Financial Statement Analysis of Popular Life

Insurance Co. Ltd.

Executive Summary

With the focus of providing one counter service to clients, Popular Life
Insurance Co. Ltd. (POPULAR LIFE INSURANCE CO. LTD.) has its journey. As
a part of my under graduation program, I have completed my internship in
this organization. Throughout the period of my internship, I had been
working in several departments. However, I was officially appointed to
work in the loan and advancement department. The report will reveal the
background of the company, description of the loans, findings and
recommendations based on the experience gathered.

One of my major responsibilities was to assist the clients in opening new

accounts. Alongside, filling up IPO form, maintaining database, providing
relevant information, accepting cash and credit cheque, maintaining OBC
register and writing vouchers were some of the core activities during my
internship. In one hand, I was assigned to provide account opening related
information to the new customers. Everyday, one of my responsibilities
was to capture new or existing information related to account opening and
then, disseminate those information to the clients who are interested to
open accounts in POPULAR LIFE INSURANCE CO. LTD.. On the other hand, I
was assigned to keep a database of the information collected. I had been
maintaining a database of clearing cheques. Alongside, I prepared and fill
up new and existing files for the department.

1
Introduction :

Popular Life Insurance Co. Ltd. established by a group of local enthusiastic

entrepreneur started its operation in September 26, 2012.

Since inception, Popular Life set before itself a high standard of all round
performance coextensive with professional soundness and proficiency. It
soon made a mark in the life insurance arena by not only being the leader
among the private sector indigenous companies, but by undertaking and
successfully implementing innovative and welfare oriented life insurance
schemes. But more importantly, in fulfillment of the avowed commitment
towards social development, Popular Life introduced micro-life insurance-
cum-savings products specially suited to the needs and pockets of poor
people of the country who constitute more than 80% of the people of
Bangladesh.

Rational of the Study :

Popular Life offers a wide variety of ordinary life (Akok Bima) product/plans
ranging from the most common endowment type, pension plan, different
types of payment (two/three/four/five) plans etc. The plans have been
designed keeping in view the diverse and multifaceted needs of the
insuring people belonging to different strata of the society. Some of the
popular plans are briefly described below.
I. Endowment plan with profits (Tables-01) The most common and
widely popular, this plan provides for a fixed sum at end of a particular
term or at earlier on death of the assured. This is a straightforward
coverage allowing a person to plan his future needs for security and
projected savings through means of insurance i.e. for security and
projected savings through means of insurance.

IV. Child protectin plans with profits (Table - 07,09) : Multiple benefits
in the form of scholarship, monthly annuity etc. in addition to sum assured
are available under these plans. Under one plan (Table-07) sum assured or
a part thereof is also payable to the policyholder in case the child dies

2
prematurely.

V. Assurance cum Pension and Medical Benefit plan (Table - 08) -

without profits. Under this plan pensions plus medical benefit are provided
from an age designated by the policyholder for life, guaranteed for a
minimum period of 10 years i.e. if the pensioner dies anytime within 10
years his designated nominee will get pension plus medical benefit for
remaining term of 10 years. Before pension starts, if the assured
policyholder dies, 10 times the annual pension plus 10% of medical
benefit be paid as a lump-sum to his nominee and the policy is terminated
upon such payment.

VII. Single Payment Endowment Assurance with profit (Table No.

10): It is a single Premium Policy offering for either 10 or 15 years term.
Full sum assured alongwith accured bonus be paid either normal tennure
of the policy expires or on death anytime before date of maturity.
Premiums are based on the age of the proposer. This plan perfectly suits
the needs of the executive class.

Statement of the Problems :

Popular Life offers a wide variety of micro insurance products (Khudro

Bima) product/plans ranging in 2001 to facilitate the rural people to save
their hard earned money alongwith the coverage of insurance. Products
are ranging fron the most common deposit pension scheme, small saving
scheme plans etc. The plans have been designed keeping in view the
diverse and multifaceted needs of the rural insuring people belonging to
different strata of the society. Some of the popular plans are briefly
described below:

3
Financial Statement of Popular Life Insurance
Ltd.

4
5
6
7
8
9
10
 Ratio Analysis of Insurance Ltd.

1. Liquidity Ratio:
a. Current Ratio
Current Assets / Current Liabilities

Yearcalculation Ratio
201 25,122,365/1825 1.37
2 8145 %
201 28798564/19365 1.48
1 485 %
201 3000000/156932 1.91
0 5 %
Table: 1.1
a. Current Ratios:

YearRati
o
201 1.96
2
201 1.70
1
201 1.91
0
Table: 1.1
Current Ratio of the City general Insurance co. ltd
Figure: 1.1
The current ratio is 1:1 then it can be interpreted as insufficiently liquid.
Because current ratio measures only total taka worth of current liabilities.
The current assets may decline its value then the ability to pay liability will
be threatening in case of 1:1 current ratio.
The current ratio of City General Insurance Co. Ltd Are 1.96 and 1.70 of
the last two years of 2007, 2008 respectively. Which can be interpreted to
be insufficiently liquid and not satisfactory.

11
b. Quick / Acid Ratio:
Cash, Marketable Securities & Receivable / Current Liabilities

YearCalculation Ratio
201 15183137/2036253 0.75
2 2 %
201 18236953/20963250.86
1 %
201 20,165,827 /0.76
0 26,409,510 %
Table: 1.2
b. Quick / Acid Ratio:

YearRati
o
201 0.75
2
201 0.86
1
201 0.76
0
Table: 1.2
Quick Ratio of the City general Insurance co. ltd
Figure: 1.2
The quick / acid test ratio of the City General Insurance Co. Ltd. Are 0.76,
0.80 of the last two years of 2007, 2008 respectively. Which can be
interpreted to be insufficiently liquid and not satisfactory.

c. Current Cash Debt Coverage Ratio:

Net Cash provided by operating Activities /Average Current Liabilities

YearCalculation Ratio
201 15183137/20362 0.75
2 532 %
201 18236953/20963 0.86
1 25 %
201 2,901,949 /0.15
0 18,905,005 %

12
Table: 1.3

13
c. Current Cash Debt Coverage Ratio:

YearRati
o
201 0.75
2
201 0.86
1
201 0.15
0
Table: 1.3
Current cash debt coverage Ratio of the City general Insurance co. ltd
Figure: 1.3
Current cash debt coverage ratio of City General Insurance Co. Ltd. Are
0.15, 1.03 of the last two years of 2007, 2008 respectively. Which can be
interpreted to be insufficiently liquid and not satisfactory.

Comment on Liquidity Ratios:

The liquidity position of the company is not satisfactory due to the fact
that their receivable management and specially, inventory management is
not satisfactory.
Though the current ratio, quick ratio, current cash debt coverage ratio are
not satisfactory and the year of some satisfactory current ratio of 2007
and quick ratio, current cash debt coverage ratio of the year 2008.

Activity Ratio
d. Receivable turnover
Net sales /Average Trade Receivable

YearCalculation Ratio
201 3932152/1396323 0.28
2 5 %
201 56329856/250963 2.25
1 69 %
201 12,843,908/16,00 0.80
0 4,918 %

14
Table: 1.4

15
d. Receivable turnover

YearRati
o
201 0.28
2
201 2.25
1
201 0.80
0
Table: 1.4
Receivable turnover Ratio of the City general Insurance co. ltd
Figure: 1.4
Receivable turnover ratio of City General Insurance Co. Ltd. Are 0.80, 0.75
of the last two years of 2007, 2008 respectively. Which can be interpreted
to be insufficiently liquid and not satisfactory.

e. Assets Turnover
Net Sales /Average Total Assets

YearCalculation Ratio
201 10856396/1300789 0.83
2 %
201 110935235/1325642 0.84
1 38 %
201 120,843,908 /1.96
0 205,513,833 %
Table: 1.5
c. Assets Turnover

YearRati
o
201 0.83
2
201 0.84
1
201 1.96
0

16
 Table: 1.5
Assets turnover Ratio of the City general Insurance co. ltd
Figure: 1.5
Assets turnover ratio of City General Insurance Co. Ltd. Are 0.06, 0.06 of
the last two years of 2007, 2008 respectively. Which can be interpreted to
be insufficiently liquid and not satisfactory.

Comment on Activity Ratio:

The receivable turnover ratio is somewhat satisfactory in the year of 2007
is satisfactory. Asset turnover same of the not satisfactory of the year 2
007, 2008
The current assets management is deplorable due to very bad inventory
management liberal credit policy. So Assets Management position of the
City General Insurance Co. Ltd. Is not efficient.
2. Profitability
f. Profit Margin on Sales
Net Income / Net Sales

YearCalculation Ratio
201 12323652/932513 1.32
2 2 %
201 13652352/113265 1.21
1 38 %
201 15,988,902/12,84 1.24
0 3,908 %
Table: 1.6
f. Profit Margin on Sales

YearRati
o
201 1.32
2
201 1.21
1
201 1.24
0

17
 Table: 1.6
Profit margin on sales Ratio of the City general Insurance co. ltd
Figure: 1.6
The gross profit Margin Ratio of the City General Insurance Co. Ltd. Are
1.32, 1.21, 1.24, and 1.64 of the last four years2005, 2006, 2007, and
2008 respectively?
The gross profit Margin Ratio of the City General Insurance Co. Ltd. Is
somewhat satisfactory and in the year of 2008 ratio is higher. Some
satisfactory of the years 2005, 2006 and 2007.
g. Rate of Return on Assets
Net Income / Average Total Assets

YearCalculation Ratio
201 80963263/2109632 0.38
2 51 %
201 14235632/1963251 0.72
1 4 %
201 15,988,902/205,51 1.08
0 3,833 %
Table: 1.7
g. Rate of Return on Assets

YearRati
o
201 0.72
2
201 1.08
1
201 1.10
0
Table: 1.7
Rate of return on assets Ratio of the City general Insurance co. ltd
Figure: 1.7
The Rate of Return on Assets of the City General Insurance Co. Ltd. Are
0.38, 0.72, 0.08 and 0.10 of the last four years 2005,2006, 2007 and 2008

18
respectively. Which can be interpreted to be insufficiently liquid and not
satisfactory.

The Earning per share of the City General Insurance Co. Ltd. Are 5.59,
4.40, 7.33, 13.08 of the last four years 2005, 2006, 2007, 2008
respectively.
In the year of 2008 the earning per share is higher i.e. 13.08 Taka than the
other year and here is mentionable that the earning per share of the year
2007 is only Taka 7.33. Though
City General Insurance Co. Ltd. Is a riskier company but its Earning per
share (EPS) is higher due to more use of debt capital.

19
4. Coverage Ratio:
h. Debt to Total Assets
Total Debt / Total Assets

YearCalculation Ratio
201 55632563/1500332 3.71
2 2 %
201 67,084,429/249,939 4.27
1 ,353 %
201 219,611,092/272,08 5.81
0 4,385 %
Table: 1.9

20
Findings :
Investors preference for ULIP and equity

1) 65.67% of the investors were males.

2) 88% of the investors age was less than 45 years indicating that
ULIP is a popular investment tool among the young people.
3) Nearly 62% of the investors were employed while only 13.67% of
the investors who were involved in their own business have unit
linked insurance plans.
4) 70% of the investors were earning less than Rs. 30000 p.m. The unit
linked insurance plans is not popular among high net worth
individuals i.e. those earning more than Rs. 45000 p.m. as only 16%
had invested in it.
5) 36.67% of the investors save less than 20%, 43% save between 20
to 40% of their annual income and balance 20.33% save more than
40% of their annual income.
6) Only 16% of the investors were ready to take risks when it comes to
investing the money, while nearly 27% were absolutely not
interested in taking any risk.
7) Apart from ULIPs, bank deposits, public provident fund were popular
investment avenues selected by the investors. Two-third of the
investors had bank deposits, while 50% have PPF a/c.
8) ICICI Prudential Life Insurance Co. Ltd is the market leader in the
unit linked plans markets can be seen from the survey of 300
investors. Here 41.33% of the investors have insurance plan with
this company and only HDFC Standard life Insurance Co. Ltd with
14.33% and Life Insurance Corporation of India with 13% have
double digit market share.

21
Recommendation :

The bank should higher export who can understand the future economic
situation and can take initiative based on the forecast. Again the bank can
achieve success from the economy if they can handle the situation
efficiently.
Bank should improve their research centre and training centre to
enrich the knowledge regarding Uniform Customs and Practice for
Documentary Credit (UCPDC).
I recommend that the bank improve its management of international
division who are responsible for handling their foreign exchange related
risk.
Again the bank should maintain correspondence relationship with the
bank that will them to settle payment and receipt regarding foreign
exchange transaction.
The bank should aware about their customer to meet up their demand
to maintain their goodwill.
Bangladesh is a developing country. Many people of our country live in
many countries. So, it is important to maintain foreign exchange
department in every banks.
Foreign exchange department of DBBL should enrich by new
technology to make a good competition among the banks.

22
Conclusion :

From our computations of liquidity and profitability ratios, we can

conclude that the liquidity and profitability of insurance companies in
Bangladesh is satisfactory. This analysis is important because each and
every insurance company must maintain its liquidity and solvency position
to sustain and continue growth.

From small to big business organization ratio analysis helps a great deal in
decision making process. As it helps to give idea about the financial
condition, thus it helps in future financial projection and decision making
process of any business house.

An insurance company, to ensure both existence and growth, must trade-

off between its liquidity and profitability. I expect that this study gives a
clear idea about the liquidity and profitability position of insurance
companies in Bangladesh.

23
Bibliography :

1. Financial Statement Analysis

Theory Application and Interpretion
- By Leopard A Bernstrein
2. Fundamental of Financial Management
- By E.F. Brigham
3. Financial Management
- By I M. Pandey
4. Intermediate Accounting
- By Donald E. Kieso
Jerry J. Weygandt
5. www. Iasplus.com/standard/ifrs04.htm
6. WWW. Varies Types of Insurance Co.com
7. WWW. History of Insurance business in Bangladesh.com
8. Annual Report of Insurance company in Bangladesh 2008.

24