	42.42	10.25
2	Marine Insurance	14.68	10.51	39.65
3	Motor Insurance	82.08	60.19	36.37
4	Engineering Insurance	23.66	14.76	60.31
5	Miscellaneous Insurance	13.92	10.72	29.86
6	Cattle and Agriculture Insurance	2.7	2.09	29.24
7	Aviation Insurance	0	0.23	-100
8	Micro Insurance	0	0	0

	TOTAL PREMIUM	183.79	140.91	30.44

Claim Settlement of Rs. 118 crores

Sagarmatha Insurance Company paid a total claim of Rs. 118 crores in F.Y. 2074/75. This is 7.36 percent less than that of the previous year. Last year, the total claim stood at Rs. 127.05 crores. The decline in claim amount is due to the huge reduction in the fire insurance claim. The claim on fire insurance declined by 35 percent to Rs. 50.19 crores. It was 76.95 crores in F.Y. 2073/74. Motor insurance business showed the highest growth in claims payment. Motor insurance claim increased by 54 percent to Rs. 44.25 crores. Which was only Rs 28.73 crores in the previous year.

The claim settlement by Sagarmatha Insurance based on different types of insurance products is shown in the table below:

S.N.	Type of Insurance	F.Y. 2074/75 (Rs. ‘in crores’)	F.Y. 2073/74 (Rs. ‘in crores’)	Percent change
1	Fire Insurance	50.19	76.95	-34.78
2	Marine Insurance	3.52	2.71	29.66
3	Motor Insurance	44.25	28.73	53.99
4	Engineering Insurance	12.91	12.46	3.64
5	Miscellaneous Insurance	4.11	2.76	49
6	Cattle and Agriculture Insurance	2.73	2.2	23.85
7	Aviation Insurance	0	1.24	-100
8	Micro Insurance	0	0	0

	TOTAL CLAIMS PAID	117.7	127.05	-7.36

Growth of Net Profit by 26%

The net profit of Sagarmatha Insurance grew by 26 percent in F.Y. 2074/75. The company earned a net profit of Rs. 34.78 crores, which is 26 percent higher than the previous year. Last year, the net profit stood at Rs. 27.62 crores. The rise in net profit is due to the increase in net premium and investment income.

Dividend declaration by Sagarmatha Insurance: 86 percent bonus share

Sagarmatha Insurance declared a massive dividend this year. The company announced an 86 percent bonus share to the shareholders. This is the highest dividend announced by the insurance company this year. The dividend is worth Rs. 46.29 crores. Shareholders should pay the tax for the bonus share. After the bonus share adjustment in the capital, Sagarmatha’s paid-up capital will rise to Rs. 100.12 crores.

Sagarmatha Insurance: General Insurance Company of the Year 2019

Sagarmatha Insurance Company Limited won the General Insurance Company of the Year 2019 award. It was provided in Emerging Asia Insurance Awards organized by the India Chamber of Commerce. Last year, Sagarmatha had won Product Innovation in General Insurance Awards 2018.

Financial Performance of Sagarmatha Insurance in F.Y. 2074/75

In the F.Y. 2074/75, Sagarmatha Insurance showed good growth in its performance as compared to the previous year. While the paid-up capital remained constant, the reserve grew by 143 percent to Rs. 52.98 crores. Likewise, the total investment (long term and short term) amount increased by 37 percent to Rs. 179.37 crores.

The company’s premium collection surged by 30 percent to Rs. 183.79 crores. In addition, the net premium grew by 36 percent to Rs. 86.48 crores. However, the net claim also increased by 20 percent during this period. Sagarmatha Insurance paid a net claim of Rs. 44.39 crores in 2074/75. With the rise in net premium, the company’s profit climbed by 25.92 percent to Rs. 34.78 crores.

The growth in net profit with constant capital has pushed the Earnings Per Share (EPS) up by 26 percent.EPS of Sagarmatha insurance stands at Rs. 64.61. Likewise, the net-worth per share of SIC has grown by 27 percent to Rs. 304.24.

The comparative performance of Sagarmatha Insurance in F.Y 2074/75 and F.Y. 2073/74 is shown in the table below:

Headings	Ashad end, 2075	Ashad end, 2074	Percent Change
Paid-up capital (Rs. ‘crores’)	53.83	53.83	0.00
Reserve & Surplus (Rs. ‘crores’)	52.98	21.83	142.69
Insurance Fund (Rs. ‘crores’)	48.88	48.88	0.00
Total Investment (Rs. ‘crores’)	179.37	130.64	37.30
Total Premium (Rs. ‘crores’)	183.79	140.91	30.43
Net Premium (Rs. ‘crores’)	86.48	63.81	35.53
Net Claim(Rs. ‘crores’)	44.39	37.02	19.91
Net Profit (Rs. ‘Crores’)	34.78	27.62	25.92
Earnings Per Share (Rs.)	64.61	51.31	25.92
Net-worth Per Share (Rs.)	304.24	239.9	26.82

Sagarmatha Insurance Financial Highlights: Third Quarter, F.Y. 2075/76

Paid-up capital and Reserve & Surplus

In the third quarter of the current fiscal year 2075/76, Sagarmatha Insurance has maintained a stable growth rate. Apart from the net profit, the growth in other financial indicators looks satisfactory. As per the unaudited report, reserve and surplus have grown by 80 percent to Rs. 69.98 crores. The paid-up capital and insurance fund remain constant. However, after the issue of the percent bonus share, the paid-up capital will cross Rs. 100 crores.

Premium collection and Investment

Similarly, Sagarmatha Insurance has a total investment of Rs. 238.68 crores until the third quarter. This is 42 percent higher than the corresponding quarter of the previous year. The company has collected a total premium of Rs. 158.95 crores in the first 9 months of this fiscal year. The total premium has grown by 22 percent. Likewise, the net premium has increased by 27 percent to Rs. 83.61 crores.

Claims and provision

Looking at the claims, Sagarmatha Insurance has paid a net claim of Rs. 40.40 crores until the third quarter. This is the rise of 42 percent from the previous year’s third quarter. In addition, the total outstanding claims have also grown by 24 percent to Rs. 88.40 crores. However, the company has maintained Rs. 92.86 crores in provision. This provision is for total outstanding claims and risks associated with unlimited loss.

Profit and Ratios

Until the third quarter, Sagarmatha Insurance has made a profit of Rs. 17.19, a rise of 1 percent only. Due to slow profit growth, Earnings Per Share (EPS) has remained constant at Rs. 42.58 crores. EPS is likely to increase in the fourth quarter as is seen in the case of insurance companies. Likewise, Net-worth Per Share has improved by 24 percent and stands at Rs. 335.78 crores.

Note: EPS and net-worth will decline after the adjustment of the bonus share.

The performance of Sagarmatha Insurance until the third quarter of F.Y. 2075/76 is shown in the table below:

Headings	Third Quarter, 2075/76	Third Quarter 2074/75	Percent Change
Paid-up capital (Rs. ‘crores’)	53.83	53.83	0.00
Reserve & Surplus (Rs. ‘crores’)	69.98	38.84	80.18
Insurance Fund (Rs. ‘crores’)	48.88	48.88	0.00
Total Investment (Rs. ‘crores’)	238.68	167.64	42.38
Total Premium (Rs. ‘crores’)	158.95	130.05	22.22
Net Premium (Rs. ‘crores’)	83.61	65.75	27.16
Net Claim(Rs. ‘crores’)	40.40	28.44	42.05
Total Outstanding Claim (Rs. ‘crores’)	88.4	71.38	23.84
Total provision for outstanding claims and unlimited risks (Rs. ‘crores’)	92.86	81.32	14.19
Net Profit (Rs. ‘Crores’)	17.19	17.02	1.00
Earnings Per Share (Rs.)	42.58	42.16	1.00
Net-worth Per Share (Rs.)	335.78	271.5	23.68

Total Premium collection by Sagarmatha Insurance until Baisakh end, 2076

Sagarmatha Insurance has collected the total premium of Rs. 176.39 crores until Baisakh 31, 2076. This is the growth of 20.72 percent from the same period of the previous year. Last year, the company had collected the premium of Rs. 146.11 crores until the end of Baisakh. Out of the total premium, Motor insurance occupies the top spot with Rs. 88.77 crores in premium amount. This is more than 50 percent of the total premium amount. The premium from motor insurance has grown by 33 percent.

Likewise, Cattle and Agriculture insurance reported the highest growth rate in the premium collection. The premium has grown by 37.20 percent to Rs. 3.09 crores. Similarly, Fire insurance still remains as the second in the most premium collection. The premium collection from fire insurance has increased by 17.77 percent to Rs. 41.22 crores.

Sagarmatha Insurance has a target to collect Rs. 215 crores in the insurance premium. Looking at the stats, the target is achievable.

S.N.	Type of Insurance	F.Y. 2074/75 (Rs. ‘in crores’)	F.Y. 2073/74 (Rs. ‘in crores’)	Percent change
1	Fire Insurance	41.22	35	17.77
2	Marine Insurance	14.95	11.99	24.67
3	Motor Insurance	88.77	66.71	33.08
4	Engineering Insurance	15.3	18.97	-19.38
5	Miscellaneous Insurance	13.06	11.19	16.71
6	Cattle and Agriculture Insurance	3.09	2.25	37.2
7	Aviation Insurance	0	0	0
8	Micro Insurance	0	0	0

	TOTAL PREMIUM	176.39	146.11	20.72