Most general insurers see profit down for adverse business climate, gloomy stocks

A strong dollar and runaway inflation continued to hit the businesses of general insurers, dragging down profits of most of them in 2023, compared to the year before.

Almost all business activities in the country remained sluggish in 2023, owing to lingering macroeconomic uncertainties, which in turn reduced general insurers' scope of earnings, say industry insiders.

Of the 43 general insurers listed on the Dhaka Stock Exchange (DSE), 33 disclosed their annual earnings by Wednesday. Of them, 20 saw their profits plummet year-on-year by 1.30 per cent to 51 per cent while 13 others managed to post a moderate growth in profit.

The aggregate profit of 33 general insurers stood at around Tk 4.87 billion in 2023, down from Tk 5.07 billion in 2022, according to their financial statements.

A majority of these companies endured a decline in gross premium income in 2023, compared to 2022.

Company representatives blamed slow business on the back of a strong dollar, largely non-existent third-party insurance and lower earnings from stock market investments.

In Bangladesh, general insurance companies do business mainly in three segments -- fire, transport and marine.

The marine insurance business shrank to a large extent as the opening of letters of credit (LCs) kept dwindling due to the dollar crisis.

Exports did not increase as expected for the subdued demand in the destination countries while the government tightened rules for imports to protect the depleting foreign exchange reserves.

L/C opening plummeted around 20 per cent year-on-year in 2023, according to the Bangladesh Bank data. As a result, the overall marine insurance business fell substantially during the time.

Most general insurers have significant exposures to the stock market, another reason as to why their profits dipped. The market remained almost stagnated throughout 2023, owing to the imposition of floor price.

Industry people say a big blow came from a sharp fall in automobile insurance as third-party insurance has become largely non-existent in the country.

Among the general insurers, Rupali Insurance's profit tumbled 51 per cent year-on-year to Tk 36 million in 2023, lowest in at least six years, as their premium income dropped sharply.

Company secretary Mohammad Atiqur Rahman said the main factor that cut profit was lower gross premium income from the marine segment.

Alongside a steep fall in third-party insurance and little income from stocks, higher claim settlement also eroded profit.

Third-party insurance is a policy purchased by the insured from the insurer for protection against claims by a third party. But in Bangladesh, no one buys third-party insurance products since it is not legally binding.

Eastern Insurance's profit plunged 43 per cent year-on-year to Tk 88 million in 2023.

A reduction in business, particularly in the marine segment impacted profit, said the company, in its earnings note.

Green Delta Insurance, the second largest insurance company in terms of market cap, experienced a 16 per cent fall in profit to Tk 610 million in 2023 despite a record gross premium income.

The profit slid due to higher claim settlements in 2023, compared to the previous year, said the company.

Green Delta's gross premium income rose 8 per cent year-on-year to Tk 4.54 billion while claim settlement expenses jumped 51 per cent year-on-year to Tk 473 million in 2023.

The company earned the highest gross premium in its history in 2023 by risk underwriting for a couple of large infrastructure and power plant projects that paid premium in US dollars.

"We could book the gain due to a strong US dollar against the taka," said Farzanah Chowdhury, managing director and CEO of Green Delta Insurance, in its annual report for 2023.

However, after a devastating fire in the capital's Bangabazar in April 2023, Green Delta had to settle claims worth Tk 190 million.

Meanwhile, Green Delta acquired a substantial number of shares of struggling Sunlife Insurance Company in November last year.

On the other hand, Reliance Insurance, the largest insurance company in terms of market value, posted a profit of Tk 690 million, the highest among listed general insurers in 2023, registering a more than 12 per cent growth.

Reliance Insurance's gross premium rose almost 11 per cent to Tk 3.90 billion, while underwriting profit grew 4.84 per cent to Tk 645 million in 2023, compared to the year before.

"Reliance Insurance maintained a steady growth rate, exceeding industry benchmarks, through strategic initiatives and a focus on customer service," said Md Khaled Mamun, chief executive officer of Reliance insurance, in its 2023 annual report.

Despite challenging market conditions, Reliance Insurance's commitment to innovation and operational efficiency allowed it to maintain a strong growth trajectory, he said.

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