report fin 303
TRANSCRIPT
A Report on
Rupali life Insurance Company
Report on
Prospect s of Life insurance organization Business in Bangladesh
Course Title : Banking and Insurance
Course Code : FIN 303
Program : BBA
Submitted To:
Mr. N.M. Zayed
Lecturer in Finance
Bangladesh University of Business and Technology
Submitted By:
Name ID:
Md. Humayun Kabi
14th Intake (Sec-01)
Program: BBA
Submission Date: 3nd January 2010
Bangladesh University of Business and Technology (BUBT)
Mirpur-2, Dhaka-1216
Introduction:
Meaning of Insurance
Insurance provides financial protection against a loss arising out of happening of an uncertain event. A person can avail this protection by paying premium to an insurance company.
A pool is created through contributions made by persons seeking to protect themselves from common risk. Premium is collected by insurance companies which also act as trustee to the pool. Any loss to the insured in case of happening of an uncertain event is paid out of this pool.
Insurance works on the basic principle of risk-sharing. A great advantage of insurance is that it spreads the risk of a few people over a large group of people exposed to risk of similar type.
Definition
Insurance is a contract between two parties whereby one party agrees to undertake the risk of another in exchange for consideration known as premium and promises to pay a fixed sum of money to the other party on happening of an uncertain event (death) or after the expiry of a certain period in case of life insurance or to indemnify the other party on happening of an uncertain event in case of general insurance.
The party bearing the risk is known as the 'insurer' or 'assurer' and the party whose risk is covered is known as the 'insured' or 'assured'.
Concept of Insurance / How Insurance Works
The concept behind insurance is that a group of people exposed to similar risk come together and make contributions towards formation of a pool of funds. In case a person actually suffers a loss on account of such risk, he is compensated out of the same pool of funds. Contribution to the pool is made by a group of people sharing common risks and collected by the insurance companies in the form of premiums.
A promise of compensation for specific potential future losses in exchange for a periodic payment. Insurance is designed to protect the financial well-being of an individual, company or other entity in the case of unexpected loss. Some forms of insurance are required by law, while others are optional. Agreeing to the terms of an insurance policy creates a contract between the insured and the insurer. In exchange for payments from the insured (called premiums), the insurer agrees to pay the policy holder a sum of money upon the occurrence of a specific event. In most cases, the policy holder pays part of the loss (called the deductible), and the insurer pays the rest. Examples include car insurance, health insurance, disability insurance, life insurance, and business insurance.
Literature review:
Types of insurance organization
1. Self-insurance: the plan by which an individual or concern sets up a private fund out of which to pay losses is termed self insurance.
2. Individual insurance: an individual like other business can perform the business of insurer provided he has sufficient resource and talent of insurance business.
3. Partnership: A partnership firm can also carry on the insurance business for the sake of profit.
4. Joint stock companies: The joint stock companies are those which are organized by the share holders who subscribes the necessary capital to start the business are formed for earning profit for the stock holders who are the real owners of the companies.
5. Mutual companies: the mutual companies were co-operative association formed for the purpose of effecting insurance on the property of its members.
6. Cooperative insurance organization: co-operative insurance organization is those concerns which are incorporated and registered under co-operative societies Act.
7. Lloyd’s association: Lloyd’s association is one of the greatest insurance institutions in the world.
8. State insurance: the government of a nation, sometimes, owns the insurance and runs the business for the benefit of the public.
Rupali Insurance company ltd:
Rupali Life Insurance Company Limited (RLIC) was established in 2000. Today Rupali Life, with its Head Office in Dhaka operates 488 Agency Offices throughout Bangladesh. Rupali Life Insurance Company Limited offers a system to replace the loss of income that occurs when someone dies (usually the person who produces the majority of income in a family situation). It is a contract between you as insured person and RLIC that is providing the insurance if our clients dies while the contract is in force, the Rupali Life Insurance Company Limited will pay a specified sum of money free from income tax "Cash benefits" to the person or persons beneficiaries or nominees. Their Life Insurance Plans do more that just replaces the loss of income that occurs after your date.
It should also provide money to cover the new costs that arise after your death funeral expenses, taxes, probate costs, the need for housekeepers, child care, and so on. And those cash benefits should provide for your families future needs as well, including education for your children and part of all of your spouse's retirement needs. In almost all the cases, your beneficiary can use the cash benefits in the way he or she sees fit, without restriction.
RLIC's policy of developing local talent to resource its operations has greatly contributed to its success in understanding, meeting and responding quickly to change customer needs and market conditions.
They are primarily staffed with local personnel who are constantly studying the needs of individuals and developing innovative products to the specific requirements of each district of Bangladesh. This long-standing approach is the foundation of our leadership, because we understand local market needs and conditions.
Local awareness typifies RLIC's previous history and continues to this day.
MISSION STATEMENT
Rupali Insurance company .Ltd. is committed to providing security and stability to share holders through, responsive professional service, dynamic products, and prudent ethical practice and respecting social values.
Abide by Shariah Principles in day -to day business affairs. Build dynamic, sound and professional management team Conduct business in a responsible manner Develop innovative products Enhance good governance Foster Quality Management System
VISION
To lead in the promotion of economic growth by providing the insuring public with secure, dynamic and professional services.
To become the best private life insurance company in Bangladesh and in South-East Asia as a whole by maintaining utmost integrity, responsibility and transparency.
Historical Background:
Insurance is nothing but a system of accepting risk of the Insured by the Insurer having consideration in the form of premium to safeguard his interest from any accident. In case of big risk the Insurer needs to transfer the risk to re-insurer. Re-Insurance means
spreading of risk of one onto the shoulder of many. In brief, Re-Insurance means Insurance of Insurance. Whilst it becomes somewhat impossible for a man to bear by himself 100% loss to his own property or interest arising out of an unforeseen contingency, insurance is a method or process which distributes the burden of loss on number of persons within the group framed for this particular purpose. The concept of grouping together or risk sharing was in existence in very ancient times but gradually developed in its present state through a process of evolution to meet the growing needs of the people in the field of general business and industries.
With a view to catering to the growing demands of this type of service Rupali Insurance Company Limited emerged as an Incorporated Public Limited Company on 20 th June 1988 and started its operations. As such we have the pleasure to introduce ourselves as one of the leading Insurance Company of the Country in private sector fully owned by Bangladeshi entrepreneurs. It has already occupied a strong position amongst it's competitors and has made significant contribution in the field of Insurance Industry in the economy. The Chairman & Members of the Board of Directors are well-reputed business personalities and leading industrialists of the Country.
Under the prudent leadership and unstinted support from the Board of Directors Rupali Insurance Company diversified it's activities to include a wide range of Insurance Services with a net work of 42 branches in Bangladesh. It is a matter of pride that a man of great personality, well-reputed industrialist and Ex-President of Bangladesh Garment Manufacturers and Exporters Association (BGMEA) Mr. Mostafa Golam Quddus is the Chairman of the Board of Directors of the Company.
It is also worth mentioning that the Ex-President of Bangladesh Garment Manufacturers and Exporters Association (BGMEA) Mr. Kazi Maniruzzaman a leading industrialist and a man of reputation is one of the Directors of the Company.
We have the pleasure to add that Mr. M. Azizul Huq Former Inspector General of Police, Government of the People's Republic of Bangladesh & Former Advisor to the Caretaker Government of Bangladesh joined the Company as Management and Financial Consultant in 1998 after retirement from Government Service.
The Company is managed by a team of highly qualified and experienced professionals headed by the Managing Director Mr. P. K. Roy, FCA, and FCS having vast expertise and experience in the field of Insurance, Re-insurance and Financial Management to his credit.
Management organ gram:
ChairmanMOSTAFA GOLAM QUDDUS
Board of DirectorsMD. SHAMSUL HUDA JINNAT ALI MIANMOJIBUR RAHMAN RUNA HAIDERMD. NAZIM UDDIN FAZLUTUN NESSA
MD. ALI AHMED MOSTAFA QUAMRUS SOBHAN
MD. YUNUS MOSTAFA GOLAM AMRAN
K. M. FAROOKH MOSTAFA GOLAM SARWAR
MD.MIZANUR RAHMAN AFTAB AHMEDABU HENA MD. SIRAJUL HUQ
KAZI MANIRUZZAMAN FAUZIA QUAMRUN TANIA
Managing DirectorP.K. ROY, FCA ,FCS
AuditorsA Wahad & Co.
Chartered Accountants
Management and Financial ConsultantM. Azizul Huq
Former Inspector General of Police & Former Advisor of Caretaker Govt.
Republic of Bangladesh
Legal ConsultantRokanuddin Mahmud
Bar-at-Law
Products & service:
1. Marine Insurance:
The policies primarily aim at providing protection in respect of loss, damage or destruction to the subject matter of insurance i.e. Hull, Cargo and freight caused by perils of the seas or maritime perils like fire, theft, jettison, collision, contact, heavy weather, stranding/ foundering sinking, war perils and other perils.
a) Hull: This refers to the ship, that is to say, hull and machinery of the vessel. The ship is always at the risk of the perils of the seas and, therefore, the ship owner can insure it against probable loss as such. b) Cargo: This refers to goods or merchandises that are being carried from one place to another or are being imported or exported. Such goods or merchandise may be lost, damaged or destroyed by perils of the seas whilst in course of transit and therefore, the owner of goods can always insure against the probable losses.
c) Freight: This is the consideration payable to the ship owner in respect of carriage of goods by owner's ship. Sometimes the freight is prepaid when it is at the risk of the cargo owner and sometimes the freight is after-paid when it is at the risk of ship owner.
2. Non-Marine Insurance:
Non Marine Insurance can be classified into three parts viz-
a) Fire,
b) Motor &
c) Miscellaneous:-
Burglary or House Breaking Cash in Safe Cash in Counter Cash in Transit DOS (Deterioration of Stock) Insurance MBD (Machinery Break Down) Insurance EAR (Erection All Risk) Insurance CAR (Contractor All Risk) Insurance Boiler & Pressure Vessels Insurance Aviation Insurance CPM (Contractor Plant & Machinery) Fidelity Guarantee Insurance EEP (Electronic Equipment Insurance Policy
IAR (Industrial All Risk) Third Party Liability Overseas Medic aim Policy
Poultry Insurance Policy PPA (People Personal Accident) PA (Personal Accident) Air Travel Policy Exhibition Cancellation Policy
Thus we may say that the field of the Miscellaneous Insurance is being expanded and number of types is being increased day by day comprehensively. The reasons behind this are the extension of the field of insurance business in modern age and the increasing demand for it. Therefore, the speed and the nature of insurance business are being multiplied rapidly every day.
Mode of payment:
-Pay on the entire policy with one large payment
- The payment into monthly installments
This way you are free to choose paying off the whole policy amount upfront in a single payment or pay in installments every month as monthly payments. Monthly payments will; save you from the hassle of paying off in huge amount. It becomes manageable to pay back in easy installments which allow you to make smaller payment when your income is low, there is salary deduction or you have lost your job etc. Whatever may be the circumstances, you need to weigh the pros and cons before deciding to choose your payment plan. Be aware of the consequences if you don’t pay your policy on time. Your policy may be terminated and the entire amount you have paid so far will be nullified. This means you have no policy on hand and no refund of what was earlier paid
Description of Non-Marine Insurance:
Non Marine Insurance can be classified into three parts viz-
a) Fire,
b) Motor &
c) Miscellaneous.
a) Fire Insurance: All policies issued under the heading of Fire Insurance primarily aim at providing protection against financial losses arising out of the operation of fire or certain other specified perils. The subject matters of insurance are usually:
Building, Furniture, Fixture and Fittings, Plant and Machinery,Goods and Merchandise, Stocks of all kindsThe policies provide cover in respect of material loss or damage. However, policies are issued in the fire department in respect of consequential losses or loss of profits arising out of material loss. These policies are known as consequential loss insurance or loss of profit insurance. Thus the scope of fire insurance may be considered under two broad headings viz., i) Material loss insurance and ii) Consequential loss insurance
b) Motor Insurance: Different types of policies may be issued for different types of motor vehicles. Motor vehicles are usually classified in the following manner:Private Cars, Commercial Vehicles, Agricultural Vehicles, Motor traders' vehicles Policies issued are usually of the following types irrespective of the class of vehicle:
i) Comprehensive Policy: This policy provides protection in respect of:1. Own damage or loss of the Vehicle
2. Liability of the insured in respect of death or bodily injury to the third party and damage caused to the property of third party arising out of the use of motor vehicle on the road.
3. Act liability only policy i.e. legal liability of the insured in respect of death and bodily injury to third party arising out of the motor vehicles use on a public road.
ii) Third party only policy: This policy provides cover only in respect of the legal liability of the insured arising out of the death and bodily injury to third party and damage to the property of third party in connection with the use of motor vehicle.
iii) Act Liability only Policy: This policy provides cover only in respect of the legal liability of the insured arising out of the death and bodily injury to third party in connection with the use of the motor vehicle
c) Miscellaneous: It may be pointed out that any policy that does not appropriately come under marine, Fire, and Motor shall come under this head. Therefore, the scope of this branch is indeed very wide and numbers of various types of policies are issued in this head. However, only those policies which fall within the scope of property insurance will be discussed here.
Balance SheetAs on 31st December, 2008
CAPITAL AND LIABILITIES
NOTE
2008 2007 PROPERTY AND ASSETS NOTE 2008 2007
Authorized Capital:20,00,000 ordinary shares
of Taka 100 each
200,000,000=========
200,000,000=========
Investment (At cost): 1 29,567,290 19,660,987
Issued subscribed & paid up capital:
1,142,640 Ordinary Shares of Taka100 each
7 114,264,000 95,220,000 Outstanding premium 2 37,612,609 20,660,293
Share Premium 8 15,000,000 15,000,000 Accrued interest 3 9,477,794 8,420,290
Reserve, Surplus & Contingency accounts:Reserve for exceptional
losses
9168,873,550 160,873,550
Amount due from other persons or
bodies carrying on Insurance Business
4 8,865,071 7,878,705
Profit & loss Appropriation Accounts
24,925,179 19,903,412Sundry debtors (including deposits and prepayments)
5 82,630,376 111,448,491
Balance of funds and Accounts:
Fire Insurance BusinessMarine Insurance BusinessMiscellaneous Insurance
Business
Cash and Bank Balances 6 257,059,740 218,908,498
121,876,138 108,131,254 Others Accounts :
Premium Deposit 10
9,252,477
11,581,935
Fixed assets at cost less depreciation(Annesure-1)
Stock of printing materials (At cost) Advance income tax
[(Note-13(I)]
104,385,468 784,74885,110,110
190,280,326
98,192,642 866,76273,328,177
172,387,581
Estimated Liabilities in respect of outstanding claims whether due or
intimated 11 31,510,103 30,323,071
Amount due to other persons or bodies
carrying on insurance Business 12
30,680,40936,871,681
Sundry creditors (including provision for expenses and
taxes ) 1399,111,350 81,459,942
Taka 615,493,206 559,364,845 Taka 615,493,206 559,364,845
The attached notes form an integral part of these financial statements. Subject to our separate report of even date
26,277,806
45,533,620
50,044,712
26,592,85838,976,78842,561,608
Sd/-P.K. Roy, FCA,FCSManaging Director
Sd/-Mostafa Quamrus Sobhan
Director
Sd/-Kazi Maniruzzaman
Director
Sd/-Mostafa Golam Quddus
Chairman
Sd/-A. Wahab & Co.
Chartered Accountants
Dated: Dhaka, April 29, 2009
Profit and Loss AccountFor the year ended 31st December, 2008
PARTICULARS NOTE
2008
2007
PARTICULARS
NOTE
2008 2007
Expenses of management(not applicable to any fund or account).
Interest, dividend and rents(not applicable to any fund or account)
Director's fees . 40,000 32,400Interest and rental income
15(i)
22,815,778 20,330,497
Audit fee (including special audit)
15(iii)
160,000 160,000 Profit Transferred from :
Donation & subscription
15(iv)
520,586 476,291
Fire Revenue AccountMarine Revenue AccountMiscellaneous Revenue Account
Publicity & advertisement
1,250,951 1,157,986 43,415,00129,318,973
Fees & charges 19,710 72,175 Legal & professional fee
319,250 338,067
Registration & renewals
15(v)
1,677,655 1,401,723Other income
15(ii)
1,067,405 1,418,033
Depreciation(Annexure-l)
8,521,804 9,278,133
Share expenses15(vi)
138,780 185,940
Expenditure ofAnneual General Meeting expenses
1,083,681 962,785
Profit for the year transferred to profit &
Loss Appropriation Account
53,565,667 37,002,003
Tak
a67,298,184 51,067,503
Taka
5,154,411
22,393,754
15,866,836
6,664,576
14,118,613
8,535,784
67,298,184 51,067,503
Profit and Loss Appropriation AccountFor the year ended 31st December , 2008
Reserve for exceptional Losses
8,000,000
15,000,000 Balance brought forward from previous year
859,412 9,901,409
Provision for tax 20,500,000 10,000,000
Net profit for the year transferred from Profit & Loss Account
53,565,767 37,002,003
Provision for Deferred taxation
1,000,000 2,000,000
Balance transferred to Balance Sheet
24,925,179 19,903,412
Taka
Taka
Statement of Cash Flow
For the year ended 31st December, 2008
Cash Flow from Operating Activities: 2008 2007Collection from premium and other income 509,974,967 409,226,029
Payments of management expenses, re-insurance and claims (433,646,620) (345,756,191)
Income tax paid (14,181,933) (17,375,530)
Net Cash Provided by Operating Activities 62,146,41446,094,308
Cash Flow from Investing Activities:. .
Purchase of Fixed Assets Including Land (14,714,630) (17,423,310)
Disposal Fixed Assets 1,442,869 1,273,880
Purchase of Shares (11,387,869) (1,761,783)
54,425,179 46,903,412 54,425,179 46,903,412
Sales of Shares 1,481,566726,175
Dividend income 7,892 23,224
Net Cash Used in investing Activities (23,170,172) (17,161,814)
.
Cash Flow from Financing Activities:.. ..
Dividend paid (825,000) (310,508)
Increase/ Decrease in cash Flow : (A+B+C) (38,151,242) (28,621,986)
Cash & Cash equivalents at the beginning of the year 218,908,498190,286,512
Cash & Cash equivalents at the ended of the year 257,059,740218,908,498
Sd/-P.K.Roy ,FCA,FCSManaging Director
Sd/-Mustafa Quamrus SobhanDirector
Sd/-Kazi MoniruzzamanDirector
Sd/-Mostafa Golam QuddusChairman
Sd/-A. Wahab & Co.Chartered Accountants
Dated: Dhaka, April 29, 2009
Form AA
Classified summery of assets as at 31st December, 2008
Class of assets Book Value
Investment :Share of Bangladesh Commerce Bank Ltd.
13,690,500
Investment in Share of listed securities 11,376,790
Deposit with Bangladesh Bank (3 years Investment Bond)
4,500,000
Cash on fixed deposit, STD and current account248,576,548
Cash in hand & stamp 8,483,192
Outstanding premium and dues from others carrying on insurance business
46,477,680
Interest accrued but not received 9,477,794
Sundry debtors,advances, deposits and advance income tax 167,740,486
Stock of printing materials in hand (at cost) 784,748
Fixed assets (at cost less depreciation) 104,385,468
Taka 615,493,206
=========
i) The amount of Fixed assets is inclusive of Tk. 2,596,044 being W.D.V.of Furniture and Fixture.
Sd/-P.K.Roy , FCA,FCSManaging Director
Sd/-Mostafa Quamrus
SobhanDirector
Sd/-Kazi Maniruzzaman
Director
Sd/-Mostafa Golam Quddus
Chairman
Sd/-A. Wahab & Co.
Chartered Accountants
Dated: Dhaka, April 29, 2009
Observation Summary:
Comfort:
Sound liquidity position Formulation of underwriting manual Ensuing IPO floatation Management expense within allowable limit Diversification product line Diversification service network
Prospects:
Expansion of service cell Further product diversification may increase the business of private sector
companies
Challenges:
Comply with new ordinance Too many companies in small market Emergence of foreign companies.
Concerns:
Moderate technical performance Yet to achieve industry average financial performance Concentrated ownership pattern Policyholder directors are holding sponsor shares High policy lapse in micro insurance Moderate premium strength Moderate underwriting quality Moderate solvency Poor corporate governance Shortfall of investment in securities in time.
Conclusion:
Since its establishment on 28th December 1999 as one of the leading life Insurance companies in the private sector, Rupali insurance company has within a short span of time established itself as one of the most Reputed and trustworthy life insurance companies in the country. Selective customer service, underwriting of liabilities and Prompt settlement of claims have contributed towards building up a very respectable image of the company within the Business community.
References:
BUBT library Reference book Rupali insurance company Web site. Others web page. Annual report
Appendix:
Balance sheet and income statement and others financial report collected from the website.