State Life Insurance Corporation of Pakistan

& Insurance Sector of Pakistan

Presented by: Muhammad Ullah

Class: MBA (B&F)

Source: Mohiuddin Aazam The Dawn, March 22, 2010

S.M.Abbas Zaidi Pakistan & Gulf Economist April 19, 2010. vol: XXIX

Summary

Why I select this topic?

The most significant measure of an industry or an activity is its

contribution towards employment generation, strengthening linkages

with other sectors of the economy in promoting growth and stability,

and creating a sizeable impact on the national income of a country. In

developed countries, the Insurance industry is a necessary part of daily life

and serves all the above mentioned purposes.

INTRODUCTION

Insurance:

The equitable transfer of the risk of a loss, from one entity to another, in exchange for payment.

Parties involved

Insurer: the company selling the insurance

Insured or Policyholder: the person or entity buying the insurance policy

Insurance sector of Pakistan

History:

77 foreign insurance companies were dominating the Pakistan market post partition when the strength of local insurers was only seven. In 1952 Government established Pakistan Insurance Corporation to promote the local insurance industry and number of local insurance companies increased to 60 while number of foreign companies reduced to seven. In 1976 National Insurance Corporation (NIC) was formed, with the purpose of undertaking General Insurance business relating to any public property.

T h e S t a t e L i f e I n s u r a n c e C o r p o r a t i o n o f P a k i s t a n

( t h e c o r p o r a t i o n ) w a s i n c o r p o r a t e d i n P a k i s t a n o n

N o v e m b e r 1 , 1 9 7 2 u n d e r t h e L i f e I n s u r a n c e

N a t i o n a l i z a t i o n O r d e r, 1 9 7 2 . T h e c o r p o r a t i o n ' s h e a d

o f f i c e i s l o c a t e d a t K a r a c h i , P a k i s t a n . T h e

c o r p o r a t i o n i s e n g a g e d i n t h e l i f e i n s u r a n c e

b u s i n e s s . I t i s t h e b i g g e s t l i f e i n s u r a n c e

c o r p o r a t i o n i n P a k i s t a n .

State Life Insurance Corporation of Pakistan

Reduction up to 33% in the premiums on the past and potential life policies for the benefit of policyholders

The paid-up capital increased from Rs.10mn in 1972 to RS.900mn in 2007.

The premium income increased from Rs.0.317bn in 1972 to RS.18.717bn in 2007.

Investment income including rental income increased from Rs.0.317bn in 1972 to Rs.17.505bn in 2007.

Total statutory fund of State Life stood at Rs.156.7373bn in 2007 as against Rs.1.494bn in 1972

Major Achievements

Investment Income as at 31-12-2008 (Rs in million)

Particulars Portfolio

Govt Securities 13,084

TFCs/Approved Govt Securities 149

Equities 2,523

Bank Deposits 694

Investment properties 342

Policy Loans 1,308

Other Income 1,086

Major Achievements …continued

During 2008, SLIC of Pakistan performed exceptionally well in its core business operation despite of overall economic recession.

Particulars 2007 (Rs) 2008 (Rs) Increase

Total income 36,222mln 41,830mln 15.5%

Management expenses 6,266mln 8,000ml 27.67%

Expenses ratio 33.4% 35.0% 0.6%

Payment to policyholders 10,783mln 12,779mln 18.5%

Statutory funds value 156,737mln177,459bln

13.22%

Financial performance

Source of income 2007 (Rs) 2008 (Rs) Increase

individual life policies 159mln 199mln 27.89%

Group life policies 2,822 3,,564 26.29%

Real Estate 316mln 342mln 8.2%

Investment 17,187mln 18,791mln 9.33%

Business portfolio wise performance

International Perspective of Pakistan insurance industry

Percentage of the GDP:

Insurance penetration rate or insurance premium as percentage of the GDP is only 0.8 per cent—the lowest among comparable countries.

Country Penetration Rate Global Ranking

India 4.6% 31st

Malaysia 4.3% 33rd

China 3.3% 43rd

Sri Lanka 1.4% 71th

Philippines 1.4% 73st

Indonesia 1.3% 75th

Iran 1.1% 78%

Bangladesh 0.9% 80th

Pakistan 0.8% 83rd

Saudi Arabia 0.6% 85th

Insurance premium as percentage of the GDP

In terms of the value of insurance premiums:

Pakistan is a little better than Bangladesh and Sri Lanka but far behind many other countries.

International Perspective …continued

Country Global Ranking Premium value in (2008 )

Share of World Market in 2008

China 6th $140.818bln 3.30%

India 14th $56.19bln 1.23%

Malaysia 34th $9.335bln 0.22%

Indonesia 39th $6.903bln 0.16%

Iran 47th $4.243bln 0.10%

Saudi Arabia 50th $3.070bln 0.07%

Philippines 54th $2.299bln 0.05%

Pakistan 63rd $1.133bln 0.03%

Bangladesh 75th $717mln 0.02%

Sri Lanka 78th $623mln 0.01%

Value of Insurance Premiums

Insurance penetration in rural areas to gain the customers.

Insurance scheme for non-borrowing small formers. Agriculture is a primary threat that is not insured

Bancassurance: Banks should provide insurance services

E-Commerce: New technology should used for selling insurance. In Pakistan a couple of

Insurers are able to provide quotes through their websites.

The future: The future looks very positive for the non-life insurance market in Pakistan.

Although there are many challenges ahead, the low penetration in the non-life sector, and strong economic growth are two factors likely to lead to significant premium growth in the years

Opinions…

The existence of a healthy insurance sector is an important condition for the well being of the population and for sustainable economic growth.

The development of this sector should become a priority of governmental economic and social policy. In order to achieve this goal, we I have two recommendations. First, the supervisory body for insurance activity (the “State Commission”) should be provided by the government and by the insurance companies with significantly higher financial resources in order to be able to fulfill its extremely important job in a proper way. Second, consumer protection should be improved through the creation of a neutral arbitrator.

Conclusion & Recommendations

Thank You