LAHORE - Private life insurers continued their impressive growth trajectory, recording net premium growth of 31 per cent YoY in 9MCY12 to Rs19.8 billion, excluding the public sector entity ‘State Life Insurance’. Investment income almost doubled to Rs6.9 billion (up 90 per cent YoY thanks to healthy equity market performance and lowering interest rates).

Experts said that where expanding insurance penetration and higher investment income contributed significantly to profitability, the sector realized further upside from 1pps drop in claim ratio to 23per cent. These took net income up by astounding 66per cent YoY to Rs1.2 billion. Among listed insurers, Jubilee Life (JLICL) remained the most inspiring performer, with 43 per cent growth in net premiums to Rs7.7 billion, roughly mirroring the market share of the leader.

American Life (ALICO) has attracted acquisition interest from its three major competitors in recent months, all keen to capture more of the exploding life insurance pie. To illustrate, the sector has shown net premium CAGR of 29 per cent for the last five -years. Still life insurance penetration in Pakistan is one of the lowest in the world at mere 0.3 per cent of GDP as of CY11 end.

In complete contrast, non life insurance business, as represented by the four largest players controlling 70 per cent of the market, grew by a meager 3per cent YoY in 9MCY12 as gross premiums clocked in at Rs23.8 billion for these players. The higher premium collection failed to materialize on the profitability, as the companies adopted a safer approach and ceded 50 per cent of their revenue as reinsurance, compared to reinsurance ratio of 45per cent in 9MCY11. This led to 7per cent YoY decline in net premiums to Rs11.8b for these players. Accordingly, underwriting result fell by 6per cent YoY to Rs923m as combined ratio deteriorated by 1pps to 92per cent.

Investment income, on the other hand, rose by 46 per cent YoY to Rs 2.3b as the equity market (gauged through KSE100 index) gained 42per cent in 9MCY12 and declining nterest rates led to value appreciation of fixed income portfolios. This directly translated into impressive 152per cent higher YoY PAT at RS3.3bn.

Experts believe that life insurance business promises immense potential amid low insurance penetration in Pakistan. In contrast, Non-life insurance continues to be under duress from below par GDP growth, low manufacturing activity in the wake of energy shortages and declining investment in physical capital.