KARACHI: After a lag of a year and a half, caused mainly by a non-functioning board of directors, State Life Insurance Corporation has finally released its annual financial accounts for 2013.
Wholly owned by the government of Pakistan, State Life posted a profit after tax of Rs810 million in 2013, which was up 5.6% from 2012.
The only state-owned life insurance company operated without a chairperson for a year and a half before Nargis Ghaloo assumed the charge in the later part of 2014.
Ghaloo did not respond to requests for comment despite repeated attempts over the past one week.
The profit of State Life for 2013 was equal to 40.2% of the combined earnings of the six private-sector life insurance companies that operated in that year. However, State Life’s profit was still less than the earnings of Jubilee Life Insurance (Rs941.4 million) and EFU Life Assurance (Rs929.1 million) recorded in the same year.
While State Life lags behind other life insurance market players in terms of profitability, several key performance indicators show it is far ahead of its private-sector counterparts. For example, total assets of State Life at the end of 2013 amounted to Rs420.8 billion after recording an increase of 20.5% over the preceding year.
In contrast, combined assets of the six private-sector life insurance players in 2013 clocked up at Rs102.4 billion, which is roughly one-fourth of the total assets of the government-owned entity.
Similarly, total gross premiums of State Life were Rs65.9 billion in 2013, which is 1.6 times of the combined total gross premiums of all private-sector life insurance players (Rs40.9 billion) in the same year.
According to a reform committee constituted by the Securities and Exchange Commission of Pakistan (SECP) in 2014, State Life appeared to be “overstaffed” relative to its private-sector competitors. The committee also reported that State Life seemed to have “relatively high agency costs compared to its peers in other countries”. Moreover, it said there were concerns about “procedural irregularities at decentralised levels” at State Life.
The number of State Life employees was 5,293 in 2013. In contrast, all private-sector life insurance companies employed only 2,497 in the same year, official statistics shows.
According to the chairperson’s note attached to the annual accounts, State Life plans to launch unit-linked life insurance products just like its private-sector counterparts.
As opposed to conventional insurance products that guarantee policyholders investment income, unit-linked insurance products let policyholders select high-, medium- and low-risk investment options besides offering the flexibility to choose the sum assured and investment ratio in the annual targeted premium.
Private-sector players introduced unit-linked products in the life insurance market about two decades ago, but State Life has so far stayed away from this segment.
State Life has traditionally been reliant on its own agency network for the sale of insurance policies. In contrast, many private-sector life insurance players, particularly Jubilee Life Insurance, have grown phenomenally by using the banking channel for the distribution of their products.
Noting that the alternative distribution channel ensures wider coverage at a lesser cost, Ghaloo said State Life signed bancassurance agreements with at least three banks in 2013.
Commenting on Islamic insurance market, she said it offered State Life bright prospects. “State Life is planning to commence Takaful operations in 2015 and is in the process of applying to the SECP for commencing Takaful operations,” she said.
