Performance Evaluation of Insurance Companies Based On Ratio Analysis

Performance Evaluation of Insurance
Companies Based on Ratio Analysis
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Term Paper on
ii
Performance Evaluation of Insurance Companies Based on
Ratio Analysis
Submitted To:
Quazi Sagota Samina
Assistant Professor
Department of Business Administration

East West University
Submitted By
Course Code-FIN410
Course Title- Risk management and insurance
Section-01
Date of submission: 1 April 2018
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Letter of Transmittal
April 01, 2018

Quazi Sagota Samina
Assistant Professor,
Department of Business Administration,
East West University, Dhaka-1212.
Subject: Submission of the report.
Dear Madam,
It is our pleasure to submit this report which was assigned to us as a partial fulfillment of Risk
Management and Insurance (FIN410) course requirements.
We have tried our level best to make an enriched report and now we are glad to submit you this report.
The writing of this report was a great experience as it provided us with exposure to the real life and
practical experience.
Thank you for your guidance and constant supervision to fulfill this report. We sincerely hope that the
contents of our paper will meet the requirements of this course and fulfill your expectations.
Sincerely yours,
Table of Content
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Chapter-1 INTRODUCTION......................................................................................................................1
1.1Origin of the Report............................................................................................................................1
1.2 Objective of the Study.......................................................................................................................1
1.3 Research Methodology......................................................................................................................1
1.4 Limitations of the Study....................................................................................................................1
1.5 Report Preview..................................................................................................................................1
Chapter-2 COMPANY OVERVIEW..........................................................................................................2
2. 1 Green Delta Insurance Company Limited:........................................................................................2
2.2 Janata Insurance Company Limited:..................................................................................................3
2.3 Karnaphuli Insurance Company Limited:..........................................................................................4
Chapter-3 Financial ratio analysis...............................................................................................................6
3.1 Liquidity Ratio...................................................................................................................................6
3.2 Underwriting Ratio............................................................................................................................7
3.3 Profitability Ratio............................................................................................................................12
3.4 Leverage Ratio.................................................................................................................................17
Chapter-4 Recommendation & Conclusion...............................................................................................20
4.1 Recommendation:............................................................................................................................20
4.2 Conclusion:......................................................................................................................................21
5. Reference:..........................................................................................................................................21
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Acknowledgement
There are many people who helped us by giving suggestion and direction how this report could
be done. The expression of thanks- no matter how extensive is always incomplete and inadequate
for them. All of our group members worked hard that’s why we all have to grateful to each other
as well.
Our project course instructor Quazi Sagota Samina, Assistant Professor, Department of Business
Administration, East West University helped us all the way through. She gave us proper
guidelines & directions about this assignment. We really want to express our gratitude to her for
giving valuable advice and time, which helped immensely in preparing this report.
While conducting the study, we had to visit many websites and journals to prepare a resourceful
term paper. Acknowledgments must go to that student of differen universities and our university
whom help us to make this report successfully.
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Executive Summary
Insurance is a system of spreading the risk of one to the shoulders of many and which is a legal
contract whereby the insurers, on receipt of a consideration known as premium, agree to
indemnify the insured against losses arising out of certain specified unforeseen or perils .
Insurance is a written contract, taken with the insuring company that transfers the risk of loss to
the insurer according to the terms of the contract. However, not all risks are insurable. If an
insurance company would have difficulty calculating the likelihood that a loss would occur
because of some risk, it is reluctant to insure against that risk.
Here in this term paper we have focused on Green delta insurance, Janata Insurance Company
Limited and Karnaphuli Insurance Company limited by analyzing there Underwriting Ratio,
Profitability Ratio, Leverage Ratio, Debt to equity ratio and Debt to capital ratio.
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Chapter-1 INTRODUCTION
1.1Origin of the Report
Our honorable course instructor Ms. Quazi Sagota Samina has authorized us the report as the partial
fulfillment of “Risk Management and Insurance” course requirements. We are assigned to make a report
on “Financial Ratio Analysis of Green Delta, Janata and Karnaphuli Insurance Company Limited”
and complete a study that covers all important factors.
1.2 Objective of the Study
The objective of this report is to observe the annual reports of Green Delta, Janata and Karnaphuli
Insurance Company Limited and analyze the financial ratios from the financial statements of the year
2012 to 2016. This includes an overview of the companies, structures as well as products and services
offered by the company.
1.3 Research Methodology
This section describes the methodology of the study. This survey is based on information collect from
secondary sources. After the detailed study of annual report, an attempt has been made to present
comprehensive analysis of financial ratios from the financial statements.
The data is organized on the basis of tables in excel and the technique that we have used to show the
graph is column.
1.4 Limitations of the Study
 Time frame for the report was very limited.
 Limited access to data.
 Limitation of knowledge.
1.5 Report Preview
Chapter two contains the company overview of “Green Delta, Janata and Karnaphuli Insurance
Company Limited.”
Chapter three includes the financial ratio analysis.
Chapter four includes limitations and our recommendation after observing the findings and analysis of the
reports.
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Chapter-2 COMPANY OVERVIEW
2. 1 Green Delta Insurance Company Limited:
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 a public limited company,
under the Companies’ Act 1913 and its operation started on 1st January 1986, with a paid up capital of
BDT 30.00 million.
Now, Green Delta Insurance Company Ltd. is amassed more than BDT 807 million with a credit rating of
AAA and ST1 as the first Insurance Company in Bangladesh. Green Delta is also the 1st Insurance
Company in Bangladesh to have equity partnership with International Finance Corporation (IFC) of
World Bank Group. With a presence in the strategically important parts of the country, which includes 39
branches, Green Delta Insurance Company has established its prominent presence with equity
participation in Delta BRAC Housing Ltd., Progressive Life Insurance Co Ltd, and United Hospital Ltd.
Fin Excel Ltd. and BD Venture Ltd. Green Delta Capital Ltd., Green Delta Securities Ltd., Professional
Advancement Bangladesh Limited and GD Assist Limited are four of the direct subsidiaries. GDIC
provides stock brokerage services through Green Delta Securities Ltd. (GDSL) and Investment
Banking services through Green Delta Capital Ltd. (GDCL). Professional Advancement Bangladesh
Limited provides international Standard professional’s trainings, in collaboration with CII, UK and GD
Assist Limited is the official representatives of Malaysia Travel Council in Bangladesh promoting
Malaysia Healthcare Tourism.
Under the charismatic leadership of Mr. Nasir A Choudhury, Advisor and Ms. Farzana Chowdhury,
Managing Director and CEO, Green Delta Insurance Company Ltd. has been leading the winds of
change in the insurance industry of the country in terms of service standard, innovative products and
legislative restructuring. After a glorious journey of 3 decades in the Insurance sector, Green Delta
Insurance Company Limited has now become a big family of visionary board members, 600+ committed
staff, numerous valued clients and thousands of esteemed shareholders. By now, Green Delta has been
able to uphold the brand image as a prompt claim settler, superior service provider, and diversified
product supplier – almost like a one stop solution provider in the non-life insurance sector in the
country.
Green Delta Insurance is the first non-life Insurance Company from Bangladesh to introduce the retail
insurance department. The department was created with the motto ‘Insurance for Everyone’. The main
products that the retail insurance department sells are Motor Insurance, Overseas Mediclaim Insurance,
Personal accident insurance, People’s personal accident policy, Health Insurance, All risk insurance and
Nibedita- Comprehensive Insurance scheme for women. There are few other projects under Retail and
SME, they are Niramoy-micro insurance for rural people, Shudin- micro insurance for garments workers,
Weather index based Crop Insurance and Probashi- Comprehensive Insurance Scheme for Migrant
workers.
Bangladesh Government has taken up a timely initiative to provide health insurance to the
people who are living below the poverty line. ‘Shashtha Suroksha Karmashuchi’ (SSK) is a project of
Health Economics Unit under Ministry of Health & Family Welfare. Green Delta Insurance is the scheme
operator for the whole project. Green Delta is eyeing the scope of digital insurance and has initiated
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online payments services to make the payment methods easier and have built up a strong IT infrastructure
to be aligned with government’s recent approaches towards a more digitalized and greener future.
As a part of the recognition for the contribution in the development of the insurance industry and for
maintaining the standard of service, the company has been considered as one of the top 500 companies
according to the renowned Rating Agency, Dun Bradstreet Rate Agency of Bangladesh. The company has
also been awarded with many national and international awards like – “ICAB National Awards” for Best
Published Accounts, ICMAB Best Corporate Award in Insurance category, ICSB Corporate Governance
Excellence Award, “Winner” for the Best Presented Accounts Award in the category ‘Insurance Sector’
by the South Asian Federation of Accounts (SAFA), “International Quality Crown Award” by BID
International in London, The BIZZ Award by World Business confederation of Business, USA for
leadership, Excellence in a management, Quality and Marketing, “The Diamond Eye Award For Quality
& Excellence” by BID OTHER WAYS, The Platinum Technology Award for Quality & Best trade name
by Association Other Ways in Berlin, International Star Award for Leadership in quality in the Gold,
Platinum and Diamond categories, World Finance Award for Best Non-Life Insurance Company in
Bangladesh, IFM Award for Best Non-Life Insurance Company Bangladesh, International ARC Award
and many more. With the slogan “Marches with time” – during the last 3 decades – GDIC has been
helping people in their time of need; pulling out all the steps when needed, and has been proud to be a
partner in progress.
2.2 Janata Insurance Company Limited:

Janata Insurance Company Ltd. (JIC) a first generation Non-Life Insurance Company in Bangladesh in
the private Insurance sector. The company was incorporated and commenced its business as a public
limited company under Companies Act 1994 on 23 rd September, 1986 with a view to run all types of
Insurance business except Life- Insurance as per Insurance Act, 1938 (subsequently repealed by the
Insurance Act 2010) in Bangladesh. JIC commenced its business operations from November 6, 1986 after
obtaining registration certificate from the office of The Chief Controller of Insurance (CCI). JIC ventured
its operation with a paid-up capital of Taka 30.00 million and authorized capital of Taka 100.00 million
sponsored by a group of leading entrepreneurs/industrialist of our country having involvement in various
socio-economic sectors. By the passage of time, the Authorized and the Paid-up capital of the company
have been enhanced to Taka 1000 million and Taka 383.53 million respectively by December 31, 2016.
JIC went for Initial Public Offering in 1994 and raised its paid-up capital by issuing rights shares in the
year 2011. The Company’s ownership is prudently distributed to Sponsor Directors 54.53% and 45.47%
to General Public including Financial Institutions.
The Board of Directors comprises a good number of eminent entrepreneurs and personalities of the
country. Members of the management team are highly qualified professionals. The Board is chaired by
Mr. Aziz Al- Masud and steered by Mr. Md. Fazlul Hoque Khan as the Chief Executive Officer of the
Company. The future plans of the company include increase of business volume by expansion of branch
network, hiring of potential man power with technical know-how in the Non-Life Insurance business
arena, implementing progressive marketing strategies and rendering quality & swift services.
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Mission:
> Grow significantly.
> Aim to provide prompt and personalized services to the clients.
> Bring innovation in insurance product and selling techniques.
> Work to deliver optimum value to the shareholders, clients, employees and add value to the nation.
> Consciousness in social obligation.
2.3 Karnaphuli Insurance Company Limited:

Background
Karnaphuli Insurance Company Limited was incorporated on 23rd November 1986 as a public limited
company under the companies act 1913, obtained the certificate of Registration, for carrying on general
Insurance Business from Controller of Capital Issues on 23rd November, 1986. Being sponsored by a
group of renowned business personalities, reputed industrialists and Journalist of the country, the
Company started its commercial operation on 25th November, 1986.
Karnaphuli Insurance Company Limited is a first generation and top-tier non-life insurance company. The
Company has been maintaining strong capital base, ethical business standards, corporate culture and
corporate governance, superior underwriting skills and dynamic investment management since its
inception
Vision
To Make the Company Bigger, Better and Bolder.
Mission
Serving the nation with significant contribution to the national economy through specialized, personalized
& relentless services to the customers with excellent team spirit to ensure steady growth of the company
and maximum return to shareholders.
Paid up Capital
Karnaphuli Insurance Company Limited was started its journey with paid up capital of 30.00 million in
1986. By way of issuing right shares, stock dividend the paid up capital stood Tk. 407.03 million.
CREDIT RATING
The Karnaphuli Insurance Co. Ltd. Regularly analysis the position of its claim paying ability. During the
year Company achieved A+ (Pronounce as A Plus) rating for long term and AR-2 for short term which
reflects a stable outlook on the basis of its premium collections, core services expeditions, settlement of
claim and sound liquidity position by the Alpha Credit Rating Limited.

NETWORK
Karnaphuli Insurance Co. Ltd. with a network of 27 branches covering strategic financial centers of
Dhaka, Chittagong, Rajshahi, Khulna, Barisal, Shylhet, Rangpur and Bogra & some important district
town has been providing whole hearted services to the doorsteps of the clients. It has active presence in
capital market. The Company is always eagerly ready to fulfill the needs of all its clients with high
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profitability & balanced growth. Karnaphuli Insurance Co. Ltd. has earned excellent market reputation
and absolute confidence of its valued clients.
Business Strategy
The Company is focused on few strategic issues encompassing change Management in the short to long
period through the implementation of various policies, processes and activities to ensure continuous,
sustainable and qualitative growth, with the sole objectives of Institution Building. An effective cluster
Management program has implemented. Branch Management is now being continually exposed to mature
thoughts and ideas through mentors resulting in qualitative improvement of their business and operational
activities.
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Chapter-3 Financial ratio analysis
3.1 Liquidity Ratio
a. Current ratio:
The current ratio is a liquidity ratio that measures a company's ability to pay short-term obligations. To

gauge this ability, the current ratio considers the current total assets of a company
(both liquid and illiquid) relative to that company’s current total liabilities.
The formula for calculating a company’s current ratio is:
Total Current Assets

Current Ratio =
Total Current Liabilities
The current assets and current liabilities of Green Delta, Janata & Karnaphuli insurance companies are
given in the following tables:
Total current assets Year

Company 2012 2013 2014 2015 2016
Karnaphuli life insurance t 677.57 759.05 824.13 1082.61 1081.20
Green Delta life insurance 3603.29 3664.7 3967.88 4861.73 5691.93
Janata life insurance 557.98 597.81 619.1 627.53 641.6
Total current liabilities Year

Company 2012 2013 2014 2015 2016
Karnaphuli life insurance t 133.89 165.42 156.3 140.46 119.9
Green Delta life insurance 1723.25 1882.9 1746.43 1968.24 2944.82
Janata life insurance 177.77 188.99 229.63 220.96 214.92
Data source: Annual report of Green Delta, Janata and Karnaphuli Insurance Company from 2012 to
2016.
From the above data, the current ratio is calculated for 2012 to 2016. The ratio is given below
Current Ratio (times) Year

Company 2012 2013 2014 2015 2016
Karnaphuli insurance 5.06 4.59 5.27 7.71 9.02
Green Delta insurance 2.09 1.95 2.27 2.47 1.93
Janata insurance 3.14 3.16 2.70 2.84 2.99
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Current Ratio
Karnaphuli insurance Green Delta insurance Janata insurance
9.02
7.71
5.06 5.27
4.59
3.14 3.16 2.99
2.09 2.27
2.70 2.47 2.84
1.95 1.93
2012 2013 2014 2015 2016
Interpretation:
The current ratio of Karnaphuli Insurance was highest 9.02 in 2016 and the lowest 4.59 was in 2013. In 2012 the
ratio was 5.09 and in 2014 and 2015 were 5.27 and 7.71 rspectively. It can be concluded that the current ratio of
Karnaphuli insurance is gradually increasing from 2012 to 2016 so that their profitability decreasing.
But the current ratio of Green Delta insurance was highest 2.47 in 2015 and the lowest 1.93 was in 2016. In 2012,
2014 and 2013 the ratio was 2.09, 2.27 and 1.95 respectively. The Green Delta insurance company can
successfully maintain their profitability 2012 to 2016.
The third company Janata insurance maintain almost same ratio from 2014 to 2016. In 2013 the ratio was highest
3.16 and in 2014 and 2016 the ratio was lowest 2.70. As their liquidity ratio decreasing from 2012 to 2016 so their
profitability is high.
3.2 Underwriting Ratio

a. Loss ratio:
The loss ratio is the difference between the ratios of premiums paid to an insurance company and the claims
settled by the company. The loss ratio is the total losses paid by an insurance company in the form of claims. By
loss ratio, we can see that, what portion has to be paid as claim out of the premium. If a company’s Loss ratio is
higher, it indicates that, the management is inefficient in their underwriting judgment. Because an efficient
underwriter can recognize the risk and can reduce the claim amount. The formula for calculating the loss ratio is-
Net Claim
Loss ratio = × 100
Net Premium
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The net claim and net premium amount of Green Delta, Janata and Karnaphuli Insurance
Net claim (million) Year

Company 2012 2013 2014 2015 2016
Karnaphuli insurance 11 14 11 26 11
Net Premium(million) Year

Company 2012 2013 2014 2015 2016
Data source: Annual report of Green Delta, Janata and Karnaphuli Insurance Company from 2012 to 2016
The values of the loss ratios of Green Delta, Janata & Karnaphuli insurance company from the year 2012
to 2016 are given in the following table:
Loss ratio Year

Company 2012 2013 2014 2015 2016
Karnaphuli insurance 7% 9% 8% 16% 7%
Green Deltainsurance 17% 28% 28% 24% 29%
Janata insurance 51% 30% 49% 31% 38%
Loss Ratio
Company Karnaphuli insurance
Green Delta insurance Janata insurance
51% 49%
38%
30%
28% 28% 31% 29%
24%
17% 16%
7% 9% 8% 7%
2012 2013 2014 2015 2016
Interpretation:
The net claim against net premium of Karnaphuli insurance was highest in 2015. This was 16% that means out of
100 taka premium the company net claim of policy holder was 16 taka. But the net claim was lowest in 2012 and
2016. It was only 7%. But in 2013, 2014 the loss ratio was 9%, 8% respectively.
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The net claim of Green Delta insurance was higher in 2016. It was 29%. The lower loss ratio was in 2012 which
was 17%. In 2013, 2014 and 2015 the net claim was 28%, 28% and 24% so that the efficiency level of this
company decreasing over this time period. The loss ratio of Green Delta insurance higher than the Karnaphuli
insurance which is not good for the company.
The loss ratio of Janata insurance company was highest in 2012 which was 31% but other four year the company
was doing well. Because loss ratio lower indicate that the policy taken by the company is good.
The loss ratio of Karnaphuli insurance is lower than others two company. But the loss ratio of Green Delta
Insurance Company is moderate. The higher loss ratio indicates that the quality of policy is not good. Company
need to pay more claims against premium. But the loss ratio of Janata insurance company is on high. So if we see
theoretically then Karnaphuli insurance is doing well in this sector
b. Expense ratio:
Expense ratio shows that, from the premium amount how much has to be paid as the underwriting
expense. This ratio also shows the efficiency of the management. Higher the Expense ratio, lower the
efficiency of the management. The formula for calculating the expense ratio is-
Underwriting Expense
Expense ratio = ×100
Net Premium
The underwriting expense and the net premium amount of Green Delta, Janata & Karnaphuli Insurance
Company are given in the following tables:
Underwriting expense Year

Company 2012 2013 2014 2015 2016

Company 2012 2013 2014 2015 2016
Karnaphuli insurance t 162.14 148.04 139.66 165.99 156.69
Data source: Annual report of Green Delta, Janata & Karnaphuli Insurance Company from 2012 to 2016
Expense ratio Year

2012 2013 2014 2015 2016
Company
Green Delta insurance 12% 20% 24% 29% 30%
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Expense Ratio
Company Karnaphuli insurance Green Delta insurance Janata insurance
55%
41% 42%
38%
29% 30%29%
24%
20%
14%12% 15% 14% 11%
11%
2012 2013 2014 2015 2016
Interpretation:
The expenses ratio in 2013 was highest for Karnaphuli insurance. It was 15% of net premium. It means if
company earn taka 1 then they need to pay taka 0.15 as under writing commission from net premium. But for next
four years the expenses ratio gradually was decreasing. Although the Karnaphuli insurance company maintains
the expense ratio from 11% to 14% for the last five years.
Green Delta insurance company expenses ratio increasing for last five years. The highest 30% was in 2016. After
that the expenses ratio was increasing gradually. In 2012 the company paid .12 taka under writing expenses
against 100 taka net premium. But in 2013, 2014 and 2015 the ratio was 20%, 24% and 29% respectively.
The Janata insurance paid 55% underwriting commission against its net premium in 2012. The next four years it
was 41%, 38%, 42% and 29% respectively. The highest was in 2012 and lowest was last years which was 29%.
The above graph indicates that the expenses ratio of Karnaphuli insurance was lower than other two companies.
As we know lower expense ratio indicate higher efficiency so Karanaphuli has the highest efficiency.
Comparatively inefficient was Green delta as the ration is increasing over the years.
c. Combined Ratio:
Combined ratio shows that, what portion of net premium is spent for net claim and underwriting expense.
Higher management efficiency comes with the lower expense and claim. The formula for calculating the
combined ratio is-
Net Claim+Underwriting Expense

Combined Ratio = ×100
Net Premium
The net claim and underwriting expense and the net premium amount of Insurance Company are given in
the following tables:
Net claim (million) Year

Company 2012 2013 2014 2015 2016
Karnaphuli insurance 11 14 11 26 11
10
Underwriting expense Year
Company 2012 2013 2014 2015 2016

Company 2012 2013 2014 2015 2016
2016.
Combine ratio Year

2012 2013 2014 2015 2016
Company
Combine Ratio
Company Karnaphuli insurance Green Delta insurance Janata insurance
106%
86%
70% 73% 67%
53% 53% 59%
48%
29% 25% 22% 26%
21% 18%
2012 2013 2014 2015 2016
Interpretation:
The combined ratio of Karnaphuli insurance was highest in 26% in 2015. That means for 100 taka net premium
the company paid 26 taka for net claim and under writing expenses. In 2013 it was second highest 25%. But in
2012, 2014 and 2016 it was 21%, 22% and 18% respectively.
In 2016 the expenses ratio of Green Delta insurance was highest 59%. That means they paid more than 55 taka as
a under writing commission and net claim from net premium. But from 2012 the next four years it was 29%, 48%,
53% and 53% respectively.
Among the three the combined ratio of Janata insurance was higher. In 2012 it was highest 106%. But the second
highest was in 2014 which 86%. In 2013, 2015 and 2016 the combined ratio was 70%, 73% and 67%
respectively.
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The combined ratio of three companies is shown above in a single graph. The combined ratio of Janata insurance
company was little bit higher than the others two company. Karnaphuli was the most efficient as it has the lowest
combined ratio in compare to Janata and Green Delta Insurance Company.
3.3 Profitability Ratio

a. Return on Assets:
Return on assets (ROA) is an indicator of how profitable a company is relative to its total assets. ROA
gives an idea as to how efficient management is at using its assets to generate earnings. Calculated by
dividing a company's annual earnings by its total assets, ROA is displayed as a percentage. Sometimes
this is referred to as “return on investment”. The formula for return on assets is
Net Income
Return on Asset = ×100
Total Assets
The net income and the total asset amount of Karnaphuli, Green Delta and Janata Insurance Company are
given in the following tables:
Total assets(million) Year

Company 2012 2013 2014 2015 2016
Net income (million) Year

2012 2013 2014 2015 2016
Copmany
2016.
Return on assets Year

2012 2013 2014 2015 2016
Copmany
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Return on assets
Copmany Karnaphuli insurance
29%
4%4%3% 4% 5%4% 5% 5%
2% 2% 3%2%
1% 1%
2012 2013 2014 2015 2016
Interpretation:
The return on Asset of Karnaphuli Insurance is almost same from 2012 to 2016. That means Karnaphuli
insurance company earns net 4 to 5% on its total assets.
Secondly the return of Green Delta insurance was highest in 2016. It is 29% return on its total assets. But
from 2012 to 2015 company maintain 4 to 3% ROA.
The last one out of three Janata insurance maintain ROA in between 1 to 3%.
High ROA indicate high profitability and we can see that Green Delta insurance was highly profitable in
2016.
b. Return on Equity Ratio:
Return on equity (ROE) is the amount of net income returned as a percentage of shareholders equity. Return
on equity measures a corporation's profitability by revealing how much profit a company generates with the
money shareholders have invested. ROE is expressed as a percentage and calculated as:
Net Income
Return on Equity= ∗100
Total shareholde r ' s Equity
Net income (million) Year

2012 2013 2014 2015 2016
Company
13
Total shareholder equity
(million) Year
2012 2013 2014 2015 2016
Company
2016.
Return on equity Year

2012 2013 2014 2015 2016
Company
Return on Equity
44%
7% 6% 5% 8% 9% 8%
6% 4% 5% 4% 4%
2% 1% 2%
2012 2013 2014 2015 2016
Interpretation:
The return on equity of Karbaphuli
Insurance company was highest in 2015. It is 9%. In 2012, 2013, 2014 and 2016 they earn 7%, 2%, 8% and 8%
respectively. It indicates that the average return on equity of Karnaphuli insurance is 7% to 9%.
In 2016 the return on equity of Green Delta insurance company was 44% which is highest in last five years. But
from 2012 to 2015 this company has stable ROE.
The return on equity of Janata insurance was lowest in 2014 which 1%. Which is very much low. It has
low ROE from 2012 to 2016.
The three companies doing well. They have consistent ROE so they all are highly profitable. But Green Delta
insurance has low profitability in 2016.
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c. Investment Yield Ratio:
Shows that, how many time is the investment compared total income. Lower investment yield shows higher
profitability. The formula for calculating the investment yield ratio is-
Total Investment
Investment Yield = times
Investment Income
Investment Income(million) Year

2012 2013 2014 2015 2016
Copmany
Investment(million) Year
2012 2013 2014 2015 2016
Copmany
Data source: Annual report of Green Delta, Janata and Karnaphuli Insurance Company from 2012 to 2016
Investment yield (Times) Year

2012 2013 2014 2015 2016
Company
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Investment Yield
31.76
19.26
14.76 15.43
13.13
11.26 12.42 13.41
10.77 10.00 10.24
8.79 8.80
6.92 7.23
2012 2013 2014 2015 2016
Interpretation:
In 2013 the investment yield of Karnaphuli insurance company was highest 31.76 but the lowest 10 was
in 2015. In 2012, 2014 and 2016 the investment yield of this company was 13.13, 11.26% and 12.42
respectively. So in these year Kaenaphuli insurance company maintain average 11 return on its cost price
of investment.
The Green Delta insurance company’s investment income was highest in 2016. This is almost 19.26. The second
highest investment income was in 2015 which 15.43 but in 2013 and 2014 the investment income was 10.77 and
7.23. Their profitability decreased in last two years.
The Janata insurance generated highest investment income in 2016 which was 13.41. Their investment yield ratio
increased from 2012 to 2015 so they have low profitability in this period .
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3.4 Leverage Ratio
a. Debt to Equity Ratio:
Debt/Equity Ratio is a debt ratio used to measure a company's financial leverage, calculated by dividing a

company’s total liabilities by its stockholders' equity. The D/E ratio indicates how much debt a company is using
to finance its assets relative to the amount of value represented in shareholders’ equity. The formula for
calculating D/E ratios can be represented in the following way :
Total Debt
Debt to Equity Ratio =
Total Equity
Total liabilities Year

Company 2012 2013 2014 2015 2016
Total shareholder equity Year

2012 2013 2014 2015 2016
Company
2016.
Debt to equity ratio Year

2012 2013 2014 2015 2016
Company
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Debt to equity Ratio
58% 60% 60% 60%
55% 55% 51%
48%45% 50%
44% 44%
34%
23% 20%
2012 2013 2014 2015 2016
Interpretation:
The debt to equity ratio of Karnaphuli Insurance was highest 60% in 2015 which indicate that the company using
debt 60% of its equity. But in 2012 they used low debt to equity ratio. It is 48%. In 2013, 2014 and 2016 the debt
to equity ratio of this insurance company was 55%, 58% and 51% respectively.
The Green Delta insurance company maintains highest debt to equity ratio in 2012 to 2014. This was from 34 to
45%. But the last two years the debt to equity ratio of this insurance company was 20% to 23% which is
consistent. That means their debt to equity ratio decreased.
The debt to equity ratio of Janata insurance company was highest in 2014 and 2016 which was 60%. That means
company has 60 taka debt against its 100 taka equity. The debt to equity ratio of Janata insurance company
gradually increasing.
The debt to equity ratio indicates the risk of the each company. As we have observe that Karnaphuli and Janata
insurance company have high debt to equity ratio so their level of risk is high but on the other hand Green Delta
insurance have low debt to equity ratio so they has low risk.
b. Debt to Total Capital Ratio:
The debt-to- total capital ratio is calculated by taking the company's debt, including both short- and
long-term liabilities and dividing it by the total capital. Total capital is all debt plus shareholders'
equity, which may include items such as common stock, preferred stock and minority interest.
Total Liability
Debt to Total Capital Ratio= ×100
Total Shareholder Equity
Total liabilities Year
Company 2012 2013 2014 2015 2016
18
Total capital Year
2012 2013 2014 2015 2016
Company
Karnaphuli insurance 1120.4 1184.64 1162 1166.41 1118.85
2016.
Debt to total capital Year

2012 2013 2014 2015 2016
Company
Debt to total Captital Ratio

35% 33% 37% 38% 38% 35% 38%
32%31%30% 31% 34%
25%
19% 17%
2012 2013 2014 2015 2016
Interpretation:
If we observe Karnaphuli Insurance Company’s debt to total capital ratios, they are increasing over the
years but again decreased in 2016. In 2015, it is higher than the other years.
Green Delta Insurance Company’s debt to total capital ratio was decreasing over the period of 2012 to
2016.
Finally, if we observe Janata insurance Company’s debt to total capital ratios, they are fluctuating over
the years and there are increasing and decreasing effects. In 2014 and 2016, it is higher than the other
years which are 38%.
So Green delta have good position than others two because their debt to total capital ratio was decreasing
that means they has low level of risk than Karnaphuli and Janata insurance.
19
Chapter-4 Recommendation & Conclusion
4.1 Recommendation:
 The insurance companies of Bangladesh should practice marketing through the use of
promotional tools such as advertising, sales promotion, public relation and publicity,
personal selling and direct marketing.
 In order to create the growth of insurance business in our country, insurance companies
should expand their target market by providing responsive services and establish efficient
departments to perform such task.
 Government must minimize the restrictions on premium so that insurance companies can
fix their premium according to their demand. This will increase the profitability of the
insurance companies.
 One of the basic requirements for the insurance industry to have sustained growth is to
enhance training facilities. Bangladesh Insurance Academy is providing training facilities
and professional education to those engaged in insurance business in the country. The
syllabus, curriculum and training programs of the academy need to be modified to meet
the modern needs of the insurance industry.
 To regain and maintain a positive public image the insurance companies should
overcome the dissatisfaction in regards to services and claim settlements and should
maintain a service standard.
 The collected premium should be invested in large and beneficial sectors so that
insurance companies can return their clients expected return in timely.
 Government should have a regulatory body for the surveillance on insurance companies
so that they must perform their business maintaining the ethical issues properly.
 Insurance companies need to modify their recruitment strategies with increased focus on
the marketing and sales training because, insurance being a service marketing industry it
requires special attention.
 In response to the opportunity of growing market the insurance companies can expand
their target market by identifying and providing responsive services. In order to do so
each company should established and effectively operate research and development
department.
20
4.2 Conclusion:
The insurance sector in Bangladesh is still relatively untapped with less than 1 percent penetration. The
sector contributes less than 1 percent of the GDP. This means there is immense growth potential for the
sector. The Industry has been growing consistently over the past decade. Recent trends show that now
people are more aware on insurance and informed on the importance of having various insurance
coverage.
By analyzing the above ratios we found that different insurance companies are good for different things.
In underwriting ration Karnaphuli insurance company is doing well. In profitability ratio Green delta is
more profitable. By analyzing Leverage ratio we found that Green delta insurance has the lowest risk. So
we can say that Green delta insurance is more efficient than Karnaphuli insurance company limited and
Janata insurance company limited.
****************************************
5. Reference:
1. Annual report of Karnaphuli Insurance from year 20012 to 2016- http://www.kiclbd.com/
2. Annual report of Green Delta Insurance from year 20012 to 2016- https://green-
delta.com/products-and-services/fire-insurance/
3. Annual report of Janata Insurance from year 20012 to 2016-
http://janatainsurance.com/index.php/fire-insurance/
4. Last 5 years financial analysis - http://lankabd.com/homepage
21

Performance Evaluation of Insurance Companies Based On Ratio Analysis

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Performance Evaluation of Insurance Companies Based On Ratio Analysis

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Performance Evaluation of Insurance

Companies Based on Ratio Analysis

Department of Business Administration

April 01, 2018

Subject: Submission of the report.

1.2 Objective of the Study

1.3 Research Methodology

1.4 Limitations of the Study

 Time frame for the report was very limited.

 Limited access to data.

1.5 Report Preview

Chapter three includes the financial ratio analysis.

2.2 Janata Insurance Company Limited:

> Grow significantly.

> Aim to provide prompt and personalized services to the clients.

> Bring innovation in insurance product and selling techniques.

> Consciousness in social obligation.

2.3 Karnaphuli Insurance Company Limited:

The current ratio is a liquidity ratio that measures a company's ability to pay short-term obligations. To

The formula for calculating a company’s current ratio is:

Total Current Assets

Total current assets Year

Total current liabilities Year

Current Ratio (times) Year

2012 2013 2014 2015 2016

3.2 Underwriting Ratio

Net claim (million) Year

Net Premium(million) Year

Loss ratio Year

2012 2013 2014 2015 2016

Underwriting expense Year

Net Premium(million) Year

Expense ratio Year

2012 2013 2014 2015 2016

Net Claim+Underwriting Expense

Net claim (million) Year

Net Premium(million) Year

Combine ratio Year

2012 2013 2014 2015 2016

3.3 Profitability Ratio

Total assets(million) Year

Net income (million) Year

Return on assets Year

b. Return on Equity Ratio:

Net income (million) Year

Return on equity Year

Investment Income(million) Year

Investment yield (Times) Year

2012 2013 2014 2015 2016

Debt/Equity Ratio is a debt ratio used to measure a company's financial leverage, calculated by dividing a

Total liabilities Year

Total shareholder equity Year

Debt to equity ratio Year

2012 2013 2014 2015 2016

b. Debt to Total Capital Ratio:

Debt to total capital Year

Debt to total Captital Ratio

2012 2013 2014 2015 2016

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