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Objective:- Review of Annual Report of 2067_2068

Methodology: The analysis of financial statement consists of study of relationship and trends, to determine whether or not the financial position and results of operations as well as the financial progress of the company satisfactory or unsatisfactory. But in given case, I have been asked to review and comment on the basis of single year financial data. Thus because of this inevitable constrain, I am limiting my review on vertical Analysis. 1. Financial Performance indicators: Authorized capital 20 crs Issued & Paid up 12.92 crs Face value of 100.00 each EPS 70.33 Market Price Per Share 307.00 Book Value of Share 253.82 PE ratio 4.32 a. EPS is in increasing tread. It shows healthy sign. b. Market Capitalization - 39.66 crs which is slightly more than net worth of company i.e. 32.78 crs. Further this impact can be understand through differences in BV and MPS. i.e MPS is 20.95 % more than BV. This is a good indicator for company valuation and measure its presence in industries. c. PE Ratio 4.32, it indicates how expensive your business is. its comparatively quite low. Standard PE of general insurance company is 13.31. that its clear that though share is not trading so high, peoples are reluctant to buy it. Thus its a clear message for low investor confidence. d. Ratio of net premium to gross premium for 2067/68 stand at 54.29% and seems to increasing. Its a good sign for long term growth. e. Ratio of net profit to Gross premium for 2067/68 stand at 17.05%, though its in increasing trend. Net profit margin is below the average. f. As per the analysis of revenue account, it appears that revenue wise 76.54 % of business generated from Motor Vehicle insurance followed by Fire Insurance with 19.42% but margin wise motor Vehicle insurance is most less profitable with 11.28% of margin and followed by engineering insurance with 22.74%. margin wise most profitable segment is Fire insurance and its operating on 47.94% margin. it appears that company is concentrating to generate less profitable segment i.e. Motor Vehicle insurance. Thus mainly concentrate in conservative product only.

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g. Out of total revenue of 61.67 crs, principal business is contributing only 28.91 crs that means only 46.87% revenue are generated from core business. That means 53.13% of total revenue generated from other misc and ancillary activities. This indicates that company is not optimizing its assets use for generation of core business. h. Reinsurance commission portion constitute 24.38% of gross insurance premium and 11.43% of total gross revenue in 2067/68. As a fundamental analyst, I would like to put negative performance mark for this. This is simply because its indicate that you as a company is should act manufacturer of product and sale it. 2. Operational Performance indicators:a. Though its good to see reducing ratio of Agents expenditure to gross Premium receipts. In 2067/68 its 7.58% only. This is less than normal agent commission percentage. Its not only give sign of less penetration but also indicate importance of awareness and literacy in mass. b. Number of Insurance agents increased to 105 from 89 in 2063/64 and Branches increased to 18 from 11 in 2063/64. It indicates that your company is operating very conservative way. c. Currently segment wise revenue contribution is as follows.. i. Fire Insurance 19.42% ii. Marine Insurance- 2.01% iii. Motor Vehicle Insurance 76.54% iv. Engineering Insurance 0.29% v. Others Misc Insurance 1.72% From above its very clear that company is mainly focusing in Motor Vehicle insurance and Fire insurance, which were first and second most contributors respectively but margin wise there were not the first and second contributing segment. 3. Statutory compliances:Due to lack of time and absence/ limitation of information, I would not like to comment on BEEMA SAMITI rules, regulation and circulars contains.

Recommendations: 1. As a listed company management, you should act to encourage investor to invest in company equity. Being insurance company and this level of operation you should increased your capital base and should make arrangement to increase float. 2. Management should diversify its product line and should more concentrate in most margin segment revenue. New and innovative product like Cash less Motor vehicle policy, cash less medical policy etc shall be initiated.

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3. Currently management seems to work in very conservative way thus more professional aggressiveness is required to improve investor and customer confidence. 4. As insurance company, more resource have to use for develop good insurance agents network, education, training. This is because insurance business worldwide mostly depends in agent network. This will not only means of high seeped penetration but also your resources will be freed for designing innovative product and making right and timely strategy.


RC Lohani

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