Insurance:
Insurance is nothing but the cooperative device that spread the loss caused by a particular risk over a number of persons who are exposed to it and who agree to unsure themselves against that risk.
Origin of insurance:
The origin of insurance are-
- Bottomry Bonds- loan taken against the pledge of vessel.
- Respondetia Bonds- loan taken against the pledge of cargo
- General Average- sharing the loss of one by all.
Functions of Insurance:
There are two types of functions of insurance. This are-
- Primary functions
- Secondary functions
Primary functions:
Some primary functions are-
1. Provides certainty:
Provide certainty of payment at the uncertainty of loss.
2. Provide protection:
Provide protection against the probable chances of loss.
3. Risk sharing:
Loss is shared by all the persons who are exposed to the risk.
Some secondary functions are-
1. Prevention of loss:
Insurance companies are joining with such companies which engaged in preventing the losses of the society because the reduction in loss causes lesser payment to the assured and so more saving is possible which will assist in reducing the premium
2. Provides capital:
Insurance company provides capital to the society by investing the accumulated fund that they collect from people.
3. Improves efficiency:
Insurance companies improve the efficiency of insured person by eliminating worries and miseries of losses at death and destruction of property.
4. Helps for economic progress:
By protecting the society from huge losses of damage, destruction and death insurance companies help countries in economic progress.
No of insurance companies in Bangladesh:
General insurance:
There are 40 general insurance companies in Bangladesh. This are-
Sadharan bima. Agrani insurance. Asia pacific general insurance. Bangladesh co-operrative general insurance ltd. Bangladesh general insurance. Bangladesh national insurance, central insurance. City general insurance. Eastern insurance, federal insurance. Green delta insurance. Janata insurance. Karnafully insurance. Meghna insurance. Mercantile insurance. Nitol insurance. Northern general insurance. Paramount insurance. People’s insurance. Phoenix insurance. Pioneer insurance. Prime insurance. Progoti general insurance. Provati insurance. Purabi general insurance. Reliance insurance. Rupali insurance. United insurance.
Central insurance. Continental insurance. Dhaka insurance. Eastland insurance. Global insurance. Islami insurance. Takaful islami insurance. Standard insurance. Sonar bangle insurance. Republic insurance. Provati insurance. Pragati insurance.
Name of life insurance companies are-
Jiban bima corporation. National life insurance. Alico insurance. Delta life insurance. Express insurance. Prime islami life insurance. Shandhani life insurance. Rupali life insurance. Progressive life insurance. Pragati life insurance.
Background of company:
United Insurance Company Ltd. (UICL) is a leading insurance company (Non-Life) with a Credit Rating ‘A’ for its good corporate governance, sound management, prudent underwriting policy and its ability to settle claims properly.
Established in 1985 and enlisted with Dhaka Stock Exchange in 1990, it transacts a wide range of general business including health insurance.
An associate of Duncan Brothers (Bangladesh) Ltd., the largest British tea producers in Bangladesh, it is also a major shareholder of United Leasing Company, sponsored in 1989 by the Asian Development Bank, the Commonwealth Development Corporation and Lawrie Group PLC of UK.
Service of the company:
The service of the company are-
Merine insurance policy. Merine cargo, marine hull, fire insurance policy, public liability policy, product liability policy, machinery breakdown policy, boiler & pressure vessel policy, motor insurance policy, motor insurance policy, cash-in-safe, cash-in-transit, cash-on-premises, consequential loss, contractor’s all risk policy, health plan scheme, personal accident policy, erection all risk policy, industrial all risk policy, erection all risk policy, industrial all risk policy, fidelity guarantee policy etc.
| IT IS ALL ABOUT YOU AND YOUR EMPLOYEES | |||||
| We have designed the Health Plan on the concept of a group health insurance scheme for your employees. Under this scheme the expenses for treatment in a nominated hospital in Bangladesh for an illness or injury are insured. Domiciliary or outdoor treatment are not covered.If you have over 50 persons you may take out this group health insurance | |||||
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| All Plans cover Maternity Benefits at no extra charge | |||||
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Financial performance based on recent news:
(Q3): As per un-audited quarterly accounts for the 3rd quarter ended on 30th September 2010 (July’10 to Sep’10), the Company has reported profit after tax of Tk. 24.21 million with EPS of Tk. 8.07 as against Tk. 3.25 million and Tk. 1.08 (restated) respectively for the same period of the previous year. Whereas profit after tax was Tk. 124.81 million with EPS of Tk. 41.60 for the period of nine months (Jan’10 to Sep’10) ended on 30.09.10 as against Tk. 31.89 million and Tk. 10.63 (restated) respectively for the same period of the previous year.
Findings
| Liquidity Ratio: | 2006 | 2007 | 2008 | 2009 | Average | |
| Current Ratio | 3.2795823 | 2.993082547 | 4.334736975 | 8.568464568 | 4.79396659 | |
| Quick Ratio | 3.2757794 | 2.989151402 | 4.331412786 | 8.560693108 | 4.78925917 | |
| Inventory Turnover | 0 | 0 | 0 | 0 | 0 | |
| Receivable Turnover Ratio | 0.277298 | 0.157839377 | 0.308967644 | 4.09723262 | 1.21033442 | |
| Average Collection Period | 101.21 | 57.61 | 112.77 | 63.00 | 441.77 | |
Comment: The current ratio is decreasing in next year but current ratio was increased in 2007.UNITED INSURANCE has $4.79(average) in current asset for every $1 in current liabilities. In 2009 It is not good for the company because so much liquidity. The quick ratio is as like as current ratio. UNITED INSURANCE has up growing liquid current asset. UNITED Insurance’s receivable turnover decrease in 2006 and Increase from 2007 also the turnover is substantially lower than industry average. In case of average collection period, UNITED INSURANCE has not good situation but it is increasing rate and also it is not like or within industry average.
| Operating Efficiency Ratios | ||||||
| Fixed Asset Turnover | 0.5950418 | 0.435703548 | 0.941580562 | 7.457941761 | 2.35756691 | |
| Total Asset Turnover | 0.0126318 | 0.006888507 | 0.008476121 | 0.063843491 | 0.02295999 |
Comment: The result of fixed asset turnover ratio that for every taka in fixed assets, UNITED INSURANCE generated Tk. 2.35 in revenues. Similarly, the result of total asset turnover suggests that for every taka in assets, UNITED INSURANCE generated Tk. 0.02295999 average in revenues.
| Leverage Ratios | 2006 | 2007 | 2008 | 2009 | Average | |
| Debt Ratio | 0.30 | 0.33 | 0.23 | 0.12 | 0.24 | |
| Debt-to-Equity | 0.04 | 0.02 | 0.01 | 0.00 | 0.02 | |
| Total Debt to Total Capitalization | 0.30 | 0.33 | 0.23 | 0.12 | 0.24 | |
| Long-Term Debt to Total Capitalization | 0.03 | 0.01 | 0.01 | 0.00 | 0.01 |
Comment: UNITED INSURANCE has Tk0 0.24 average in debt for Tk.1 in assets. Therefore is Tk. 0.02 in equity for every Tk. 0.24 in debt. Based on the ratio analysis it understood that for Tk.1 in total capital of the company, UNITED INSURANCE has Tk. 0.24 in total debt. UNITED INSURANCE has Tk. 0.01 in long-term debt.
| Coverage Ratios | 2006 | 2007 | 2008 | 2009 | Average | |
| Times Interest Earned | 7.44 | -0.82 | 118.70 | 441.37 | 141.67 | |
| Cash Coverage Ratio | 14.30 | 4.00 | 161.50 | 454.62 | 158.60 |
Comment: Time-interest earned ratio shows that UNITED INSURANCE has over condition. That means this company, the interest bill is over 141.6 times over. Although next year it is decreasing but it was increased in 2009. Similarly based on the result of cash coverage ratio suggests that UNITED INSURANCE has well ability means available cash to pay interest.
| Operating Profitability Ratios | 2006 | 2007 | 2008 | 2009 | Average | |
| Gross Profit Margin | ||||||
| Operating Profit Margin | 3.24 | -14.98 | 1.79 | 1.08 | -221.82% | |
| Net Profit Margin | 0.19 | 0.11 | -0.33 | 0.87 | 21.18% |
Comment: Operating profit margin is fiund out that UNITED INSURANCE generated Tk -221.82% that less than Tk.1 in operating profit for every Tk.1 in revenues of the company and it was not increasing in 2007. Besides, the net profit margin ratio measured it is increasing in each year but decreased in 2008.
| Profitability Ratios | 2006 | 2007 | 2008 | 2009 | Average | |
| Return on Total Assets (ROA) | 0.07 | 0.06 | -0.03 | 0.07 | 4.37% | |
| Return on Equity (ROE) | 0.09 | 0.09 | -0.03 | 0.08 | 5.86% |
Comment: The result of return on total assets it can be defined that for every Tk.1 in total assets of the company, UNITED INSURANCE generated Tk. 4.37 in profit. Although it was decreasing. It was decreased in 2008 that is not good for the company. The other side for every Tk.1 in total equity of the company, UNITED INSURANCE generated Tk. 5.86 in profit.
| Valuation Ratios | 2006 | 2007 | 2008 | 2009 | Average | |
| Earnings Per Share | 38.20 | 32.73 | -199.91 | 21.31 | -26.92 | |
| Dividend per Share | 0.00 | 23.08 | 220.00 | 60.00 | 75.77 | |
| Price/Earnings Ratio | 10.72 | 10.91 | 12.05 | 8.42 | ||
| P/B (price to book) Ratio | 1.00 | 1.00 | 1.00 | 1.00 | 1.00 | |
| Dividend Payout Ratio | 0.00 | 0.71 | -1.10 | 2.82 | 0.61 |
Comment: EPS was decreasing in each year but it was decreased in 2008. That means for each outstanding share of the company, Similarly dividend per share ratio was zero in every year. Company paid Tk. 75.77 dividend against each outstanding shares. UNITED INSURANCE’s price-earnings ratio is lower than the industry average 8.42 times. Besides the payout ratio suggests that UNITED INSURANCE has high rate to the dividends that was increasing and as well as decreasing in 2009.
| Growth Rate | 2006 | 2007 | 2008 | 2009 | Average | |
| EPS Growth Rate | -14.34% | -710.87% | -110.66% | -27.28% | ||
| Dividend Growth Rate | #DIV/0! | 22.22% | 58.82% | 34.68% | ||
| Sales Growth Rate | -35.21% | 29.12% | 68.98% | 29.49% | ||
| EBIT Growth Rate | -114.01% | -20.56% | 81.06% | -48.48% | ||
| Net Income Growth Rate | 11.36% | -18.32% | -36.44% | -19.81% |
Comment: The growth rate condition of the UNITED INSURANCE is not so bad. In case of EPS growth rate is -27.28, it was decreased negative result. Dividend growth rate is good, 34.68% (average) that is high increasing in every year. Although sales growth rate was increasing but it was decreased and touched at negative figure in 2008 that is not good for the company. EBIT growth rate that average -48.48%. The net income growth rate was decreased but increased only in 2008 and 2009. The average net income growth rate is -19.81% that is not so high compared to industry average.
| DUPONT ANALYSIS -3 STEP | 2006 | 2007 | 2008 | 2009 | Average | |
| NOPAT/Sales | 520.48% | 894.59% | -305.79% | 114.92% | 306.05% | |
| Sales/Total Assets | 0.01 | 0.01 | 0.01 | 0.06 | 2.30% | |
| Total Asset/Common Equity | 1.42 | 1.49 | 1.30 | 1.13 | 133.34% | |
| ROE | 9.33% | 9.17% | -3.36% | 8.30% | 5.86% |
Comment: The result of DuPont analysis shows that ROE was increased in each year but it decreased in only in 2008 negative result . Here it needs to define that the result of ROE decreased average 5.86% by Total Asset/Common Equity That’s why it makes a not good sense to say that UNITED INSURANCE is now in bad situation.
