Morning Briefing for April 11, 2014 – Standard Capital

Karachi, April 11, 2014 (PPI-OT): Insurance Sector gains confidence | Portfolio galore…maintain buy in AICL

The macro-economic indicators showing revival of Pakistan economy which has attracted foreign investors to invest in Pakistan Reportedly a Switzerland based private equity fund has shown interest in the insurance sector in Pakistan, where at least 3 companies are likely to be on a roll.

Since the economy is growing and non –life insurance is correlated with the economic growth, it’s evident that insurance sector will perform well in the coming years. Though Pakistan insurance industry ranks lowest amongst its peers, however the performance of the insurance sector in the recent years indicates that there is lot of potential in insurance companies to grow.

Insurance Sector – Standard Capital Limited’s coverage AICL, CENI, RICL and IGIIL

Analytical review of 4 major insurance companies’ annual reports shows that Insurance sector has performed well in CY13 as compared to CY12.


Adamjee Century Reliance IGI
2013 2012 Change 2013 2012 Change 2013 2012 Change 2013 2012 Change
Rs million
Net Premium Revenue 5,507 5,672 -3% 322 268 20% 261 241 8% 1,067 939 14%
Net Claims – 3,487 – 4,143 16% – 159 – 112 -42% – 88 – 83 -6% – 767 – 583 -31%
Underwriting Results 137 – 412 133% 83 84 -1% 20 17 15% 105 232 -55%
Investment Income 2,357 1,332 77% 133 105 27% 97 110 -12% 658 397 66%
PBT 2,210 670 230% 151 129 16% 81 94 -14% 911 – 343 366%
PAT 1,966 628 213% 147 116 27% 75 87 -14% 813 – 354 330%
EPS 5.62 1.79 214% 3.22 2.56 26% 2.04 2.38 -14% 7.29 – 3.17 330%

In 2013, the reduction in Insurance prices continued to put pressure on premiums but the selected companies managed to perform well. There is increase in underwriting results.

Insurance companies highly depend on their investment incomes, insurance companies in Pakistan maintain balance portfolio and due to the outperformance of capital markets in CY13 insurance sector in Pakistan enjoyed high incomes which resulted significant increase in profits and EPS.


Adamjee Century Reliance IGI
PBV 0.74 0.45 0.35 1.03
P/E 9.15 6.74 5.37 27.83
Book value per share 69.73 48.65 31.46 196.20
ROA 7.2% 8.5% 5.1% 6.2%
ROE 15.1% 13.3% 11.4% 7.5%

Insurance companies show good BV (inclusive of investment portfolio). Normally, equities of insurance companies exclude gains or deficit on portfolio investment and hence under represent actual book value amount. As per Standard Capital Limited’s working the earnings capacity of insurance companies largely depend upon investment portfolios.

From the book value perspective Standard Capital Limited sees AICL undervalued (also reported vide Standard Capital Limited’s Apr 10, 2014 call) alongside CENI and also RICL


As on April 10, 2014
Script Adamjee Century Reliance IGI
Avg Volume (52 weeks) (mn) 2.1 0.079 0.02 0.108
52 weeks High (Rs) 108.99 22.9 12.6 234
52 weeks Low (Rs) 36.36 11.2 7 110.1
Close (Rs) 51.44 21.7 10.95 202.9
Market Capitalization (bn) 18 0.99 0.4 22.36
Beta 1.33 0.94 0.16 0.78
Total no. of shares (mn) 350 45.72 36.68 111.54
Free float shares (mn) 74.22 11.43 10.08 21.55

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