Report on Insurance Companies

of Bangladesh & Analysis of

Fareast Islami Life Insurance Co.
Ltd.

1.0 List of Insurance Companies of

Bangladesh

The insurance sector is regulated by the Insurance Act, 1938 with

regulatory oversight provided by the controller of insurance on
authority under the Ministry of Commerce. A separate insurance
regulatory authority is being established. A total of 77 insurance
companies have been operating in Bangladesh, of which 30 provide
life insurance and 45 are in the general insurance field. Among the
life insurance companies, except the state-owned Jiban Bima
Corporation and foreign owned American Life Insurance Company,
and the rest are private. Among the general insurance companies,
state-owned Shadharan Bima Corporation is the most active in the
insurance sector. A total of 31 insurance companies are listed in the
capital market, of which eight offer life insurances.

There are two types of Insurance Companies in Bangladesh

1. Life-Insurance Companies (45)

2. General or Non-life Insurance Companies (30)

There are also 2 state owned insurance companies in Bangladesh in

Public Sector

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 List of Life Insurance Companies

There are 30 Life Insurance Companies in Bangladesh as stated

below:

1. American Life Insurance Company (Foreign Company)

2. Baira Life Insurance Company Ltd.

3. Delta Life Insurance Company Ltd.

4. Farest Islami Life Insurance Co. Ltd.

5. Golden Life Insurance Ltd.

6. Homeland Life Insurance Company Ltd.

7. Meghna Life Insurance Company Ltd.

8. National Life Insurance Company Ltd.

9. Padma Islami Life Insurance Company Ltd.

10. Popular Life Insurance Company Ltd.

11. Pragati Life Insurance Ltd.

12. Prime Islami Life Insurance Company Ltd.

13. Progressive Life Insurance Company Ltd.

14. Rupali Life Insurance Company Ltd.

15. Sandhani Life Insurance Company Ltd.

16. Sunflower Life Insurance Company Ltd.

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 17. Sunlife Insurance Company Ltd.

18. Zenith Islami Life Insurance Ltd.

19. Mercantile Islami Life Insurance Ltd.

20. NRB Global Life Insurance Company Ltd.

21. Guardian Life Insurance Ltd.

22. Chartered Life Insurance Company Ltd.

23. Best Life Insurance Company Ltd.

24. Protective Islami Life Insurance Co. Ltd.

25. Sonali Life Insurance Co. Ltd.

26. Sawdesh Life Insurance Co. Ltd.

27. Diamond Life Insurance Co. Ltd.

28. Alpha Islami Life Insurance Ltd.

29. Trust Islami Life Insurance Co. Ltd.

30. Jamuna Life Insurance Ltd.

List of Non-Life Insurance Companies

There are 45 General Insurance Companies in Bangladesh as stated

below:

1. Agrani Insurance Company Ltd.

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2. Asia Insurance Ltd.

3. Asia Pacific Gen Insurance Co. Ltd.

4. Bangladesh Co-operatives Ins. Ltd.

5. Bangladesh General Insurance Co. Ltd.

6. Bangladesh National Insurance Co. Ltd.

7. Central Insurance Company Ltd.

8. City Gen. Insurance Company Ltd.

9. Continental Insurance Ltd.

10. Crystal Insurance Company Ltd.

11. Desh Gen. Insurance Company Ltd.

12. Eastern Insurance Company Ltd.

13. Eastland Insurance Company Ltd.

14. Express Insurance Ltd.

15. Federal Insurance Company Ltd.

16. Global Insurance Ltd.

17. Green Delta Insurance Co. Ltd.

18. Islami Commercial Insurance Co. Ltd.

19. Islami Insurance Bangladesh Ltd.

20. Janata Insurance Company Ltd.

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21. Karnaphuli Insurance Company Ltd.

22. Meghna Insurance Company Ltd.

23. Mercantile Insurance Company Ltd.

24. Nitol Insurance Company Ltd.

25. Northern Gen.Insurance Company Ltd.

26. Peoples Insurance Company Ltd.

27. Phonix Insurance Company Ltd.

28. Pioneer Insurance Company Ltd.

29. Pragati Insurance Ltd.

30. Pramount Insurance Company Ltd.

31. Prime Insurance Company Ltd.

32. Provati Insurance Company Ltd.

33. Purabi Gen Insurance Company Ltd.

34. Reliance Insurance Ltd.

35. Republic Insurance Company Ltd.

36. Rupali Insurance Company Ltd.

37. Sonar Bangla Insurance Company Ltd.

38. South Asia Insurance Company Ltd.

39. Standard Insurance Ltd.

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 40. Takaful Islami Insurance Ltd.

41. Dhaka Insurance Ltd.

42. Union Insurance Company Ltd.

43. United Insurance Company Ltd.

44. Sena Kalyan Insurance

45. Sikder Insurance Company Ltd.

List of the Insurance Companies in Public

Sector

Besides the above mentioned ones there are 2 Insurance Companies

in public sector as follows-

1. Sadharan Bima Corporation(Gen. Ins)

2. Jiban Bima Corporation (Life Ins.)

2.0 IDRA
Insurance Development & Regulatory Authority
Bangladesh

History of Emergence

There are 77 insurance companies operating in the country and they

need to be regulated under comprehensive laws and guidelines and

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supervised by a strong regulatory authority. The Insurance Act 2010
said the sector needs to be managed properly and he strengthened
by reducing business risks, and local and
international insurance laws need to be
harmonized considering the socio-
economic aspect of the country, and protect the interest of policy
holders and other beneficiaries.

Parliament on 03 March 2010 passed two insurance laws in a bid to

further strengthen the regulatory framework and make the industry
operationally vibrant. The new laws, came in to effect on 18 March
2010, are Insurance Act 2010 and IDRA 2010.

Vision

To make the insurance industry the premier financial service

provider in the country and beyond focussing an efficient corporate
sector and capital market securing ever evolving aspiration of
society penetrating deep into all segments for high economic
growth.

Mission

Our mission is to protect the interest of the policy holders and other
stakeholders under insurance policy, supervise and regulate the
insurance industry effectively, ensure orderly and systematic growth
of the insurance industry and for matters connected therewith or
incidental thereto.

Value

Ethical norms, unbiased treatment, integrity, blind review, high

standard, continuous improvement.

Functions of IDRA

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Following Draft Regulatory functions are performed by IDRA-

1. Appointment of Consultants or Advisors

2. Fees for Inspection and Supply of Public Published Prospectus
3. Investment of Assets of Islami Insurers Regulations
4. License of Brokers
5. Licensing of Life-Insurance Agents
6. Licensing of Non-Life Insurance Agents
7. Life Insurance Policy Holders Protection Fund
8. Paid-Up Capital and Share Holdings of an Insurance Company
9. Registers of Policies and Claims
10. Registration of Insurance Companies
11. Reinsurance for Life Insurance Business in Foreign
Countries
12. Reinsurance for Non-Life Insurance Business in Foreign
Countries
13. Review of Orders and
14. Statistics

3.0 Ministry in Control

The insurance sector is regulated by the Insurance Act, 1938 with

regulatory oversight provided by the controller of insurance on
authority under the Ministry of Commerce.

4.0 Products of Insurance Company

Products of Life Insurance Companies

Life Insurance is a means to safeguard ones financial dependents.

Generally, the primary breadwinner in a family is insured against
death or disability so that the dependents continue to receive
adequate financial support.

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While insurance companies do introduce various types of Life
Insurance plans and policies from time to time, the basic ones are-

Term A Term Insurance policy is the simplest and most

economical life insurance plan. It offers an assured death
benefit for a small yearly premium.

Children's An insurance plan that covers the parent's life for a sum,
Plan equivalent to that required to meet specific financial needs
of your child.

Retireme A policy specially designed to help one save and invest

nt Plan money during the working/ professional life, to ensure a
financially secured post-retirement.

Pension It is a type of retirement plan, wherein an employee

Plan contributes to a fund instituted by the organization or the
company for his or her benefit.

Whole Traditional insurance plans offer life cover only up to a

Life Plan certain age, but a Whole Life Plan is an insurance policy
that offers a lifelong coverage.

Money Insurance plan that offers coverage for a stipulated period

Back Plan during which, the policyholder periodically gets a sum of
tax-free money from the insurance company.

Endowme This life insurance policy is designed to pay back a lump

nt Plan sum after a specified term or on death. These are for those
who seek some form of return on their insurance
premiums.

Limited An insurance policy that expects premiums only for a fixed

Pay-Term tenure, after which no additional premiums are paid to
keep the policy in force.

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Highest This is an insurance plan that offers life cover as well as a
NAV Plan maximum return on investment. These policies generally
invest in market-related instruments.

Products of General Insurance Companies

All insurance excluding life insurance falls under general

insurance.

For e.g.

General Insurance comprises of insurance of property

against fire, burglary, theft etc.

The non-life insurance companies also offer policies

covering machinery against breakdown. A granite
factory owner would like to buy a policy to cover his
granite cutting machines.

Further, insurance of motor vehicles against damages

and theft forms a major chunk of non-life insurance
spends.

Following are some of the products that fall in non-life

category

Household Insurance

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 Auto Insurance

Business Insurance

Health Insurance

Travel Insurance Etc

Following are the four primary categories of Non-life

insurance-

Medical Insurance

Medical Insurance protects you from costly medical bills in case of

any emergency. It covers you and your family against expensive
healthcare costs.

Auto Insurance

Auto Insurance is a protection of your automobile against physical

damages from fire, theft, explosion, accidents, etc. This is also
compulsory, especially because while drive, there is always a
possibility of damaging third-parties, and hence you need the
insurance to settle the liabilities arising.

Property Insurance

Having Property Insurance will protect your dream home, office,

factory, shop, valuables, domestic or electronic items, etc from fire,
burglary, theft and any other untoward incident.

Travel Insurance

It becomes all the more important to consider your safety and

wellbeing when you are traveling. Travel insurance protects one
from travel related medical emergencies, delays or loss in baggage,
loss of passport in foreign countries, etc.

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 5.0 Company Profile

About Fareast

Fareast Islami Life Insurance Co.

Ltd. emerged as the 1st full-
fledged Islami Life Insurance
Company in the country in 2000.
Fareast Islami Life Insurance Co. Ltd. is a
Shariah Compliant life insurance company having sharpened
operational pattern, unique customer focus, expansion of branch
network, new business development, building of an efficient and a
dedicated work force and ensuring the highest level of transparency
in all spheres of operations. As a result, in 2008 the Company has
earned a total premium of Tk. 319.78 crore showing an increase of
34% over the previous year which is no doubt a remarkable
achievement. Last year the company had taken a holistic approach
in doing business with focus on quality customer services and
business growth with decentralization of operational activities.

With this, the company has been pursuing this strategy consistently,
reinforcing their approach with emphasis on growth within a frame
work of trust, integrity, good governance and compliance with the
legal and regulatory frame work of the country.

Core Values-ISLAM

Integrity
Solidarity

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 Lawful
Adle and Ehsan
Mutual benefit

Services

Ordinary Life (Ekok Bima)

01. Endowment Assurance Plan with profits

02. Assurance-Cum-Pension Plan-without profits
03. Islamic Endowment Plan (Hajj Bima)- with profits
04. Four Payment Endowment Assurance Plan with profits
05. Islamic Endowment Plan (Denmohar Bima)-with profits
06. Islamic Three payment Assurance Plan-with profits
07. Single Premium Endowment Assurance Plan-without profits
08. Child Protection Plan with profits
09. Fareast Deposit Pension Scheme (FDPS)-with profits
10. Group Assurance Plans
11. Islami Money Back Plan
12. Child Education & Marriage Insurance with profit
13. Joint Life Insurance with profit
14. Two payment anticipated Insurance with profit
15. Five payment anticipated Insurance with profit

Group Insurance

01. Group Insurance

02. Group Endowment Insurance
03. Group Variable Endowment Insurance

Micro Insurance (Sharbojanin Bima)

01. Monthly Savings Plan with profits

02. Single Premium Plan-without profits
03. Fareast Deposit Pension Scheme (FDPS) with profits
04. Islami endowment Insurance (FDPS)
05. Denmohor Insurance with profit
06. Hajj Insurance with profit
07. Child Education & Marriage Insurance with profit
08. Joint Life Insurance with profit

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 6.0 Operation System

Fareast conducts its operations and sells its policy through a

diversified manpower and a well executed advertisement policy.

1. Manpower of the Fareast

These resources play vital role in each and every operations of
the organization. There are approximately 30,000 salaried
commission based people are working for the company in the
different level of the organization.

Following are the valuable personnel/ human resources working

in the organization who add the economic value for the Fareast
Life:

Fareast Islami Life Insurance Co. Ltd. (AGENTS)

Official (Desk) 2600 Salaried

Employee
Development 27000 Salaried &
Employee Commission based

2. Advertisement Policy
The company publicizes its product through-
o Agents
o Television
o Radio
o Billboard
o Print media such as Newspapers, Magazines and Poster.

They also try to create market by-

conducting sponsorship,
giving customer service month and
Various sales promotion policies.

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 7.0 Capitalization Condition
Authorized capital: 50000000 ordinary shares of tk 10 each
the company increased its authorized capital from tk 5.00
crore to tk 10 crore which was approved in the EGM held on 05
may 2013.
Issued, Subscribed & Paid in capital: 39390120 ordinary
shares of tk 10 each are fully paid up.

Shareholding Capital:

Category of Shareholders Share holding (%)

Sponsor 24.93

General Public 75.07

Distribution schedule of paid up capital:

As per listing rules of the stock exchange a distribution schedule of

each class of equity shares and the number of shareholders and
percentage as on 31 December 2011 is given-

Category of Share holding No of shares No of share Share h

shareholders range holders
Sponsor 50000-100000 62800 1 .16
100000-200000 684040 5 1.73
200000-300000 473440 2 1.2
300000-500000 736176 2 1.87
500000-700000 2437624 4 6.19
700000-1000000 3097073 4 7.87
1000000-1200000 2328613 2 5.91

9819766 20 24.93
General Public 0001-5000 7071838 13979 17.95
5001-10000 1627284 231 4.13
10001-50000 4509370 212 11.45
50001-100000 2799460 40 7.11
100001-500000 11294227 53 28.67
500001-100000 1221115 2 3.10
1000001-1500000 1047060 1 2.60
29570357 14518 75.07
39390120 14538 100

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Following Figure shows current capitalization technique of
Fareast:

Commission

Commission to insurance agents (less that received on Re

-Insurance) represents first year commission, renewal commission
and group commission allowance & commission (other than
commission to insurance agents less that on re-insurance) represent
field officers salary & allowances including incentive bonus.
Agent Commission
OR Commission
SOR Commission

OR commission & SOR commission represent over-riding

commission and senior employees over-riding commission. OR
commission is usually paid among the employer of the agents such

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as marketing officers (MO) & Marketing manager (MM). SOR
commission is usually paid among the branch manager (BM) and
above ranked employer of agents. These are being done in line with
the provision of the Insurance act, 2010

8.0 Investment of Premiums

The premium collected by the general insurance companies is

mainly used to settle down the claims for different incidents covered
under the insurance policies. This part of the premium usually
insurance companies keep in their bank accounts in the form of FDR
as well as STD account. A part of premium income the companies
use for making payment of reinsurance premium. And a part
companies use for investment purpose. So among the various uses
of premium, investment is the only utilization which provides
positive income in future for the company.

Premium income:
First year premium (Individual Life)
First year premium (Sharbojonin Bima)
Renewal premium (Individual Life)
Renewal premium (Sharbojonin Bima)
Group premium

Premium Investment

A portion of the collected premium are invested in

Equity shares in CDBL,

Shares & Bonds,
Islamic investment bond with BB,
investment in fixed assets such as land & land
development, furniture &fixture, office decoration, office

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 equipment, motor vehicles, electric installation, telephone
installation, software etc.

After analyzing the annual reports, further investments are found as

follows-

i. Govt. Securities: As government securities Fareast

Islami Life Insurance Company Ltd. mainly invest in
National Investment Bonds. This is a risk free
investment for them as well as this instrument is very
liquid. Moreover insurance companies get involved in
these instruments as a part of fulfillment of govt.
statutory requirements.

ii. Corporate Debt Instruments: Besides the govt.

securities, Fareast Islami Life Insurance Company Ltd.
do involve in investment in corporate debt
instruments. They invest in debentures, corporate
bonds etc.

iii. Minority Ownership: Insurance companies which

are under a holding company, sometimes invest in
other subsidiary companies. But such ownership has
a minor proportion.

iv. Share: Like govt. securities, Fareast Islami Life

Insurance Company Ltd. invests in shares of different
companies. Most of this share investment is done
through private placement. A very less percentage of
the total share investment is done through stock
exchange.

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 v. ICB Debenture: Fareast Islami Life Insurance
Company Ltd. invests in the debenture issued by the
Investment Corporation of Bangladesh.

Proportion of Investment

Graph 1 shows the behavior of Fareast towards investment through

a bar diagram:

This upward moving trend indicates the fact that the private general
insurance companies are becoming more interested to employ their
assets for investing in different financial assets rather than keeping
money only in their bank accounts.

Growth Rate

Average growth rate of Fareast is presented in the table below:

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 9.0 Business Analysis

EKOK BIMA (INDIVIDUAL LIFE)

(Taka in Lac)
Year New Business Business In Force
No. of Policies First Year Premium No. of Policies
2011 2,24,102 19,882 6,54,803
2010 2,96,738 23,551 6,53,650

SHARBOJONIN BIMA (MICRO INSURANCE)

(Taka in Lac)

Year New Business Business In Force

No. of Policies First Year Premium No. of Policies
2011 87,503 3,910 3,00,080
2010 1,20,627 4,168 3,17,546

BUSINESS PERFORMANCE
(Taka in Lac)
2012 2011 2010 2009 2008
First Year Premium 1,57,63.57 2,37,91.92 2,77,18.70 3,40,97.03 1,20,99.22
Renewal Premium 5,49,70.02 ,52,82.53 3,74,10.83 2,90,14.22 1,98,76.35
Group Insurance 12.18 13.17 6.03 2.71 2.83
Premium
Gross Premium 7,07,45.77 6,90,87.62 6,51,35.56 6,31,13.96 3,19,78.40
Investment Income 1,72,20.25 80,97.22 1,13,13.33 66,16.37 43,04.43
Claims 1,73,22.96 1,39,78.15 66,22.68 64,91.49 42,52.22
Management Expenses
a) Commission 1,16,11.93 1,76,07.45 1,72,22.30 2,21,37.06 82,73.01
b) Admin. 1,06,24.29 84,90.43 80,43.63 55,91.35 35,53.21

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Expenses
Assets 28,22,22.35 21,92,37.78 14,61,17.98 10,11,60.02 6,45,13.23
Life Fund 20,80,42.24 16,48,65.07 13,52,95.05 9,28,21.62 5,58,93.16
Claims to Premium (%) 24.49 20.23 10.17 10.29 13.30
Management Expenses 31.43 37.78 38.79 43.93 36.98
toPremium(%)
Dividend of face value of
share
a) Cash 20% 12.50% - 5%
b) Stock 15% 25% 40% 45% 40%

BUSINESS GROWTH

2012 2011 2010 2009 2008

Assets (%) 28.73 50.04 44.44 57 49
Life Fund (%) 26.19 21.86 45.76 57 48
Premium (%) 2.40 6.07 3.20 97 34

10.0 Financial Analysis of FILICL

Financial analysis is the process of understanding the risk and

profitability of a company through analysis of reported financial
information, particularly annual and quarterly reports. Investors
need this information to estimate both future cash flows from the
firm and the riskiness of those cash flows. Financial managers need
an in-depth risk and profitability analysis if a comprehensive
evaluation of companys performance is required. Financial analysis
also concentrates how a particular firm compares with other firms in
its industry (benchmarking). The following are some devices to
analyze the risk and profitability of FILICL:

Ratio Analysis

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Financial ratios are mathematical equations derived from
information presenting on a companys financial statements. Every
ratio measures a unique association that may have an impact on
other ratios. All financial ratios are used as indicators to reveal the
financial health of the company. In this paper, I have used some
ratios for analyzing the risk and profitability of FILICL.

1. Analysis of Risk

Analysis of risk typically aims at detecting the underlying

liquidity risk, solvency risk, and financial operating risk of
FILICL.

Liquidity Ratio:

For unique characteristics of life insurance, the liquidity ratio

of other financial institutions is generally not applicable.
Hence, I have used the following formula for analyzing the
liquidity risk of life insurer, which has suggested by Credit
Rating Agency of Bangladesh (CRAB).

Liquidity Ratio (LR) = Liquid Assets / Total liability

According to CRAB, the minimum requirement for the ratio of

liquid assets to total liabilities for life insurers is 60%. Usually
a high liquid ratio indicates the lower the liquidity risk and the
lower the opportunity for profit. The liquidity ratio of life
insurers has obtained from the life insurers annual reports
(see Appendix).

Liquidity ratio

year 2012 2011

Liquidity ratio 0.97 0.98

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 Source: Authors calculation from Annual Report of FILICL

Comment: The liquidity ratio of FILICL was decreased from 2011 to

2012 but not more. These results indicate that FILICL has
undertaken low risks in managing the liquid assets.

Solvency Ratio

It is the ability of an insurer to meet all its liabilities whenever

they fall due. So, the solvency ratio is a measure of the risk an
insurer faces of claims that it cannot absorb. According to
CRAB the solvency ratio is-

Solvency ratio (SR) = Policyholders Surplus / Net

premium written

According to CRAB, the minimum standard for the solvency

ratio of life insurers is 8%. Generally a high solvency ratio
indicates that life insurer has the ability to meet its
commitments to the policyholders.

Solvency Ratio

year 2012 2011

0.0
Solvency ratio 4 0.03
Source: Authors calculation from Annual Report of FILICL

Comment: These results indicate that FILICL is more vulnerable in

managing the policyholders surplus than the CRAB standard but it
increases in 2012 than 2011.

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 2. Financial Operational Efficiency Analysis:

To obtain an accurate picture of an insurers risk and profitability,

it is important to analyze the overall gain or loss from operations.
So we measure the operational efficiency ratio.

Loss ratio (LOR):

The loss ratio is determined by dividing the net claims by net

premiums earned.

Loss Ratio = Net Claims/ Net premiums earned

Lower loss ratio shows higher operating profit and vice versa.
Higher loss ratios may indicate that an insurance company
may need better risk management policies to guard against
future possible insurance payouts.

Loss Ratio

year 2012 2011

Loss ratio 0.1 0.1

Source: Authors calculation from Annual Report of FILICL

Comment: There is no change in the loss ratio between the two

years. But if this ratio is less than industry then the company loss
management work is efficient.

Expense Ratio (ER):

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 The amount of a company's net premiums are the amount
that are allocated to underwriting costs, like commissions to
agents and brokers, state and municipal taxes, salaries,
benefits and other operational expenses. This ratio is
determined by dividing the underwriting expenses total by net
premiums earned.

Expense Ratio (ER) = Underwriting expense/net

Premiums

Expense Ratio (ER)

year 2012 2011

Expense ratio 0.39 0.47
Source: Authors calculation from Annual Report of FILICL

Comment: Expense ratio is the measure of an insurer's business

efficiency to investors. The lower the loss ratio the higher the
operating profit and vice versa. So the operating profit of 2012 had
increased.

Investment Income Ratio (IR)

Investment Income Ratio (IR) = Investment

income/net premium earned

Investment Income Ratio (IR)

year 2012 2011

Investment income ratio 0.18 0.16
Source: Authors calculation from Annual Report of FILICL

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Comment: Higher IR ratio shows higher operating profit and vice
versa. So here as the IR had increased in 2012 the operating income
also increased which indicates management efficiency.

Operating ratio:

Operating ratio shows how efficient the company is to manage

its underwriting expenses.

Operating Ratio (OR) = Combined Ratio (CR) -

Investment Income Ratio (IR)

= (Loss ratio + expense ratio) -

Investment Income Ratio (IR)

Here the combined ratio is used to measure of the profitability of an

insurance company, because it is an indication of an insurance
company's health and investment income helps to offset
underwriting losses.

Operating Ratio

year 2012 2011

Operating ratio 0.31 0.41
Source: Authors calculation from Annual Report of FILICL

Comment: The less the operating ratio the more good it is and here
the operating ratio of 2012 is better than 2011.

3. Analysis of Profitability

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 Profitability reflects the final result of business operation. It helps
to establish future earning capability of the business. For a life
insurance company, premium/underwriting income and
investment income are mainly two components of profits. The
profitability indicators are the rate of return on assets (ROA), rate
of return on equity (ROE), rate of return on capital employed
(ROCE), and profit margin (PM).

Return on Assets Ratio (ROA)

ROA shows how effectively a life insurance company uses its

financial and real investments to generate profits.

ROA= Net Profit / Total Asset

Return on Assets Ratio (ROA):

year 2012 2011

Return on Assets 0.32 0.34
Source: Authors calculation from Annual Report of FILICL

Comment: Less variability in the return on assets ratio indicates

proper or efficient management of wealth. So here in 2012 the
company is more efficient in wealth management.

Return on Equity Ratio (ROE):

ROE shows how effectively an insurance company is using

policyholders investment. For unique characteristics of life
insurance, the return on equity ratio of other financial
institutions is generally not applicable. Here instead of total
equity policyholders surplus is used.

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 Return on Equity = Net profit/Policyholders surplus

Return on Equity

year 2012 2011

Return on Equity 16.43% 17.24%
Source: Authors calculation from Annual Report of FILICL

Comment: Less variability in the return on equity ratio indicates

proper or efficient management of policyholders surplus. So
performance in 2012 is better than 2011.

Return on Capital Employed Ratio (ROCE):

It measures the overall performance of a business in terms of

profitability. This ratio is more appropriate for evaluating the
efficiency of internal management.

ROCE = Net profit/Net capital Employed

Return on Capital Employed Ratio

year 2012 2011

Return on capital employed 33.00% 37.00%

Comment: A high ratio indicates better performance and a low ratio

indicates poor performance. Higher the ratio, more efficient the
management is considered to have been using the funds available.
So 33% in 2012 indicates low performance than 2011.

Profit Margin Ratio (PM)

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 This ratio determines the profitability of an insurance
company. It is the profits after all expenses and taxes are paid
by the insurance company.

PM ratio=Net profit /Total revenue

Profit Margin Ratio

year 2012 2011

PM ratio 0.59 0.48

Comment: A higher profit margin indicates a more profitable

company that has better control on its costs. A decrease in this ratio
may indicate more intensive competition in the market, declining
selling prices or an increased cost of underwriting. So from the Chart
we can see that the company has better control over cost in 2012
than 2011.

11. Conclusion

Fareast Life has started her journey 10 years back and its market
share is more than 62%. Its business growth is very good. Fareast
Life has strong vision & mission. But it is not clear to all level of

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people in Fareast Life. People should realize what would be their
responsibility to achieve the Vision & Mission. The Fareast Life has
got a uniform management pattern as the top directs everything.
Although it is a large organization, because of its company limited
nature, the company has modern developed policies and strategies
but great challenges are implementing of these policies in the
organization.

Whatever, implementation will depend upon the honest and sincere

appears of employee, owners and management, side by side, the
government should provide active support in policy matters as well
as day to day functioning. The company already possesses a very
strong foothold in the insurance industrial arenas and contributes a
lot to the national exchequer. In future contribution is likely to be
increased significantly and let hope for the best.

References

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1. Arkell Julian, 2011, The Essential Role of Insurance Services
for Trade, Growth & Development, International Association
for the Study of Insurance Economics, Geneva Association,
Geneva, http://www.genevaassociation.org/

2. Retrieved on September 3, 2014 from http://www.idra.org.bd

3. Retrieved on September 3, 2014 from
http://www.fareastislamilife.com

4. Annual Report 2011

5. Half Yearly Report 2012
6. Fareast Diary 2011
7. Fareast Islami Life Barta, 7th Year, 3rd Volume October -
December 2011

8. Retrieved on September 3, 2014 from

http://www.primeislamilifebd.co

9. Retrieved on September 3, 2014 from

http://www.crab.com.bd

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