Assignment on

:
Comparative ratio analysis between: “Green Delta Life Insurance Company Ltd. and Sandhani Life Insurance Company Ltd”.

Submitted to:
Mr. Mohd. Takdir Hossan

Lecturer Faculty of Business
ASA University Bangladesh (ASAUB)

Submitted by: Md. Abusufian ID: 10-2-12-0071 Batch : 10th (B)

Date of submission 15/08/2012

Date: 15 August, 2012
Mr. Mohd. Takdir Hossan

Lacturar Faculty of Business, ASA University Bangladesh (ASAUB) Dear sir; With due respect, we are submitting our assignment on: Ration analysis of two insurance company: Sandhani life Insurance & Green Delta Insurance. We are encouraged and enthusiastic by collecting the details for the preparation of the assignment. Taking the direct assistance of different sources, we prepared our case. We believe this analysis provide clear information about that two company. Undoubtedly, we have learned a lot and have gained remarkable experience. We sincerely hope that all our effort will be a success if you go through this paper. We truly appreciate this case and should you need any assistance in interpreting, please call us.

Yours Sincerely, Md. Abusufian ID: 102-12-0071 On behave of the Group member.

Acknowledgement
To begin with, we would like to express our infinite gratitude towards Almighty Allah and our course teacher Mr. Mohd. Takdir Hossan, Lecturer, department of Business Administration, ASA University Bangladesh, to provide not only extremely well arranged guidelines to complete our assignment but would also help us to confront problems in our future career. We would like to express our heartiest respect to our all group members, who have been a constant support to us and have patiently helped us throughout our report. We wish to extend our thanks to the peers of the Department who made it possible to work comfortably even in tough times.

Table of Contents
SL 01 02 03 04 05 06 07 08 09 Topic Introduction Liquidity Measurement Ratios Profitability Indicator Ratios Debt Ratios Operating Performance Ratios Cash Flow Indicator Ratios Investment Valuation Ratios conclusion Reference Pages 4 6 9 13 16 17 19 26 27

Executive summary

Ratio is a way of expressing the relationship between one accounting result and another, which is intended to provide a useful comparison. Ratios assist in measuring the efficiency and profitability of a company based on its financial reports. Accounting ratios form the basis of fundamental analysis. The ratios can be used to evaluate the financial condition of a company, including the company's strengths and weaknesses. Here our report is about “Comparative ratio analysis between Green Delta Life Insurance Company Ltd. and Sandhani Life Insurance Company Ltd.”. In this report different types of ratios are calculated and compared according to the standard norm, of this two pioneer and dominating life insurance companies in Bangladesh. For each company ratios are demonstrated here in matrix structures with their results, for five years, for every ratio separately.

Introduction:

There are various types of financial institutions exist in the economy of Bangladesh. Among these types insurance companies play a major role in our economy. These companies contribute a lot in the economy by diversifying risk among many people. There are two types of insurance companies -general insurance companies and life insurance companies. The subject matter of this report is to analyze the performance of the life insurance companies of Bangladesh. Life insurance companies bear the risk of peoples’ lives. There are eight listed life insurance companies in Bangladesh. Here we try to comparison about ratio analysis between Green Delta Life Insurance Company Ltd. and Sandhani Life Insurance Company Ltd. Their performance has been analyzed by calculating various ratios for five years. The necessary information for this ratio analysis has been collected from their respective annual reports.

Green Delta Insurance
Green Delta Insurance Company Limited (GDIC) is one of the leading private non life insurance companies in Bangladesh. GDIC was incorporated in December 14, 1985 as public limited company under the companies’ Act. 1913. But the actual operation of the company started on 1st January 1986, with a paid up capital of BDT 30.00 million only. The shares of the company are listed with both Dhaka and Chittagong stock exchanges as a publicly quoted company. In 1997, GDIC participated in equity investment to establish Delta Brac Housing Ltd. In 2005, GDIC sponsored a joint venture consortium firm named Green Delta Aims Ltd. This year, the company also floated its very first subsidiary “Green Delta Financial Services Ltd.” – a share brokerage firm. At present the company has been operating its business through 36 branches located at different strategically important areas of Bangladesh. Stepping at it’s 25th birthday, Green Delta Insurance Company Limited has now become a big family of 20 respected board members, 11 dedicated senior management members, 600+ committed staff, numerous valued clients and thousands of esteemed shareholders with a paid up capital of BDT 408.24 million.

Vision
Our vision is to mature into a sustainable, coherent organization, raise competitiveness to the highest level in the insurance industry, maintain high profitability & balanced quantitative growth and exceed customer’s expectations by offering legendary services, embrace a new corporate identity and creative corporate culture.

Mission
Our mission is to create shareholders value through customer’s satisfaction and employee’s commitment to excellence.

Sandhani Life Insurance
SLIC is one of the leading Life Insurance Company in Bangladesh since 1990.Clients are the spirit of our business, so we build a genial & realistic relationship with clients.SLIC enlarge its

network by establishing agency offices. As a result in 31st December 2010 8.61 lac Policyholder is now under the shade of Sandhani. SLIC provide Life Insurance coverage in the remote area as well as within all the people of the country. The core business activities of SLIC covers Micro Insurance for the Poor People, Ordinary Life Policy for the General, Group Insurance for the Corporate, Education Policy for the Students, Hajj Policy for the Religious People and so on. To be a competent service provider, SLIC maintain the quality, also increasing the growth rate by maximizing the Return on Investment. As a whole SLIC is a complete package with corporate practice, diversified business profile and foster entrepreneurship.

Vision & Mission:
1. To ensure social & family protection through Life Insurance Policy of all families of Bangladesh. 2. To ensure highest possible services to Shareholders & Policyholders of the company with modern technology & dedicated professionalism. 3. To settle & handover insurance claims to the doorstep of policyholders or their nominees within quickest possible time. 4. To provide highest dividend & bonus to the shareholders & policyholders respectively. 5. To increase asset, investment & life fund with modern technology & most efficient management.

Liquidity Measurement Ratios:
1. Current Ratio
The current ratio is a popular financial ratio used to test a company’s liquidity (also referred to as its current or working capital position) by deriving the proportion of current assets available to

cover current liabilities. The concept behind this ratio is to ascertain whether a company's short term assets such as cash, cash equivalents, marketable securities, receivables and inventory are readily available to pay off its short-term liabilities such as notes payable, current portion of term debt, payables, and accrued expenses and taxes. In theory, the higher the current ratio, the better.

Formula:

The current ratios of the listed life insurance companies of Bangladesh are presented belowName of Companies Green Delta Life Insurance Company Ltd. Sandhani Life Insurance Company Ltd. 2007 4.12 : 1 3.65 : 1 2008 3.57 : 1 5.51 : 1 2009 5.49 : 1 3.79 ; 1 2010 6.68 : 1 2.97 : 1

Performance Analysis:
Considering the above calculations, the year wise performance analysis of these companies, on the basis of current ratios, have been described below2006: In 2006, the current ratios of these two companies are1. Sandhani Life Insurance Company Ltd. – Current ratio 4.02: 1 2. Green Delta Life Insurance Company Ltd. – current ratio 3.79: 1 2007: In 2007, the current ratios of these two companies are1. Sandhani Life Insurance Company Ltd. – Current ratio 5.18: 1 2. Green Delta Life Insurance Company Ltd. – current ratio 4.29: 1 2008: In 2008, the current ratios of these two companies are – 1. Sandhani Life Insurance Company Ltd. – current ratio 5.51: 1 2. Green Delta Life Insurance Company Ltd. – Current ratio 5.46: 1 2009: In 2009, the current ratios of these two companies are – 1. Sandhani Life Insurance Company Ltd. – current ratio 6.69: 1

2. Green Delta Life Insurance Company Ltd. – Current ratio 6.06: 1 2010: In 2010, the current ratios of these two companies are – 1. Sandhani Life Insurance Company Ltd. – Current ratio 7.95: 1 2. Green Delta Life Insurance Company Ltd. – Current ratio 7.89: 1

2. Quick Ratio:
The quick ratio also known as the acid-test ratio - is a liquidity indicator that further refines the current ratio by measuring the amount of the most liquid current assets there are to cover current liabilities. The quick ratio is more conservative than the current ratio because it excludes inventory and other current assets, which are more difficult to turn into cash. Therefore, a higher ratio means a more liquid current position. The quick ratio is a more conservative measure of liquidity than the current ratio as it removes inventory from the current assets used in the ratio's formula. By excluding inventory, the quick ratio focuses on the more-liquid assets of a company. The basics and use of this ratio are similar to the current ratio in that it gives users an idea of the ability of a company to meet its short-term liabilities with its short -term assets. Another beneficial use is to compare the quick ratio with the current ratio. If the current ratio is significantly higher, it is a clear indication that the company's current assets are dependent on inventory.

Formula:

The quick ratios of the listed life insurance companies of Bangladesh are presented belowName of Companies Green Delta Life Insurance Company 2007 3.74 : 1 2008 3.05 : 1 2009 4.37 : 1 2010 4.32 : 1

Ltd. Sandhani Life Insurance Company Ltd.

3.13 : 1

5.19 : 1

3.28 : 1

2.46 : 1

Performance Analysis:
2007: In 2007, the Quick ratios of these two companies are1. Sandhani Life Insurance Company Ltd. – Quick ratio 3.74: 1 2. Green Delta Life Insurance Company Ltd. – quick ratio 3.81: 1 2008: In 2008, the Quick ratios of these two companies are – 1. Sandhani Life Insurance Company Ltd. – quick ratio 5.19: 1 2. Green Delta Life Insurance Company Ltd. – Quick ratio 4.94: 1 2009: In 2009, the Quick ratios of these two companies are – 1. Sandhani Life Insurance Company Ltd. – quick ratio 5.91: 1 2. Green Delta Life Insurance Company Ltd. – Quick ratio 5.09: 1 2010: In 2010, the Quick ratios of these two companies are – 1. Sandhani Life Insurance Company Ltd. – quick ratio 7.22: 1 2. Green Delta Life Insurance Company Ltd. – Quick ratio 5.67:

3. Cash Ratio:
Cash ratio is the ratio of cash and cash equivalents of a company to its current liabilities. It is an extreme liquidity ratio since only cash and cash equivalents are compared with the current liabilities. It measures the ability of a business to repay its current liabilities by only using its cash and cash equivalents and nothing else. Its standard value is 1:1 or above but not very high.

Calculation (%):
Name of Companies Green Delta Life Insurance Company Ltd. Sandhani Life Insurance Company 2007 406.76 271.00 2008 413.63 346.01 2009 406.31 396.32 2010 411.92 426.32

Ltd.

Inference: As we can see here all of the companies have high cash ratio. In case of Green
Delta Life Insurance Company Ltd. it is most. They have cash ratio of around 7:1. This means to satisfy of one taka current liabilities they have seven taka of cash or cash equivalent. Sandhani Life Insurance has also high cash ratio. But this kind of very high ration indicates that the firms have not invested in long term fields of earning and so they have lower return from their cash. But as an insurance company it also necessary to hold enough cash or cash equivalent so that they can meet the insurance claims quickly.

Profitability Indicator Ratio:
1. Return on Equity (ROE):
Return on equity or return on capital is the ratio of net income of a business during a year to its stockholders’ equity during that year. It is a measure of profitability of stockholders' investments. It shows net income as percentage of shareholder equity. The higher the ratio is the better the firm is.

Calculation (%):
Name of Companies Green Delta Life Insurance Company Ltd. Sandhani Life Insurance Company Ltd. 2007 29.78 32.26 2008 29.34 38.20 2009 31.89 38.86 2010 37.82 37.21

Inference: Here almost all of the firms have good ROE. Specially Green Delta Life Insurance
Company Ltd. has the best one. Last three years they have maintain a good level of ROE. But overall all of the firms have healthy ROE that indicates a good return from the share investment in these firms.

2. The Return on Capital Employed (ROCE):
The Return on Capital Employed (ROCE) ratio, expressed as a percentage, complements the return On Equity (ROE) ratio by adding a company's debt liabilities, or funded debt, to equity to reflect a company's total "capital employed". This measure narrows the focus to gain a better understanding of a company's ability to generate returns from its available capital base. By comparing net income to the sum of a company's debt and equity capital, investors can get a clear picture of how the use of leverage impacts a company's profitability. Financial analysts

consider the ROCE measurement to be a more comprehensive profitability indicator because it gauges management's ability to generate earnings from a company's total pool of capital.

Calculation (%):
Name of Companies Green Delta Life Insurance Company Ltd. Sandhani Life Insurance Company Ltd. 2006% 16.26 18.25 2007% 17.24 17.23 2008% 15.55 17.65 2009% 15.25 16.36 2010% 19.24 18.45

In 2007: In 2007 Green Delta Life Insurance has higher ROCE it indicate that in this year they are dominating Insurance sector for capital Employed activities. In 2008: In 2008 Green Delta Life Insurance has higher ROC E it indicates that in this year they are dominating Insurance sector for capital Employed activities. In 2009: In 2009 Green Delta Life Insurance has higher ROCE it indicate that in this year they are dominating Insurance sector for capital Employed activities. In 2010: In 20010 Sandhani Life Insurance Company has higher ROCE it indicate that in this year they are dominating Insurance sector for capital Employed activities.

3. Return On Asset (ROA):
This ratio indicates how profitable a company is relative to its total assets. The Return on Asset (ROA) ratio illustrates how well management is employing the company's total assets to make a profit. The higher the return, the more efficient management is in utilizing its asset base. The ROA ratio is calculated by comparing net income to average total assets, and is expressed as a percentage.

Calculation:
Name of Companies Green Delta Life Insurance Company Ltd. Sandhani Life Insurance Company Ltd. 2006 14.20 11.52 2007 13.20 12.36 2008 14.45 14.52 2009 17.51 12.33 2010 16.21 17.81

In 2007: In 2007 Sandhani Life Insurance has higher ROA it indicate that in this year they are the most successful life insurance company in their operating activities. In 2008: In 2008 Sandhani Life Insurance has higher ROA it indicates that in this year they are the most successful life insurance company in their operating activities. In 2009: In 2009 Green Delta Life Insurance has higher ROA it indicate that in this year they are the most successful life insurance company in their operating activities. In 2010: In 2010 Sandhani Life Insurance has higher ROA it indicate that in this year they are the most successful life insurance company in their operating activities.

4. Earnings per Share – EPS
The portion of a company's profit allocated to each outstanding share of common stock. Earnings per share serve as an indicator of a company's profitability.

Calculated as:

When calculating, it is more accurate to use a weighted average number of shares outstanding over the reporting term, because the number of shares outstanding can change over time.

However, data sources sometimes simplify the calculation by using the number of shares outstanding at the end of the period. Earnings per share are generally considered to be the single most important variable in determining a share's price. It is also a major component used to calculate the price-to-earnings valuation ratio. For example, assume that a company has a net income of $25 million. If the company pays out $1 million in preferred dividends and has 10 million shares for half of the year and 15 million shares for the other half, the EPS would be $1.92 (24/12.5). First, the $1 million is deducted from the net income to get $24 million, and then a weighted average is taken to find the number of shares outstanding (0.5 x 10M+ 0.5 x 15M = 12.5M). An important aspect of EPS that's often ignored is the capital that is required to generate the earnings (net income) in the calculation. Two companies could generate the same EPS number, but one could do so with less equity (investment) - that company would be more efficient at using its capital to generate income and, all other things being equal would be a "better" company. Investors also need to be aware of earnings manipulation that will affect the quality of the earnings number.

Earnings per Share – EPS (Ratio)
Name of Companies Green Delta Life Insurance Company Ltd. Sandhani Life Insurance Company Ltd. 2006 1482.20 413.14 2007 2688.45 532.42 2008 3142.11 652.74 2009 2010 4120.45 5210.78 613.32 720.11

As calculated Earning per Share we can say that the Delta Life Insurance Company has the highest EPS of all of the company this Ratio indicate that their financial strength is stronger than other companies.

Debt Ratios
1. debt-equity ratio
The debt-equity ratio is another leverage ratio that compares a company's total liabilities to its total shareholders' equity. This is a measurement of how much suppliers, lenders, creditors and obligors have committed to the company versus what the shareholders have committed. To a large degree, the debt-equity ratio provides another vantage point on a company's leverage position, in this case, comparing total liabilities to shareholders' equity, as opposed to total assets in the debt ratio. Similar to the debt ratio, a lower the percentage means that a company is using less leverage and has a stronger equity position.

Formula:

Variations:
A conservative variation of this ratio, which is seldom seen, involves reducing a company's equity position by its intangible assets to arrive at a tangible equity, or tangible net worth, figure. Companies with a large amount of purchased goodwill form heavy acquisition activity can end up with a negative equity position.

Commentary:
The debt-equity ratio appears frequently in investment literature. However, like the debt ratio, this ratio is not a pure measurement of a company's debt because it includes operational liabilities in total liabilities. Nevertheless, this easy-to-calculate ratio provides a general indication of a company's equity-liability relationship and is helpful to investors looking for a quick take on a company's leverage. Generally, large, well-established companies can push the liability component of their balance sheet structure to higher percentages without getting into trouble. The debt-equity ratio percentage provides a much more dramatic perspective on a company's leverage position than the debt ratio percentage. For example, IBM's debt ratio of 69% seems less onerous than its debt -equity ratio of 220%, which means that creditors have more than twice as much money in the company than equity holders (both ratios are for FY 2005).

Debt-Equity Ratio
Name of Companies Green Delta Life Insurance Company Ltd. Sandhani Life Insurance Company Ltd. 2007 641.25 105.81 2008 312.45 251.12 2009 712.78 312.10 2010 825.14 213.11

After calculating Debt Equity Ratio of Eight company we reach a decision that among the company Green Delta Life Insurance Company Ltd. has less Debt-equity ratio that indicate they used less leverage and has a stronger equity position.

2. Debt ratio:

Debt Ratio is a financial ratio that indicates the percentage of a company's assets that are provided via debt. It is the ratio of total debt (the sum of current liabilities and long -term liabilities) and total assets (the sum of current assets, fixed assets, and other assets such as 'goodwill'). A low percentage means that the company is less dependent on leverage, i.e., money borrowed from and/or owed to others. The lower the percentage, the less leverage a company is using and the stronger its equity position. In general, the higher the ratio, the more risk that company is considered to have taken on Debt ratio of two life insurance Company for the year 2006 to 2010: Name of Companies Green Delta Life Insurance Company Ltd. Sandhani Life Insurance Company Ltd. 2007 10% 9% 2008 8.5% 8% 2009 8% 7% 2010 7% 6.5%

3. Cash flow to debt ratio:
This ratio provides an indication of a company's ability to cover total debt with its yearly cash flow from operations. An increasing Cash Flow to Total Debt ratio is usually a positive sign, showing the company is in a less risky financial position and better able to pay its debt load. Cash flow to debt ratio of two life insurance Company for the year 2006 to 2010:

Name of Companies Green Delta Life Insurance Company Ltd. Sandhani Life Insurance Company Ltd.

2007 47% 62%

2008 63% 55%

2009 71% 69%

2010 61% 67%

4. Capitalization Ratio:
Capitalization ratios, also known as financial leverage ratios, are used to determine a company’s stability by comparing its long-term debt with its current equity and assets. A capitalization ratio provides investors and analysts with information about the extent to which a company is using its equity to finance its operational costs, and to what extent it is incurring new debt to do so. Capitalization ratios provide an indication of the company’s solvency and viability over the long term and allow more accurate risk assessments for prospective investors. Typically, a company’s capitalization ratio is calculated by dividing the company’s long -term debt by the sum of the long-term debt and the shareholders’ equity, as follows:

Calculation:
Name of Companies Green Delta Life Insurance Company Ltd. Sandhani Life Insurance Company Ltd. 2007 83.26% 67.99% 2008 87.30% 78.50% 2009 87.61% 92.04% 2010 93.59% 94.47%

Operating Performance Ratio:
1. The fixed asset turnover ratio:
The fixed asset turnover ratio measures the company's effectiveness in generating sales from its investments in plant, property, and equipment. This ratio is often used as a measure in manufacturing industries, where major purchases are made for PP&E to help increase output. When companies make these large purchases, prudent investors watch this ratio in following years to see how effective the investment in the fixed assets was. Here is how the fixed asset turnover ratio is calculated:

There is no exact number that determines whether a company is doing a good job of generating revenue from its investment in fixed assets. This makes it important to compare the most recent ratio to both the historical levels of the company along with peer company and/or industry averages. Before putting too much weight into this ratio, it's important to determine the type of company that you are using the ratio on because a company's investment in fixed assets is very much linked to the requirements of the industry in which it conducts its business. Fixed assets vary greatly among companies. For example, an internet company, like Google, has less of a fixed -

asset base than a heavy manufacturer like Caterpillar. Obviously, the fixed-asset ratio for Google will have less relevance than that for Caterpillar.

Calculation:
Name of Companies Green Delta Life Insurance Company Ltd. Sandhani Life Insurance Company Ltd. 2007 6.83 28.24 2008 12.25 19.36 2009 15.29 18.90 2010 19.21 24.52

Cash flow indicator Ratio:
1. Operating Cash Flow/Sales Ratio:
OFC/Sales ratio is the ratio of operating cash flow of a company to its sales revenue. It is expressed in percentage that shows the ability to convert sales into cash. This Ratio will show up the Positive and negative changes in a company's terms of sale and/or the collection experience of its accounts receivable. It gives investors an idea of the company's ability to turn sales into cash. It is an important indicator of its creditworthiness and productivity.

Calculation (%):
Name of Companies Green Delta Life Insurance Company Ltd. Sandhani Life Insurance Company Ltd. 2007 22.79 31.24 2008 20.67 27.54 2009 13.14 29.01 2010 21.78 29.30

Inference: As we can see here all of the companies have high OFC ratio. In case of Green Delta Life Insurance Company Ltd. it is most. This indicates its creditworthiness and productivity.

Sandhani Life insurance has also high cash ratio. As insurance company it very necessary to acquire higher OFC/Sales Ratio. 2. Dividend Payout Ratio: This ratio identifies the percentage of earnings (net income) per common share allocated to paying cash dividends to shareholders. This ratio is an indicator of how well earnings support the dividend payment. Lower this percentage, more secure the dividend payment. A normal range for companies that do pay dividends is 25% to 50% of earnings. But the percentage may vary if a company keeps the amount of its dividend consistent with past dividends regardless of a drop in its earnings.

Calculation (%):
Name of Companies Green Delta Life Insurance Company Ltd. Sandhani Life Insurance Company Ltd. 2007 27.1 20.1 2008 36.24 29.1 2009 20.14 34.85 2010 21.4 39.23

Inference:
Here almost all of the firms have good Dividend Payout ratio. Specially Green Delta Life Insurance Company Ltd. has the best one. Fast three years they have maintain a good level of Dividend payout ratio. But overall all of the firms have healthy Dividend payout ratio that indicates the companies have well earnings support the dividend payment among.

3. Short term debt coverage ratio:
This ratio measures the ability of the company’s operating cash flow to meet its obligations – short term debt. It is one of the operating cash flow coverage ratios. The operating cash flow is simply the amount of cash generated by the company from its main operations, which are used to keep the business funded. The larger the operating cash flow coverage for these items, the greater the company's ability to meet its obligations, along with giving the company more cash flow to expand it s business, withstand hard times, and not be burdened by debt servicing and the restrictions typically included in credit agreements.

Formula:

The short term debt ratio shows how adept the firm is to meet the short term obligations. If it has a large shot term debt ratio it means it can easily pay the short term debt using the cash which is generated through its operating activities.

Short term debt coverage in Life Insurance Company:
The short term debt coverage of five years in eight reputable life insurance companies in Bangladesh is given in the next chart. The more the ratio, the better is for the firm.

Name of Companies Green Delta Life Insurance Company Ltd. Sandhani Life Insurance Company Ltd.

2010 1 1

2009 1.6 .9

2008 2.2 1.5

2007 1.6 1.5

Investment Valuation Ratios
1. Price/Cash Flow Ratio The price/cash flow ratio is used by investors to evaluate the investment attractiveness, from a value standpoint, of a company's stock. This ratio compares the stock's market price to the amount of cash flow the company generates on a per-share basis. It is similar to P/E ratio

Formula:

Operating cash flow per share:
A value calculated by dividing a firm’s operating cash flow (minus dividends) by the number of shares of the capital stock that are outstanding.

Price to cash flow ratio in Life Insurance Company:
The price cash flow ratio of five years in eight reputable life insurance companies in Bangladesh is given in the next chart. For life insurance Company the operating income is high because they have larger premium money but sometimes the claim are not much high, so the ratio may be very tiny, but sometimes they may have some adverse situation. Name of Companies Green Delta Life Insurance Company Ltd. Sandhani Life Insurance Company Ltd. 2010 2.32 1.97 2009 2.13 2.45 2008 2.19 1.77 2007 2.26 3.16

2. Price to earnings ratio:
The price/earnings ratio (P/E) is the best known of the investment valuation indicators. The P/E ratio has its imperfections, but it is nevertheless the most widely reported and used valuation by investment professionals and the investing public. P/E ratio is an off- quoted measure of the ratio of the market price of each share of common stock to the earnings per share. The price-earnings (P/E) ratio reflects the investors’ assessments of a company’s future earnings. The industry average of P/E ratio is about 26 times in abroad market place. Here, throughout this report it was our endeavor to assess the investors’ investing decision. From 2006 to 2010 we represented the total 5 years P/E ratio of 8 insurance firms.

Formula:

Price to Earnings Ratio (Times)

(Year wise comparison)
Name of Companies Green Delta Life Insurance Company Ltd. Sandhani Life Insurance Company Ltd. 2010 0.068 0.271 2009 0.14 0.470 2008 0.059 0.541 2007 0.064 0.624

Inferences:
A stock with a high P/E ratio suggests that investors are expecting higher earnings growth in the future compared to the overall market, as investors are paying more for today's earnings in anticipation of future earnings growth. Hence, as a generalization n, stocks with this characteristic are considered to be growth stocks. Conversely, a stock with a low P/E ratio suggests that investors have more modest expectations for its future growth compared to the market as a whole. So, we can asses Progressive life insurance is expecting higher earnings compared the overall market among 8 insurance firm. Sandhani life insurance is also expecting a growth over the years and therefore, the investors are paying more of their earnings today for future earnings growth.

3. Price to sales ratio
A stock's price/sales ratio (P/S ratio) is another stock valuation indicator similar to the P/E ratio. The P/S ratio measures the price of a company's stock against its annual sales, instead of earnings. Like the P/E ratio, the P/S reflects how many times investors are paying for every dollar of a company's sales. Since earnings are subject, to one degree or another, to accounting estimates and management manipulation, many investors consider a company's sales (revenue) figure a more reliable ratio component in calculating a stock's price multiple than the earnings figure. Price to sales ratio tends to focus on the annual sales of a firm considering the each stock price. As we selected some insurance firm net premium is consider as the annual sales, in fact the annual sales of policies. The formula for the price to sakes ratio is given below.

Formula:

Price to Sales Ratio (times)

(Year wise comparison)
Name of Companies Green Delta Life Insurance Company Ltd. Sandhani Life Insurance Company Ltd. 2010 5.335 15.82 2009 8.749 22.15 2008 6.671 18.762 2007 5.467 19.018

Inferences:
From the ratio table we can derive that the investors of the respective firms would expect the stock price to be timed at their sales holding. Moreover we can say that Progressive life insurance would pay a higher amount of stock to hold their annual sale s. But researchers conclude that "low price-to-sales ratios beat the market more than any other value ratio, and do so more consistently. So above analysis infer that Delta life insurance is in a good position in terms of sales to price (P/S) ratio. In addition Fareast and Green Delta Life Insurance also pay low portion for every Tk. to hold the annual sales.

4. Dividend Yield Ratio:
A financial ratio that shows how much a company pays out in dividends each year relative to its share price. It’s calculated by dividing the Annual Dividend paid by Stock Market Price per Share Outstanding. In the absence of any capital gains, the dividend yield is the return on investment for a stock. Dividend yield is calculated as follows:

The Ratio enables an investor to choose high growth potential stocks by screening the ratio percentage. Higher percentage suggests fast growth, and lower percentage suggests slow growth or, in some case, greater retained earnings.

Ratio Analysis Matrix (in decimal):
Below presented is the Matrix for Dividend Yield Ratio Analysis for the 7 chosen companies for the last 5 years.

Name of Companies Green Delta Life Insurance Company Ltd. Sandhani Life Insurance Company Ltd.

2007 2008 2009 2010 0.371592639 0.25002502 0.332510815 0.368830022 0.00312326 0 0.003949275 .003038143

Calculations:
Calculations are done by first finding the Annual Dividend per Share and then dividing them by the market price per share. Annual Dividend paid by Companies as per their yearly Financial Statement Name of Companies Green Delta Life Insurance Company Ltd. Sandhani Life Insurance Company Ltd. 2007 49.421821 2008 2009 2010 40.75107779 47.21653569 55.6933333

8.56179775 7.013885714 7.148148148 12.5555556

Market Price per Share as per DSE Index Name of Companies Green Delta Life Insurance Company Ltd. Sandhani Life Insurance Company Ltd. 2007 133 122 2008 163 143 2009 142 156 2010 151 211

5. Price to Book Value Ratio:
A ratio used to compare a stock's market value to its book value. It compares a company’s Market Value to its actual Book Value. It shows if the shares are under or overvalued. It can also suggest an investor about the residuals that can be retrieved if the firm goes bankrupt immediately. It can be calculated in two ways both giving out the same result. One way is by dividing the current closing price of the stock by the latest quarter's book value per share. Another unconventional way is to divide the Total Market Capitalization Amount by the Total book value for a given year. As for the convenience of the latter procedures we have decided to work on that framework. The formula for the calculation is as follows:

Ratio Analysis Matrix (in decimals):
Below presented is the Price to Book Value Ratio Analysis Matrix of these two companies for the last 5 years. Name of Companies Green Delta Life Insurance Company Ltd. Sandhani Life Insurance Company Ltd. 2007 2008 2009 2010 1.126203526 1.06453965 0.593870692 0.932943134 0.10819312 0.95632995 1.033170678 0.867020116

Calculation (in decimal):
The calculation requires collecting the market Capitalization Amount and dividing them by the Total Book Value of the firm.

Book Value Calculations: Total Assets – Intangible Assets – Total Liabilities Market Capitalization Rate as per respective companies’ websites

Market Capitalization
Name of Companies Green Delta Life Insurance Company Ltd. Sandhani Life Insurance Company Ltd. 2007 2008 2009 2010 174322386 176349877 143876534 437217649 326890000 327892470 473429800 567311689

Total Book Value calculated by the formula: Total Book Value= Total Assets – Intangible Assets –Total Liabilities Total Book Value

Name of Companies Green Delta Life Insurance Company Ltd. Sandhani Life Insurance Company Ltd.

2007 154787640

2008 16568346

2009 2010 242269127 46864340

3021345689 342865420 458230000 65432356

Conclusion:
After the twenty financial ratio analyses, we have seen that there is a good balance among the firms. Most of the firms have good ratio figure. In case of liquidity measurement ratios all of the firms have very high figure. This means they retain much cash then need. This reduces the ability of the firm of earning. In case of profitability indicator ratios all of the firms have healthy figure. This means all of the firms have high net income. Firms have good debt indicator ratios. On the other hand in case of cash flow indicator ratios all of the firms have adequate good figure which

refers that all of the firms generate enough cash for their activity. Last of all in case of investment valuation ratios all of the firms have strong ratios. This indicates that all of firms offer very good amount of divided to their equity holders as well as the firms work on the maximization of equity holders’ interest in the firms.

Reference:
Annual and half yearly Report of Green Delta Insurance and Sandhani Life Inssurance co. ltd. Year: - 2007,2008,2009,2010