By Kazim Alam, The Express Tribune
KARACHI: What does an increase of over 400% in one year in advertisement and publicity expense of a Pakistani life insurance company indicate given the fact that life insurance penetration in the country as a percentage of gross domestic product (GDP) is barely 0.4%?
“We’re very, very bullish about the life insurance market in the long term. You’re not even scratching the surface at 0.4%,” EFU Life Assurance Managing Director and CEO Taher G Sachak said while speaking to The Express Tribune in a recent interview.
In terms of total assets, EFU Life Assurance is the largest private sector life insurance company in Pakistan with an asset base of Rs37.9 billion in 2012, up 35.2% from 2011. Its gross premiums increased 17% to Rs11.8 billion in 2012.
However, the growth of 17% in gross premiums is considerably less than what EFU Life Assurance achieved in the preceding five years – the annualised increase in gross premiums between 2007 and 2011 remained almost 25%.
“It will be unrealistic of us to continue to grow at 25% because the base is so much larger now. The percentage growth rate on a huge base will tend to taper off to some extent,” Sachak said. “I would have liked 25%. But realistically speaking, we did a good job.”
One of the major competitors of EFU Life Assurance in the private sector – Jubilee Life Insurance – increased its gross premiums to Rs12.1 billion in 2012, which is 47% higher than gross premiums collected in 2011.
“Their base was smaller than ours in the previous year,” Sachak said, while commenting on the difference of 30 percentage points in gross premium growth rates for the two companies in 2012.
“They have done well and I don’t want to take anything away from them. But they also have a substantive health insurance-related premium in their total premiums,” he noted, adding EFU Life Assurance does not collect health premiums because its joint venture company – Allianz EFU – is a dedicated health insurance company with over a billion rupees worth of premiums.
Going by profitability, however, EFU Life Assurance is way ahead of its closest rival. While the profit after tax of Jubilee Life Insurance rose 47.7% to Rs553.4 million in 2012, the corresponding growth rate for EFU Life Assurance remained 58% with profit after tax of Rs914 million in the same year.
“At the end of the day, the bottom line gives you the indication how well and efficiently a company is being run,” he said.
EFU Life Assurance has 160 branches in 70 cities. About 40% of the company’s gross premiums come from Karachi, Lahore, Islamabad, Rawalpindi and Peshawar, according to Sachak, while 60% gross premiums come from second and third-tier cities.
“In terms of new business, the share of rural cities is much higher,” he said. “That’s where the disposable income is.”
According to Sachak, EFU Life Assurance’s policy distribution through the bancassurance channel remained flat in 2012. “We do not have the benefit of having a large bank as part of our business group – something a couple of our competitors do. We have to go and fight for each and every bit of business that we get from our banks,” he said.
EFU Life Assurance currently has partnership with 12 banks that enables it to sell insurance products using their nationwide branch network. However, these banks do not sell EFU Life Assurance products exclusively.
“I can’t even enter Habib Bank or MCB Bank,” he said, while referring to the fact that these banks are major shareholders in Jubilee Life Insurance and Adamjee Life, respectively.
Published in The Express Tribune, March 17, 2013.