1.1 Introduction
Though soon after liberation in 1971, the insurance industry was nationalized and was controlled by two state owned institution namely Sadharan Bima Corporation for general insurance and Jiban Bima Corporation for life Insurance (with the exception of American life insurance Co, in the private sector), there are at present 43 general insurance and 17 life insurance companies operating in the private sector industrial growth, has not been as expected. It is however need to mention that despite tough competition, the company’s business show satisfactory performance. So far already 3 life insurance companies have gone public and their shares are all traded.
1.2 Objectives
In 1984, the government had allowed the flatiron of insurance companies in the private sector; such companies started functioning from the middle of 1985
The main objective of the study is to reveal the following overall insurance business in Bangladesh along with the specific objectives,
The major objectives of this report are given below –
v
v
Source of information
Ø Secondary Source
The main sources of the secondary data are the Intermediate Accounting.
Other sources
v Annual report of the insurance companies
v Annual report of the financial performance of the Ratio Analysis.
v Journals and Booklets published by insurance company in Bangladesh.
v
- Cash in Transit policy
- Cash in safe policy
- Cash in counter policy
- Fidelity Guarantee policy
- Employer’s Liability/ Workmen’s compensation policy
- Personal Accident policy
- The peoples personal accident policy
- Personal Accident policy for Air Travel only policy
- Compressive Air Travel policy
- Professional indemnity policy
- Product liability policy
- Dread Disease policy
- Crop insurance policy Prawn culture insurance policy
- Livestock / Cattle insurance policy
Theoretical Development
History of Insurance business in Bangladesh
Insurance a system of spreading the risk of one to the shoulders of many. It is a contract whereby the insurers, on receipt of a consideration known as premium, agree to indemnify the insured against losses arising out of certain specified unforeseen contingencies or perils insured against.
Insurance is not a new business in Bangladesh. Almost a century back, during British rule in India, some insurance companies started transacting business, both life and general, in Bengal. Insurance business gained momentum in East Pakistan during 1947-1971, when 49 insurance companies transacted both life and general insurance schemes. These companies were of various origins British, Australian, Indian, West Pakistani and local. Ten insurance companies had their head offices in East Pakistan, 27 in West Pakistan, and the rest elsewhere in the world. These were mostly limited liability companies. Some of these companies were specialized in dealing in a particular class of business, while others were composite companies that dealt in more than one class of business.
The government of Bangladesh nationalized insurance industry in 1972 by the Bangladesh Insurance (Nationalization) Order 1972. By virtue of this order, save and except postal life insurance and foreign life insurance companies, all 49 insurance companies and organizations transacting insurance business in the country were placed in the public sector under five corporations. These corporations were: the Jatiya Bima Corporation, Tista Bima Corporation, Karnafuli Bima Corporation, Rupsa Jiban Bima Corporation, and Surma Jiban Bima Corporation. The Jatiya Bima Corporation was an apex corporation only to supervise and control the activities of the other insurance corporations, which were responsible for underwriting. Tista and Karnafuli Bima Corporations were for general insurance and Rupsa and Surma for life insurance. The specialist life companies or the life portion of a composite company joined the Rupsa and Surma corporations while specialist general insurance companies or the general portion of a composite company joined the Tista and Karnafuli corporations.
The basic idea behind the formation of four underwriting corporations, two in each main branch of life and general, was to encourage competition even under a nationalized system. But the burden of administrative expenses incurred in maintaining two corporations in each front of life and general and an apex institution at the top outweighed the advantages of limited competition. Consequently, on 14 May 1973, a restructuring was made under the Insurance Corporations Act 1973. Following the Act, in place of five corporations the government formed two: the sadharan bima corporation for general business, and jiban bima corporation for life business.
The postal life insurance business and the life insurance business by foreign companies were still allowed to continue as before. In reality, however, only the American life insurance company. Continued to operate in the life sector for both new business and servicing, while three other foreign life insurance continued to operate only for servicing their old policies issued during Pakistan days. Postal life maintained its business as before.
After 1973, general insurance business became the sole responsibility of the Sadharan Bima Corporation. Life insurance business was carried out by the Jiban Bima Corporation, the American Life insurance Company, and the Postal Life Insurance Department until 1994, when a change was made in the structural arrangement to keep pace with the new economic trend of liberalization.
The Insurance Corporations Act 1973 was amended in 1984 to allow insurance companies in the private sector to operate side by side with Sadharan Bima Corporation and Jiban Bima Corporation. The Insurance Corporations Amendment Act 1984 allowed floating of insurance companies, both life and general, in the private sector subject to certain restrictions regarding business operations and reinsurance. Under the new act, all general insurance businesses emanating from the public sector were reserved for the state owned Sadharan Bima Corporation, which could also underwrite insurance business emanating from the private sector. The Act of 1984 made it a requirement for the private sector insurance companies to obtain 100% reinsurance protection from the Sadharan Bima Corporation. This virtually turned Sadharan Bima Corporation into a reinsurance organization, in addition to its usual activities as direct insurer. Sadharan Bima Corporation itself had the right to reinsure its surplus elsewhere outside the country but only after exhausting the retention capacity of the domestic market. Such restrictions aimed at preventing outflow of foreign exchange in the shape of reinsurance premium and developing a reinsurance market within Bangladesh.
The restriction regarding business placement affected the interests of the private insurance companies in many ways. The restrictions were considered not congenial to the development of private sector business in insurance. Two strong arguments were put forward to articulate feelings: (a) since the public sector accounted for about 80% of the total premium volume of the country, there was little premium left for the insurance companies in the private sector to survive. In this context, Sadharan Bima Corporation should not have been allowed to compete with the private sector insurance companies for the meager premium (20%) emanating from the private sector; (b) Being a competitor in the insurance market, Sadharan Bima Corporation was hardly acceptable as an agency to protect the interests of the private sector insurance companies and should not have retained the exclusive right to reinsure policies of these companies. The arrangement was in fact, against the principle of laissez faire.
Private sector insurance companies demanded withdrawal of the above restrictions so that they could (a) underwrite both public and private sector insurance business in competition with the Sadharan Bima Corporation, and (b) effect reinsurance to the choice of reinsures. The government modified the system through promulgation of the Insurance Corporations (Amendment) Act 1990. The changes allowed private sector insurance companies to underwrite 50% of the insurance business emanating from the public sector and to place up to 50% of their reinsurance with any reinsured of their choice, at home or abroad, keeping the remaining for placement with the Sadharan Bima Corporation.
According to the new rules the capital and deposit requirements for formation of an insurance company are as follows:
Capital requirements: for life insurance company – Tk 75 million, of which 40% shall be subscribed by the sponsors; for mutual life insurance company – Tk 10 million; for general insurance company – Tk 150 million, of which 40% shall be subscribed by the sponsors; and for cooperative insurance society – Tk 10 million for life and Tk 20 million for general.
Deposit requirements (in cash or in approved securities): For life insurance – Tk 4 million; for fire insurance – Tk 3 million; for marine insurance – Tk 3 million; for miscellaneous insurance – Tk 3 million; for mutual insurance company – Tk 1.4 million; and for cooperative insurance society, in case of life insurance – Tk 1.4 million, and in case of general insurance – Tk 1 million for each class.
The government guidelines for formation of an insurance company are:
(1) The intending sponsors must first submit an application in prescribed form to the Chief Controller of Insurance for prior permission. (2) After necessary scrutiny the Chief Controller shall forward the application with his recommendation to the Ministry of Commerce. (3) After further scrutiny, the Ministry of Commerce shall submit its views to the Cabinet Committee constituted for this purpose. (4) The decision of the Committee, if affirmative, should be sent back to the Ministry of Commerce which in turn should send it back to the Chief Controller of Insurance for communicating the same to the sponsors. (5) The sponsors would then be required to apply in a prescribed form to the Registrar of Joint Stock Companies to get registration as a public liability company under the Companies Act. Memorandum and Articles of Association duly approved by the Controller of Insurance would have to be submitted with the application. (6) Once the registration process was completed the sponsors would have to obtain permission of the securities and exchange commission to issue share capital. (7) Reinsurance arrangements would have to be made at this stage. (8) After all the above requirements were fulfilled the licence to commence business under the Insurance Act 1938 is to be obtained from the Chief Controller of Insurance. Application can only be made subject to government announcements in this regard.
The control over insurance companies, including their functions relating to investments, taxation, and reporting, are regulated mainly by the Insurance Act 1938 and the Finance Acts.
privatization policy adopted in the 1980s paved the way for a number of insurers to emerge in the private sector. This resulted in a substantial growth of premium incomes, competition, improvement in services, and introduction of newer types of business in wider fields hitherto untapped. Prior to privatization, the yearly gross premium volume of the country was approximately Tk 900 million in general insurance businesses and approximately Tk 800 million in life insurance business. In 2000, premium incomes raised to Tk 4,000 million in general insurance business and Tk 5,000 million in life insurance business.
Up to 2000, the government has given permission to 19 general insurance companies and 10 life insurance companies in the private sector. Insurers of the country now conduct almost all types of general and life insurance, except crop insurance and export credit guarantee insurance, which are available only with the Sadharan Bima Corporation.
Numerous institutions, associations and professional groups work to promote the development of insurance business in Bangladesh. Prominent among them are the Bangladesh Insurance Association and Bangladesh insurance academy. Bangladesh Insurance Association was formed on 25 May 1988 under the Companies Act 1913. It is registered with the Registrar of Joint Stock Companies and has 30 members. It aims at promoting, supporting and protecting the interests and welfare of the member companies.
Surveyors and insurance agents occupy a prominent position in the insurance market of Bangladesh. The surveyors are mainly responsible for surveying and assessing general insurance losses and occasionally, for valuation of insurance properties, while the agents work to procure both life and general insurance business against commission. The system of professional brokers has not yet developed in Bangladesh. However, it is a common practice of the insurers to engage salaried development officers for promotion of their insurance business. [AH Choudhury]
2.2 Varies Types of Insurance Business in Bangladesh
Fareast Islamic Life Insurance
Fareast Islamic Life Insurance Co. Ltd. emerged as the 1st full-fledged Islami Life Insurance Company in the country in 2000 and has, by the grace of Almighty Allah, been able to bring confidence among the common people of the country.
Standard Insurance Ltd. (SIL) is one of the leading General Insurance Company in Bangladesh.
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Homeland life insurance Company limited (HOLICO)
Homeland Life Insurance Company Limited is first time introduce Islami Life Insurance on basis of Quran & Sunnah in Bangladesh.
A well know insurance company in Bangladesh
choosing business insurance for your business can be a daunting task. Here you will find answers to demystify business insurance and help you insure
choosing business insurance for your business can be a daunting task. Here you will find answers to demystify business insurance and help you insure
Aided by its excellently skilled human resources, CRISL is poised to take any rating assignment pursuing international standards with its proven methodology and research on various economic fields of Bangladesh.
In the process, CPD strives to bridge the gap between empirical research and policy advocacy through a sustained effort in public policy analysis. CPD Endeavour’s to create a national environment conducive
Pragati Life Insurance Limited
Pragati Life Insurance Limited is a public limited company registered with the Registrar of Joint Stock Company and licensed by the Controller of Insurance, Govt. of Bangladesh to transact life insurance business in Bangladesh.
Alico American Life Insurance Company (ALICO) is one of the largest international financial service companies globally. Incorporated in Delaware USA
Jibon Bima Corporation
The Jiban Bima Corporation (JBC) is the lone state-owned life Insurance company in Bangladesh, which started its maiden journey on May 14, 1973.
Eastland general insurance company is involve with providing general insurance for all kind of occasions.
American Life Insurance Company (ALICO)
American Life Insurance Company (ALICO), a subsidiary of American International Group, Inc. (AIG), is one of the largest international life insurance companies in the
Reliance Insurance Bangladesh
Reliance general insurance, fire insurance, marine cargo insurance, engineering, motor and Miscellaneous insurance.
Fire and other insurances. A group of young entrepreneurs of Bangladesh who had earlier launched a commercial Bank in the private sector sponsored the company with 30 million Taka capital in 1986.
Fire, marine, motor, flood & disaster insurance.
The City General Insurance Company Ltd. (CGIC)
Sponsored by few of the most eminent business personalities, industrialists and bankers of Bangladesh under the patronization and guidance of Al-Haj Anwar Hossain, Chairman of Anwar Group of Industries.
Meghna Life Insurance Company Ltd.
We are proud of our transparent and accountable services being rendered to our valued customers at their utmost satisfaction. Life insurance.
Paramount Insurance Company Limited.
Paramount Insurance Company Limited is one of the leading insurance companies of the country, since its establishment in November 1999; the company has successfully been in operation.
Pioneer Insurance Company Limited.
Pioneer Insurance Company Limited was founded in 1996 sponsored by a group of entrepreneurs of Bangladesh who had earlier established themselves as leading industrialists and business magnates of the country. Pioneer Insurance Company Limited is a public
Tactful Islamic Insurance Company Ltd.
Tactful Islamic Insurance Company Ltd is a leading General Insurance Company of Bangladesh.]
United Insurance
United Insurance Company Ltd. (UICL) is a Public Limited General Insurance Company (Non-Life) maintaining the traditional values of insurance business since commencement in 1985.
2.2 General Insurance in Private Sector:
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Bangladesh General Insurance Co. Ltd. |
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Central Insurance Co. Ltd. |
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Eastern Insurance Co. Ltd. |
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Eastland Insurance Co. Ltd. |
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Federal Insurance Co. Ltd. |
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Janata Insurance Co. Ltd. |
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Karnaphuli Insurance Co. Ltd. |
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Phoenix Insurance Co. Ltd. |
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Purabi Insurance Co. Ltd. |
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Union Insurance Co. Ltd. |
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Tactful Islami Insurance Ltd. |
2.2 Life Insurance in Private Sector:
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Others:
American Life Insurance Co. Ltd… Postal Life Insurance.
§ Insurance services marketed by our industry so far have been limited to conventional classes of insurance. § Little has been done to introduce or promote a need oriented insurance coverage and to apply innovative approach in responding to local needs and local hazards. § There is an acute shortage of well trained agents / employer of agents to give service to customers § There are no proper training facilities in the country. § There is an acute shortage of well trained and qualified loss adjusters in the country. There is a need for training of CILA (Chartered Institute of Loss Adjuster) § Absence of healthy competition is also another factor bringing about indiscipline and irregularity in the insurance industry. Healthy competition occurs where there is well informed market and in particular a well informed and well advised consumer group.
2.3 Traditional of Insurance Schemes: Fire, Marine Hull, Marine Cargo, Motor , Aviation , Engineering, Miscellaneous Insurance so to say personal Accident , Burglary and House Breaking , Fidelity Guarantee Insurance , Cash-in Transit, Cash in Safe, Workmen’s compensation , public liability , Dreadly Disease Insurance and Overseas Medical aim Insurance.
2.4. Non Traditional Insurance Schemes: ECG, Crop Insurance, Cattle Insurance, Shrimp Cultivation Project Scheme, Rubber Cultivation project insurance etc.
Fire Insurance: Under fire insurance risk of indemnity is taken in case of losses occurred by the risk of fire, lighting, explosion (used in household work), Food, Cyclone, Earthquake, Riot etc.
Marine Cargo Insurance: This policy is issued against existing risk in case of exporting commodities and shifting of commodities from one place to another .the risks which are covered in this case are fire, explosion, standing of ship or turn or loss due to displacement of goods at time of loading and unloading from the ship, earthquake, lightning or eruption, risk by clash, jettison, general average etc.
Marine Hull Insurance: Marine Hull policy is issued for indemnity of ship. In this case, the risks which are taken by clash, fire, explosion, lightning, stranding, sinking, of ship by natural calamity, jettison general average etc.
Motor Insurance: Motor policy id issued against risk on accident of miscellaneous cars, various motor cars, as private car , commercial vehicle, motor cycle, etc, In this case the risks which taken are fie, explosion, theft, riot, earth quake, flood, cyclone, any other loss by accident and the loss of lives & properties of third party.
Aviation Insurance: This policy is issued against risk by loss of property and life of third party, aviation hull, engine, parts and passengers.
Engineering Insurance: This policy is issued for probable loss at the time of engineering works. The risks taken in this regard are accident, natural calamities such as earthquake, flood, cyclone, and lives & properties of third party etc
2.5. Miscellaneous Insurances:
Personal Accident insurance Insurance cover is made against accidental death and bodily injury. In this case, deaths, permanent loss of lymph and disability risks are covered.
Burglary & House Breaking Insurance. Under this insurance risks are covered due to loss of properties and burglary.
Fidelity Guarantee Insurance. This insurance is covered due to distrust of officers /employees transacting cash, money.
Cash in safe / cash in counter Insurance. This insurance is covered against loss due to burglary & hijacking of cash money kept in policy holder’s own safe / counter. The risks taken are theft, hijacking, robbery etc.
Workmen’s Compensation Insurance. This insurance is covered in order to indemnity any loss when regular salaried workers and other officials fell in accident or ill due to nature of works during working period. The risks taken are accident and professional diseases etc.
Public Liability Insurance The liabilities are taken by the insurer through this insurance while any liability shoulders upon him due to loss of property or any person of third party for negligence of policy holder. Peoples Personal Accident Insurance This policy is issued against accidental loss of any professional between the age of 16 to 65.
FINANCIAL STATEMENT ANALYSIS
4.1 FINANCIAL ANALYSIS
Introduction: Financial analysis is a very important aspect in the modern days of business. It consists of the application of analytical tools and techniques to financial statement and data in order to measure relationship that are significant and useful in decision making. It helps to do the selection of investment process it can also serve as a tool in the evaluation of management. At the same time it reduces and narrows the inevitable areas of uncertainty.
Financial analysis can be described in different ways, depending on the objectives to be attained. It can be used as preliminary screening tools in the selection of investment or merger candidates. Financial analysis can be used as forecasting tools of future financial condition and result. It can do the diagnosis of managerial operating of other problematic areas.
According to Leopold A. Bernstein “The process of financial statement analysis consist of the application of analytical tools and techniques to financial statements and data in order to derive from them measurement and relationship that are useful and significant for decision making”.
According to I .M. pandey “Financial analysis is a process of identifying the financial strengths and weaknesses or a firm by properly establishing relationship between the item of balance sheet and profit and loss account”.
4.1 Types of Ratio: Every management is interested in evaluating probable aspect the firm’s performance. They need to protect the interest of all parties and see that the firm grows profitably. We can classify these ratios into few categories. They are as follows:
1. Liquidity Ratio: Liquidity ratio measures the ability of a firm to meet the current obligation .A firm should ensure that it does not suffer from lack of liquidity and also does not have execs liquidity, will result in a poor creditworthiness, loss of creditors confidence. The most common ratios which indicate the extent of liquidity or lack of it are as follows:
Current Ratio: Current ratio is calculated by dividing current assets into current liabilities.
Cash, Marketable securities Current Cash Debt Coverage ratio Current cash debt coverage ratio is calculated by dividing Net cash provided by operating activities by Average current liabilities.
So we can ratio these: Net cash provided by operating activities Average current liabilities
2. Activity Ratio Activity ratios are employed to evaluate the efficiency with which the firm managers and utilizes its assets. This ratio indicates the speed with which assets are being converted or turned over into sales thus activity ratio involve a relationship between sales and assets.
Receivable turnover: Receivable turnover ratio is calculated by dividing Net sales by Average trade receivable.
So we can ratio these: Net sales Average trade receivable
3. Profitability ratio: A company should earn and grow over a period of time profit is the difference between revenue and expenses over a period of time. It is the ultimate outcome of a company and the company will have no future if fails to make sufficient profit. The profitability ratios are calculated to measures the operating efficiency of a company. a. Profit Margin on sales: Profitability ratio in relation to sales is the profit margin or gross margin. It is calculate in the following way:
Profit margin on sales = Net Income
Cash debt coverage ratio: These ratios calculate by dividing net cash provided by operating activities by Average total liabilities. So this calculated by = Net cash provided by operating activities Total Liabilities
4.2 Calculation of financial Ratios of Insurance Company Ltd.
This chapter contains the calculation of main financial ratios for evaluating performance of Insurance Company Limited. Many hundreds of different ratios can be developed from a set of financial reports, but most of them are of little value or simply a different way of expressing the same concept. Although opinion among analysts vary widely as to which are the key ratios, most will agree that only a score or so are really significant.
The contains analysis and interpretation o the financial ratios of Insurance company ltd. And graphically presentation of the ratios on the basis of financial ratios calculated of the company.
Calculation of Some of the Important Financial Ratios for Measuring Performance.
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2009 |
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1.70 % |
Table: 1.1
a. Current Ratios:
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Year |
Ratio |
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2009 |
1.96 |
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2010 |
1.70 |
Table: 1.1
Current Ratio of the City general Insurance co. ltd
Year
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2010 23,134,702 /29,006.599
b. Quick / Acid Ratio:
Table: 1.2
Figure: 1.2
The quick / acid test ratio of the City General Insurance Co. Ltd. Are 0.76, 0.80 of the last two years of 2009, 2010 respectively. Which can be interpreted to be insufficiently liquid and not satisfactory.
c. Current Cash Debt Coverage Ratio:
Net Cash provided by operating Activities /Average Current Liabilities
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Ratio |
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2009 |
12,843,908/16,004,918 |
0.80 % |
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2010 |
16,3018,073/21,650,265 |
0.75 % |
Table: 1.4
d. Receivable turnover
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Year |
Ratio |
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2009 |
0.80 |
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2010 |
0.75 |
Table: 1.4
Receivable turnover Ratio of the City general Insurance co. ltd
Assets turnover ratio of City General Insurance Co. Ltd. Are 0.06, 0.06 of the last two years of 2009, 2010 respectively. Which can be interpreted to be insufficiently liquid and not satisfactory.
Comment on Activity Ratio:
The receivable turnover ratio is somewhat satisfactory in the year of 2009 is satisfactory. Asset turnover same of the not satisfactory of the year 2009, 2010
The current assets management is deplorable due to very bad inventory management liberal credit policy. So Assets Management position of the City General Insurance Co. Ltd. Is not efficient.
2. Profitability
f. Profit Margin on Sales
Net Income / Net Sales
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Year |
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2009 |
15,988,902/205,513,833 |
0.08 % |
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2010 |
26,818,369/261011869 |
0.10 % |
Table: 1.7
g. Rate of Return on Assets
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Year |
Ratio |
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2009 |
0.08 |
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2010 |
0.10 |
Table: 1.7
Rate of return on assets Ratio of the City general Insurance co. ltd
3. Earning Per Share
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Year |
Taka |
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2009 |
7.33 |
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2010 |
13.08 |
Table: 1.8
Table: 1.10
I. Cash Debt Coverage Ratio
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Year |
Ratio |
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2009 |
0.05 |
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2010 |
0.52 |
2009
500,542,223 /259,467,142
1.93%
2010
462,493,608 / 199,626,870
2.32%
Table: 2.1
a. Current Ratios:
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Year |
Ratio |
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2009 |
1.93 |
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2010 |
2.32 |
Table: 2.1
Current Ratio of the Pioneer Insurance co. ltd
Figure: 2.1
The current ratio is 2:1 then it can be interpreted as insufficiently liquid. Because current ratio measures only total taka worth of current liabilities. The current assets may decline its value then the ability to pay liability will be threatening in case of 2.1 current ratio.
Ratio
2009
173,509,269 / 259,467,142
0.67%
2010
121,844,167 / 199,626,870
0.61%
Figure: 2.2
The quick / acid test ratio of the Pioneer Insurance Co. Ltd. Are 0.67, 0.61 of the last two years of 2009, 2010 respectively. Which can be interpreted to be insufficiently liquid and not satisfactory
c. Current Cash Debt Coverage Ratio:
Net Cash provided by operating Activities /Average Current Liabilities
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Year |
Calculation |
Ratio |
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2009 |
72,903,904 / 252,458,631 |
0.29% |
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2010 |
72,364,927 / 229,547,006 |
0.35% |
Table: 2.3
c. Current Cash Debt Coverage Ratio:
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Year |
Ratio |
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2009 |
0.29 |
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2010 |
0.35 |
Table 2.3
Figure: 2.3
Current cash debt coverage ratio of Pioneer Insurance Co. Ltd. Are 0.29, .35 of the last two years of 2009, 2010 respectively. Which can be interpreted to be insufficiently liquid and not satisfactory.
Comment on Liquidity Ratios:
The liquidity position of the company is not satisfactory due to the fact that their receivable management and specially, inventory management is not satisfactory.
Though the current ratio, quick ratio, current cash debt coverage ratio are not satisfactory and the year of some satisfactory current ratio of 2010 and quick ratio, current cash debt coverage ratio are not satisfactory.
2. Activity Ratio
Ratio
2009
24,657,993 / 172,004,794
0.14%
2010
45,887,210 / 147,676,718
0.31%
Table: 2.4
d. Receivable turnover
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Year |
Ratio |
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2009 |
0.14 |
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2010 |
0.31 |
Table: 2.4
Receivable Turnover Ratio of the Pioneer Insurance co.
ltd
Figure: 2.4
Receivable turnover ratio of Pioneer Insurance Co. Ltd. Are 0.14 0.31 of the last two years of 2009, 2010 respectively. Which can be interpreted to be insufficiently liquid and not satisfactory.
e. Assets Turnover
Net Sales /Average Total Assets
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Year |
Calculation |
Ratio |
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2009 |
24,657,993 / 626,400,549 |
0.04% |
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2010 |
45,887,210 / 683,854,050 |
0.07% |
Figure: 2.5
Assets turnover ratio of Pioneer Insurance Co. Ltd. Are 0.04, 0.07 of the last two years of 2009, 2010 respectively. Which can be interpreted to be insufficiently liquid and not satisfactory.
Comment on Activity Ratio:
The receivable turnover ratio is somewhat satisfactory in the year of 2008 is satisfactory. Asset turnover same of the not satisfactory of the year 2009, 2010.
The current assets management is deplorable due to very bad inventory management liberal credit policy. So Assets Management position of the pioneer Insurance Co. Ltd. Is not efficient.
2. Profitability
f. Profit Margin on Sales
Net Income / Net Sales
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Year |
f. Profit Margin on Sales
Table: 2.6
g. Rate of Return on Assets
Table: 2.7
Rate of Return on Assets Ratio of the Pioneer Insurance co. ltd of the Pioneer Insurance co. ltd
Figure: 2.9
Debt to Total Assets of the Pioneer Insurance Co. Ltd. Are 0.61, 0.57 of the last two years 2009, 2010 respectively. Which can be interpreted to be insufficiently liquid and not satisfactory. Some satisfactory of the year 2009.
I. Cash Debt Coverage Ratio
Net Cash Provided by Operating Activates / Average Total Liabilities
Table: 2.10 I. Cash Debt Coverage Ratio
Table: 2.10
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2009 |
257,639,813/32,067,254 |
8.03% |
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2010 |
553,835,022/91,399,665 |
6.06% |
Table: 4.1
a. Current Ratio
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Year |
Ratio |
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2009 |
8.03 |
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2010 |
6.06 |
Table: 4.1
Liquidity Ratio of the United Insurance co. ltd
Figure: 4.1
The current ratio is 4:1 then it can be interpreted as insufficiently liquid. Because current ratio measures only total taka worth of current liabilities. The current assets may decline its value then the ability to pay liability will be threatening in case of 4.1 current ratio.
Ratio
2007
18,077,973/32,067,254
0.56%
2008
21,159,604/91,399,665
0.23%
Table: 4.2
b. Quick / Acid Ratio:
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Year |
Ratio |
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2009 |
0.56 |
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2010 |
0.23 |
Table: 4.2
Quick / Acid Ratio of the United Insurance co. ltd
Current Cash Debt Coverage Ratio:
Net Cash provided by operating Activities /Average Current Liabilities
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Year |
Calculation |
Ratio |
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2009 |
61,073,137/30,317,261 |
2.01% |
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2010 |
10,761,860/61,733,459 |
0.17% |
Current cash debt coverage ratio of United Insurance Co. Ltd. Are 0.203, 0.17 of the last two years of 2009, 2010 respectively. Which can be interpreted to be insufficiently liquid and not satisfactory and some satisfactory of the year 2007 ratio of 2.03.
Comment on Liquidity Ratios:
The liquidity position of the company is not satisfactory due to the fact that their receivable management and specially, inventory management is not satisfactory.
Though the current ratio, quick ratio, current cash debt coverage ratio are not satisfactory and the year of some satisfactory current ratio of 2009, 2010 and current cash debt coverage ratio 2009 and quick ratio are not satisfactory.
2. Activity Ratio
Receivable turnover
Net sales /Average Trade Receivable
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Year |
Receivable turnover
Table: 4.4
Receivable turnover of the United Insurance co. ltd
Figure: 4.4 Receivable turnover ratio of United Insurance Co. Ltd. Are 5.49, 17.03 of the last two years of 2009, 2010 respectively. Which can be interpreted to be insufficiently liquid and not satisfactory but satisfactory of the year 2008, this ratio 17.03
e. Assets Turnover
Net Sales /Average Total Assets
Assets turnover ratio of United Insurance Co. Ltd. Are 0.24, 0.56 of the last two years of 2009, 2010 respectively. Which can be interpreted to be insufficiently liquid and not satisfactory.
Comment on Activity Ratio: The receivable turnover and Asset turnover ratio is somewhat satisfactory in the year of 2008. Asset turnover and receivable turnover not satisfactory of the year 2007 The current assets management is deplorable due to very bad inventory management liberal credit policy. So Assets Management position of the United Insurance Co. Ltd Is not efficient 2. Profitability f. Profit Margin on Sales
Net Income / Net Sales
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