International Journal of Research and Innovation in Social Science (IJRISS) | Volume V, Issue VII, July 2021 | ISSN 2454–6186

Financial Performance of General Insurance Companies in Bangladesh: A 2003-2020 Evaluation

Dr. Muhammad Ziaulhaq Mamun¹, and Fairuz Chowdhury^2
1Pro-Vice Chancellor, East West University, Bangladesh Former Professor, Institute of Business Administration University of Dhaka
²Assistant Professor Institute of Business Administration University of Dhaka Dhaka, Bangladesh

Abstract: This paper analyzed the financial performance of the general insurance companies of Bangladesh over the period 2003-2020 by studying 18 general insurance companies out of 46 (including the only government owned company Sadharan Bima Corporation, SBC). In terms of net premium, the study found no definite industry trends; but, the only nationalized insurance company (SBC) has around 1200% higher premium earnings than the private average. Also, SBC has the highest figures for both investment and investment income for the studied period. Average investment has increased in the private insurance sector steadily during 2003-2007, then onward there was sharp ups and downs; but SBC’s investment growth has been steady all through. In the studied period, the net claims of most private insurance companies have increased significantly with an overall rising trend. SBC has been incurring the most net claims and its average is 2543.18% more than private insurance companies’ average.
Regarding APBT (annual profit before tax), SBC had a much higher figure than any of the private companies and is almost 1200% of the average of the private general insurance companies. ROTA for most of the companies is consistent throughout the studied years. The companies had their highest ROTA during 2008-2010. The average of the private insurances showed much more fluctuation than SBC. The study found very strong correlation between industry net premium and net claims. But majority of the sample companies depict a negative correlation between profit and share price. The study further noted that older companies were financially better off compared to the newly established companies. Also, among the private general insurance companies there is variability in performance. SBC, being the only public insurance company, has a lot upper hand. Overall it can be said that the general insurance sector is doing moderately well.

Key words: APBT, investment, investment income, net claim, net income, ROTA

I. INTRODUCTION

1.1 Background

Insurance is an important sector that fosters financial stability by enabling economic agents to undertake various transactions with the transfer and dispersion of risks. Insurance provides the insured with a means of offsetting the burden of financial losses. Insurers protect individuals and businesses from the adverse effects of losses by peril, hazard, death, accident and many other unwanted happenings. Bangladesh economy holds huge risk in every sector due to its vulnerability to natural disasters like flood, cyclone, draught,