Performance Analysis of Rupali Insurance Limited. Assignment

Performance Analysis of Rupali Insurance Limited. Assignment Words: 3243

A Report On The Performance Evaluation Of Rupali Insurance Company Limited Prepared for Md. Dilshadul Islam by 1. Nuriya Zannat Roll No. 0406 2. MD. Joynal Abedin Roll No. 0414 3. Md. Mahamudul Hasan Roll No. 0424 4. MD. Moulude Hossain Roll No. 0434 5. Runa Afruz Roll No. 0438 B. B. A. (NU) 4th Semester Institute of Science and Technology

A report submitted in partial fulfillment of the requirement of TAC 311: Report Writing 16th January 2007 ACKNOWLEDGEMENTS We would like to thank Md. Dilshadul Islam for encouraging us to undertake this study and for help and guidance given for this study. We would also like to thank General Manager (Admin. ) & Company Secretary A. S. M. Rashed, Asstt. General Manager of Branch Control Division Kazi Rezual Islam, Deputy General Manager of Finance & Account Division Md.

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Mizanur Rahman for given their valuable ideas of the company and given answer of our questions, and help us to prepare the report as we want. CONTENTS Page Acknowledgement 2 Executive Summary 4 1. Introduction of Rupali Insurance 5 2. Previous 5yrs performance 7 3. The different policies of Rupali Insurance 11 4.

Aggregate amount of different policies 13 5. Reasons of too much concentration of a certain policy 17 6. Conclusions 18 7. Recommendations 19 Bibliography 20 EXECUTIVE SUMMARY The report is based on the performance of Rupali Insurance for previous 5 yrs.

The report is for the overall judgment of the business condition of the mentioned company, about their current condition of asset, liability and profit. The data were collected from the annual reports of the company. Some of the information’s were collected from the executives and by searching the website of the Company. According to the executives, to be a successful insurer service and proper maintenance Govt. regulation is more important than public awareness. On answer of our question they said us that, Fire & Marine Cargo insurance is common case because of increase in export-import business and implementation of certain Govt. egulations. On answer of our another question they said that without the permission of Shadaron Bima Corporation any insurance company cannot introduce new policy and they are not interested to introduce Crop & cattle insurance because of high risks. The executives also said that they have another policy named ‘Oversea Medi-claim’ policy but it is only for Govt. VIPs and some of their clients. In general the policy is not introduced because of bad practices by clients, for example, presenting a wrong medical certificate.

From the discussion we found that they have very much confidence on their surveyor and still now they do not found any material hazard by any client. From the speech of Mr. Mizanur Rahman, the General Manager of the Finance & Accounts division, we known that in case of Marine Insurance the Marine Cargo is available in their policy, they have very little of Marine Hull and he suggest us to consider marine cargo insurance as the overall marine insurance. From these reports it is clear that their current business trend is upward.

By this analysis we try to determine the present condition of the insurance business in our country. 1. Introduction to Rupali Insurance Company Limited Rupali Insurance Company Limited is one of the most well-known insurance companies, which operate its business successfully in Bangladesh and contribute to the national development and economic progress in our country. It is a public limited company under the Company Act, 1994, and is engaged in general insurance business as per Insurance Act, 1938. Now let us consider a brief introduction of Rupali Insurance Company Limited. ? COMPANY PROFILE

Incorporation : May 13, 1988 Commencement of business : June 25, 1988 Branch Offices : 42 Number of employees (Since 2005) : 509 Listing with Dhaka Stock Exchange : March 20, 1995 Listing with Chittagong Stock Exchange : October 10, 1995 ? MANAGEMENT ? Board of directors: Its has 21 member board of director including a Chairman and a Managing Director. ? Executives: Its has seven executive posts, these are, Managing Director ? Deputy Managing Director ? Assistant Managing Director ? Senior General Manager ? General Manager ? Deputy General Manager ? Assistant General Manger ? Policy: The Company undertakes risks involved in trade and properties and thus provides their securities through insurance and re-insurance services. As per Re-Insurance Treaty, it re-insures risks undertaken with the SADHARON BIMA CORPORATION. The business of the company covers fire insurance, marine cargo and hull insurance, motor insurance and miscellaneous insurance. ? CAPITAL FORMATION ? Authorized capital: The authorized capital of the company is TK. 00 million divided into 2 million ordinary shares of TK. 100 each. ? Paid up capital: Its paid up capital is TK 30 million. A total of 14 sponsor shareholders hold 50% of the company’s share capital and the general public owns the rest ? VISION The vision of Rupali Insurance Company Limited is ahead to meet the challenges of National advancement in the years to income. ? MISSION ? Specialized, Personalized and Relentless Services to the Clients with Excellent team work spirit. ? Ensure steady growth of the Company and maximum to the Shareholders. ? Job satisfaction of the employees. Service the nation through active participation in the Development if the Economy. ? Importance of professional Management and development of corporate culture. ? Development of Human resources for meeting the challenges of the competitive market. 2. PREVIOUS 5 YRS PERFORMANCE In order to justify the performance of Rupali Insurance Company Limited let us analyses the last 5 yrs performance in the following statement 2. 1 PROFIT EARNED BY THE COMPANY IN LAST 5 YEARS Underwriting profit in the year 2005 amounted to Tk. 22 million compared to TK. 16 million in 2004. Net profit before tax stood at Tk. 6 million as against Tk. 24 million in 2004 showing an increase of Tk. 2 million. Let us compare the profit earned by the company in previous 5 years Figure: Graphical representation of profit earned in last 5 yrs 2. 2 ASSETS OWNED BY THE COMPANY The asset of the company stood at TK. 443 million in the year 2005 compared to Tk. 407 million in 2004. This includes the book value of the 12 storied building of the Company at Tk. 88 million, the present market of which is much higher. Seven floor measuring 15,750 sft. of the building have been leased out to different parties including 2 Life Insurance Companies.

Figure: Graphical representation of the assets owned by the Company 2. 3 CAPITAL AND LIABILIUTIES OF THE COMPANY The capital and liabilities of the company has been brilliantly maintained by the authority. The capital and liabilities of the company is just equal to the property and asset hold by the company. In the year 2005 the issued, subscribed & paid up capital of the company is increased from Tk. 60 million to Tk. 69 million divided into 6. 9 million ordinary shares of Tk. 100 each. The capital and liabilities of the Figure: Graphical representation of liability of the insurance company company maintained is hown by the figure 2. 4 INVESTMENT MADE BY THE COMPANY IN LAST 5 YRS Total investment of the Company in 2005 stood at Tk. 19 million. Out of this Tk. 4. 50 million was in government securities and Tk. 13. 60 million in shares 0of Bangladesh Commercial Bank Limited. In addition Fixed Deposits with commercial bank stood at Tk. 123 million. The total investment made by the Company in last 5 years, graphically represent in the following figure Figure: Graphical representation of investment made by the company 2. 5 RESERVES FOR EXCEPTIONAL LOSSES Reserve foe exceptional losses in 2005 stood at Tk. 138 million including Tk. million raised during the year out of net profit. Besides, Reserve for Unexpired Risks stood at Tk. 59 million. It may be mentioned here that the reserve is higher than the Paid-up-Capital of Tk. 69 million. As per fourth schedule of income tax ordinance 1984 amended 1995 the Company is allowed to keep Tax free Reserve for Exceptional losses up to the Premium Income of that year or the average Premium Income of the three years immediately proceeding that year, whichever is the higher. The net premium income of Rupali Insurance Company Limited is Tk. 146 million. As the Reserve for Exceptional Losses stood at Tk. 32 million as on 31. 12. 2004 which is almost at par with the net premium income of the year 2005, the Company keeps reserve under this head for Tk. 6 million during the year to meet the Exceptional losses of the Company. Figure: Graphical representation of last 5 yrs reserve for exceptional losses 2. 6 LAST 5 YRS DIVIDEND DECLREAD BY THE COMPANY With a view to increasing the paid up capital of the Company gradually the Board if Directors recommended declaring 15% stock dividend to the shareholders for the year ended 31st December, 2005 approved by the shareholders in the 18th Annual General Meeting of the Company.

The dividend declared for the year 2004 was also 15%. The dividend declared by the Company is shown into the following figure 2005 2004 2003 2002 2001 |Dividends declared by |15% |15% |14% |13% |12. 50% | |the Company | | | | | | 2. 7 SHARES OF THE COMPANY The shares and shareholders of the Company are presented by the following table.

The table also represents the other information’s of shares 2005 2004 2003 2002 2001 |No. of shareholders |1645 |1838 |1980 |2056 |2084 | |Earning per share |27. 98 |29. 60 |24. 04 |17. 41 |16. 83 | |Net asset value per share |240. 67 |251. 34 |241. 24 |235. 70 |252. 3 | |Market price of the share |190. 00 |380. 00 |193. 75 |145. 25 |153. 50 | |as on 29th December | | | | | | 2. 8 BRANCHES AND EMPLOYEES The Company had 50 branches through out the country in operation since 1998. 8 branches have since been closed because of business consideration during the year 2001 & 2002. 2005 2004 2003 2002 2001 |No. f branches |42 |42 |42 |48 |48 | |No. of employees |509 |507 |490 |502 |525 | Comment: From the above discussion of the last 5 yrs performance of Rupali Insurance Company Limited in different point of views, such as, profit, asset, reserve etc. we may say that the mentioned company perform a brilliant job in different side of their regular course of business activities.

Their profit earning trend is upward as well as their reserve fund for exceptional losses also increases year to year. In the year 2005 they close their 8 branches for business reasons. 3. DIFFERENT POLICIES OF THE COMPANY The business of the company covers five different policies, these are the followings 3. 1 FIRE INSURANCE By the contract of fire insurance the insurer ensure the insured person to compensate for the loss consequent upon destruction by fire for which the insurer must have to pay a certain sum of money called premium. Now let us discuss the special features of the fire insurance. 3. . 1 Period of limitation: Fire insurance may be ? Annual Insurance ? Short-Term policies ? Long-Term policies 3. 1. 2 More than one fire during the period: When there more than one fire in respect of same subject matter insured, the insurer is not bound to pay more than the sum assured. 3. 1. 3 More than one policy: If the same subject matter is insured with more than one insurer, he cannot realize more than the actual loss from all the insurer. 3. 1. 4 Assignment or transfer of interest: In fire insurance policy assignment or the transfer of interest can be freely assigned. 3. 2 MARINE INSURANCE

Marine Insurance is a contract between insured and insurer whereby the insurer undertakes to indemnify the insured in a manner and to the interest thereby agreed, against marine losses incident to marine adventure. The Rupali Insurance Company Limited covers the following two types of marine insurance. 3. 2. 1 Marine Cargo Insurance: Marine cargo insurance has the following features ? These clauses are used in the insurance of goods and are incorporated in cargo policies. ? The clauses describe the nature, extent and scope of insurance and define comprehensive conditions and restrictions. The additional marine perils against which cover may be sought or which are excluded from the policies are inserted through special clause. ? The underwriting of cargo goods depends upon the nature of goods, the susceptibility of the goods, intention of the insurer and insured and willingness of the assured to pay extra premium. 3. 2. 2 Marine Hull Insurance: Marine hull insurance has the following features ? These clauses are mainly framed with the insurance on vessels are incorporated in hull policies. ? The clauses may be pertaining to losses resulting from collision, standing, general average, etc. All risk policy may be issued or certain risk may be excluded from the policy by inserting suitable policy. ? ‘Inland or Port Risk’ may be incorporated in the policy to determine the extent of loss. 3. 3 MOTOR INSURANCE Motor insurance got recently a great momentum in insurance business. Motor is a kind of asset so the motor insurance is a contract of indemnity. The insurer will pay only up to the loss not more or less. To mitigate the financial hardship caused to the persons, the Motor Vehicles Act. 1939, as amended from time to time, has made it compulsory to insure against the risk of liability to third parties.

The motor insurance has the following features, 3. 3. 1 Classification of vehicles for the purpose of insurance: For the purpose of insurance vehicles as below:- ? Private Cars (not used for carrying passengers for hire or reward). ? Commercial vehicles such as goods carrying vehicles, passenger’s vehicles, tractors and others. ? Motor cycles, scooters and auto cycles. 3. 3. 2 Kinds of policies: The policies under motor insurance are as follows:- ? Act liability policy ? Third party policy ? Comprehensive policy 3. 4 MISCELLINOUS INSURANCE

Under the miscellaneous form of insurance the Company introduces the following policies 3. 4. 1 Employees liability insurance: Such policies can be traced to the industrial development. 3. 4. 2 Oversea medi-claim insurance: Such policies is applied for the persons going abroad and insurer undertakes the risk of illness if occurs due to the journey. But the Company applies the policy only for the VIPs. 4. AGREERATE AMOUNT OF DIFFERENT POLICIES 4. 1 PREMIUM INCOME 4. 1. 1 Total premium income During the period under review the Company procured premium for the year 2005 amounting to TK. 41 million as against Tk. 211 million in 2004, Tk. 188million in 2003, Tk. 184 million in 2002, Tk. 188 million in 2001. After ceding Re-Insurance premium the net premium for the year 2005amounting to Tk. 146 million as against Tk. 135 million in 2004,Tk. 126 million in 2003,Tk. 121 million in 2002, Tk. 121 million in 2001. Now let us represent the above information graphically Figure: Graphical representation of Premium Income 4. 1. 2 Premium income of Fire Insurance policy The premium income of fire insurance policy is day to day increased.

The last 5 yrs premium income of fire insurance is shown by the following figure Figure: Graphical representation of premium income of fire insurance policy 4. 1. 3 Premium income of Marine Insurance policy The premium income of marine insurance policy is shown collectively. It includes both marine cargo and marine hull. The last 5 yrs premium income of marine insurance is shown by the following figure [pic] Figure: Graphical representation of premium income of marine insurance policy 4. 1. 4 Premium income of motor & other insurance policy Motor insurance is mandatory for the motorists.

That is why motor insurance is increased year to year. The Company has some other policies in practice. The premium income of the Company from motor and other insurance represented by the following figure. The figure includes the gross and net premium income of the Company for last 5 yrs. [pic] Figure: Graphical representation of premium income of fire insurance policy Comment: From the above discussion we find that The Rupali Insurance Company Limited have increasing receipt of premium income year to year. Though the motor and other insurance is decreased in last year. 4. 2 CLAIMS PAYMENT 4. 2. Total claims paid in last 5 yrs During the year 2005 the Rupali Insurance Company Limited settled more claims. In the year 2005 the gross claim of the Company was Tk. 76 million and net claim was Tk. 61 million which was Tk. 77 million and Tk. 33 million for the year 2004 respectively,Tk. 45 million and Tk. 21million for year 2003, Tk. 61 million and Tk. 10 million for year 2002, Tk. 32 million and Tk. 7 million for the year 2001. Now let us show the claim payment into graphical view Figure: Graphical representation of total claim paid 4. 2. 2 Net claims paid for Fire Insurance in last 5 yrs

The net claim paid for fire insurance policy is very from year to year. The last 5 yrs net claim paid for the fire insurance is shown by the following figure [pic] Figure: Graphical representation of net claim paid for fire insurance policy 4. 2. 3 Net claims paid for Marine Insurance in last 5 yrs The net claim paid for marine insurance policy is also depends on the export-import condition of the country. The last 5 yrs claim paid of fire insurance is shown by the following figure Figure: Graphical representation of net claim paid for marine insurance policy 4. 2. Net claims paid for Motor & Other Insurance in last 5 yrs The company also has motor insurance in practice. In the year 2005 the Company settled more claims. In 2005 the net claims paid for motor and other insurance was Tk. 23. 26 million, which was more than the previous years. However the company remains the claim within control by their excellent management and product & judicious underwriting. Figure: Graphical representation of net claim paid for fire insurance policy Comment: From the above figure we find that at the year 2005 Rupali Insurance Company Limited paid the most claim of their last 5 yrs claim payment.

They paid TK. 61 million in the year 2005 which is increased by TK. 28 million as against the year 2004. 5. Reason of too much concentration on a certain policy From the above discussion of the report let us have a look up on the following table:- | Policy | Fire | Marine | Motor & | | | | |Others | |Year | | | | | Premium |Claim |Premium |Claim |Premium |Claim | | |received |paid |received |paid |received |paid | |2005 |44 |18. 66 |41 |9. 22 |33 |2. 28 | |2004 |68. 94 |18. 76 |37. 86 |10. 14 |36 |5. 59 | |2001 |37. 55 |7. 17 |30. 92 |2. 83 |52. 5 |16. 98 | Form the above table we observed that, if we consider the total income earned by the Company from premium we find that fire and marine insurance has the maximum priority. But according to the management of Rupali Insurance Company Limited marine insurance has a greater contribution on the total premium income because marine insurance is mandatory for export-import business. According to the management of Rupali Insurance Company Limited they have equal priority for policies but the insurance business is fully depend on the Govt. ules and regulation and the socio-economic situation as well as the political situation of our country. 6. CONCLUSION From the above discussion of the performance evaluation of the Rupali Insurance Company Limited now let us draw a conclusion of our analysis- ? As we saw the Rupali Insurance Company Limited is able to increase their profit from year to year and they have a positively upward trend of profit earned by the company in last 5 yrs. ? The company increase their asset from year to year. They increase their total asset by about TK. 37 million as against the year 2004 in the year 2005 ?

The important assumption of a good management is to maintain the basic accounting equation of ‘Asset = Liability’ and the company maintain the equation as per the principle. ? The investment maid the company also increased from year to year. ? The reserve for exceptional looses also increased from year to year. Though insurance business is now on growth stage in our country, people are not aware of such service rendered by different companies, such business is very much competitive one, because there are lot of insurance companies mushroomed all over the country specially in our capital city.

In such a competitive market the performance of Rupali Insurance Company Limited is quite good as per our analysis. 7. Recommendation After analyzing the report of the Rupali Insurance Company Limited now let us recommended on the performance of the Rupali Insurance Company Limited. – Since the insurance business is not very much familiar to the general people The Rupali Insurance Company Limited should take initial steps to increase awareness about the function of insurance as part of their business. – The company should introduce new policies as there are a very limited number of policies are practiced by most of our insurance companies. ibliography 1. Annual Report 2001 Rupali Insurance Company Limited 2. Annual Report 2002 Rupali Insurance Company Limited 3. Annual Report 2003 Rupali Insurance Company Limited 4. Annual Report 2004 Rupali Insurance Company Limited 5. Annual Report 2005 Rupali Insurance Company Limited 6. Insurance Principles and Practices M. N. Mishra, S. Chand & Company Ltd. [pic] ———————– [pic] [pic] (Taka in million) Taka in million (Taka in million) (Taka in million) (Taka in million) [pic] (Taka in million) (Taka in million) [pic] [pic] [pic] [pic] [pic] [pic] [pic] [pic] [pic]

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