Jubilee Life Insurance (formerly known as New Jubilee Life Insurance)–the largest private sector life insurer in Pakistan holds a market share of 41 percent as of September 2013 (in terms of gross premiums), according to the data published by Insurance Association of Pakistan (IAP).
The company was incorporated in 1995 as a public limited company and is quoted on Karachi Stock Exchange, having a market capitalization of Rs 17 billion. Having an asset base of Rs 37 billion and equity base worth Rs 2 billion as of September 2013, Jubilee Life enjoys the largest Bancassurance network in the country. The company has access to all the big banks namely HBL, MCB and UBL along with many other renowned banks. Jubilee Life Insurance has further broadened its outreach with a set-up of nearly 129 outlets in various parts of the country. The company is a subsidiary of the Aga Khan Fund for Economic Development (AKFED), Switzerland-the economic development wing of the Aga Khan Development Network (AKDN).
Credit rating Last year, JCR-VIS Credit Rating Company Limited, upgraded the Insurer Financial Strength (IFS) rating of Jubilee Life Insurance to AA (double A) from AA- (double A minus) earlier, along with a ‘stable’ outlook. According to the press release issued by JCR-VIS, the rating denotes sturdy growth in premiums, potency of company’s sponsors, sound liquidity profile and strong capitalization against the risks underwritten. However, it also highlighted that the sales force turnover has remained high in line with industry wide trends. With regards to the areas of improvement, it stressed on the need to further improve sales force retention and productivity levels.
1Q CY14: Financial performance Jubilee Life Insurance kicked off 2014 on a promising note by posting double-digit profitability growth of 59 percent year on year during the quarter ended March 2014. Healthy investment income from government securities and more than a twofold increase in dividend income comforted Jubilee Life’s profitability during the quarter under review.
Insurance business of the company continued its upward drive as net premiums witnessed an upsurge of Rs 1 billion or 34 percent year on year during the aforementioned quarter. Moreover, the ratio of net claims to net premiums and investment income improved to 45 percent from 49 percent earlier. This improvement in ratio is attributable to a slight reduction in management expenses as a percentage of company’s net premiums. Reluctantly, underwriting result of the firm grew by more than 55 percent during the aforementioned quarter.
However, life unit-unit linked business has remained the driving force behind growth in premiums. As of March 2014, the segment contributes more than 80 percent to firm’s net premiums, with accident and health and conventional business following the lead by contributing 11 percent and six percent, respectively.
Business performance Despite soaring costs associated with medical expenses, accident and health business remained the front runner, posting the highest growth amongst other segments. The segment grew by 45 percent year on year in its gross premiums.
Individual life unit linked business followed the lead, surging by 35 percent year on year in its gross premiums. On the basis of gross premiums, individual life unit linked business frames nearly 79 percent of the firm’s total gross premiums, as of March 2014. Needless to say, the remarkable growth witnessed in Bancassurance network over the past few years, remains the primary reason why the individual life unit linked business has grown so fast. Owing to stiff competition being faced by the conventional business together with high price sensitivity, the segment posted a paltry rise of two percent year on year in its gross premiums.
Investment portfolio As of March 2014, the value of investment portfolio of the company was worth Rs 32 billion, reflecting a rise of Rs 3.79 billion when compared to the corresponding period of last year. Based on the financial statements of 2013, fresh investments in treasury bills and Sukuks led to an increase in the value of government securities. The value of government securities rose by Rs 2.68 billion (equivalent to 12 percent) year on year during the quarter under review.
The portfolio mix of the company is skewed towards government securities that frame 76 percent to the investment portfolio of the company. On the other hand, listed equity exposure of the company stands at only 21 percent. This tilt towards government securities wards off the companies against volatilizes in the stock market. However, there is still some room available for the company to perk up its equity exposure to further augment its investment and dividend income. This can lend a hand in buttressing its bottom line in coming years.
Outlook The insurance industry in Pakistan still remains untapped and there is still enormous potential available for insurers to explore. Usage of alternative distribution channels by insurers including UBL Omni, ARM machines, Easy Paisa are the unconventional modes that can be used by insurers to further tap the market.
Sadly, these areas have not been the focus of many insurers as yet. Not long ago, Jubilee Life Insurance launched a scheme “Talkshawk Mohafiz Zindagi Beema” with Telenor Pakistan whereby Telenor users are given a feature to subscribe to insurance schemes with death benefits ranging from Rs 20,000 to Rs 100,000. Such schemes can open doors for the insurance sector to expand its wings and target different segments on a mass level.
Considering that Pakistan is a country where a large part of the population belongs to low-income groups, micro-insurance remains another window for insurers to open up to. A recent study done by Insurance Industry Reforms Committee (IIRC) highlighted: “Micro insurance market in Pakistan is underdeveloped and there is no national level program category to micro insurance sector.” It also stressed on the fact that the demand for microinsurance in Pakistan is higher than the supply of micro insurance schemes, thus indicating that the segment holds a lot of potential. With the insurers focusing on the use of alternative distribution channels are discussed above, insurers can go a long way in expanding their outreach. However, creating awareness remains the key to this!