Net profits in the non-life insurance sector in 2020 rose by 5% compared to 2019, largely because of a lower effective tax rate, according to Topline Securities. The analysis is based on the financial results of 12 listed insurance companies which in aggregate account for 83% of the capitalisation of the non-life insurance market.
In comparison, in 2019, listed non-life insurers saw aggregate profits jump by 19% to PKR7.1bn ($46.4m) due to a sharp rise in investment income.
In 2020, underwriting income in the sector declined by 5% to PKR2.9bn from PKR3.0bn in 2019. However, investment income jumped by 11% to PKR5.4bn last year. Investment income accounted for 78% of the total profits of non-life insurance companies in 2020.
The underwriting income came under pressure because net premiums dropped by 5% in 2020 largely due to a slowdown in economic activities amidst the COVID-19 pandemic and lockdowns.
The net claims in the sector declined by 8% to PKR19.3bn in 2020. The sector’s claims ratio fell to 53% in 2020 compared to 54% in 2019.
The rise in investment income of the sector was largely due to gains on the sale of equities and fixed income instruments, Sunny Kumar at Topline Securities said.