Cover page

14

Final Report on financial

Analysis of EFU. 28th November, 2014

Submitted By: Shankar Talreja, Arif Aziz, Vikash Ashra and

Ishfaque Ali Shah

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Table of contents Cover page .................................................................................................................................................... 0

Executive summary ....................................................................................................................................... 2

Introduction .................................................................................................................................................. 4

Background and history ............................................................................................................................ 4

Main events success stories ...................................................................................................................... 4

PRODUCTS ................................................................................................................................................. 4

BUSINESS MODEL OF EFU LIFE INSURANCE COMPANY ............................................................................ 5

PROFITS ..................................................................................................................................................... 5

Financial performance in past years ............................................................................................................. 6

Ratio analysis ............................................................................................................................................ 6

Current ratio: ........................................................................................................................................ 6

Return on capital employed .................................................................................................................. 6

Total asset turnover ratio ..................................................................................................................... 6

Market data .............................................................................................................................................. 6

Price of the share .................................................................................................................................. 6

Market capitalization ............................................................................................................................ 7

Cash dividend per share ........................................................................................................................ 7

Current financial performance...................................................................................................................... 7

Investment analysis ...................................................................................................................................... 7

Future outlook .............................................................................................................................................. 7

Strategic objectives ................................................................................................................................... 7

SWOT Analysis........................................................................................................................................... 8

Role of EFU life insurance in economy ..................................................................................................... 8

Impact on economy in case of default .......................................................................................................... 8

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Executive summary

EFU Life Insurance Company is the company which provides insurance service to community. It

has made life easier by providing security and also provide a way to live happier life. People are

relax in terms of security they do their business without being worried. EFU has contributed

more in the prosperity of country by giving positive results.

It was established in 1932 in India by Muslims and made its head office in Karachi in 1950 after

independence. It has many awards such as, “EUROMONEY”, “BRAND OF THE YEAR” and

“BRAND ICON OF PAKISTAN”, “SAFA AWARDS” and“LEADERSHIP EXCELLENCE AWARD”

and “CSR BUSINESS EXCELLENCE AWARD”.

It offers following products,

EDUCATION PLAN

SAVING PLAN

SECURITY PLAN

UNIT LINKED INSURANCE PLAN

LOAN PROTECTION PLAN

ASASA PLAN

MARRIAGE PLAN

KHUSHHALI PLAN

NOOR PLAN

PENSION PLAN

INFLATION PROTECTION BENEFIT

SALARY CONTINUATION PLAN

FEE CONTINUATION PLAN

CREDIT LIFE PLAN

Financial performance of efu from 2012 to 2013 was not up to that level where as in

2014’s first three quarters they have performed very well. Their net income in 2014 as

compare to 2013 has increased about 100%. Net profit margin and worth of assets has

also increased.

EFU has obtained flying results in its time period. It has some fluctuations in past due to the

effect of external environment but currently it has improved a lot. There is increment of share

price, investments and profits. In fact, company’s total assets has increased almost 7%.

As there is also negative impact upon economy if insurance company defaults. In fact, if any

other company defaults, there would also be negative impact. Default of any company leads

economy in depression.

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It brings these results,unemployment will be increased, crime rate will be increased, poverty

will be increased, people trust will be decreased in other existing insurance companies,

Government revenue will be decreased, chances of development will be decreased, and there

is also negative impact upon equity market and real estate sector.

EFU has made its strategies for growing and serving their customers best. Overall, this company

has flourish our economy. This company is doing their best for creating value proposition.

4

Introduction

Background and history

EFULife Insurance Company is first Pakistan-based insurance company.Founded

in 1932 in Indiaowned by Muslims. When Pakistan become an independent

country in 1947, company was moved in Pakistan and initiated in east and west of

Pakistan. Company was ceased in East Pakistan when it became Bangladesh.

Then it was reorganized to EFU life assurance ltd. Aim was to provide insurance

services to the community.

Mainly it was started as general insurance company. But in 1936 company was

started by investing Rs.5 million and in short time period in 1938 total business

was transacted of Rs.13.9 million. In 1950 may, EFU shifted its head office in

Karachi. After 1972 EFU was only general insurance company operating In

Pakistan. In 1992 Pakistani government opened up life insurance as a private

sector and was the first private sector life insurance company. It had over 150

branches I overall the country and about 3500 employees in its sales force.

Main events success stories

In 1993, EFU became a billion rupee company under the leadership of Mr.

Saifuddin managing director and chief executive.

Only after 15 years in 2005 two branches of EFU became billion rupee branches.

In 2008, EFU got “EUROMONEY” award as the best insurer of Pakistan by

international financial authoritative journal.

In 2009, consecutively by three years awarded by “BRAND OF THE YEAR” and

“BRAND ICON OF PAKISTAN”.

In 2012, federation of Pakistan chamber of commerce and industry (FPCCI)

announced achievement award and gold medal for its outstanding performance.

And also EFU LIFE was awarded with “SAFA AWARD” in life insurance category

for annual report of 2012.

In 2013, EFU life insurance was awarded with “leadership excellence award 2013”

and “CSR business excellence award 2013”.

In 2014, EFU became ISO certified.

PRODUCTS EDUCATION PLAN

SAVING PLAN

SECURITY PLAN

UNIT LINKED INSURANCE PLAN

5

LOAN PROTECTION PLAN

ASASA PLAN

MARRIAGE PLAN

KHUSHHALI PLAN

NOOR PLAN

PENSION PLAN

INFLATION PROTECTION BENEFIT

SALARY CONTINUATION PLAN

FEE CONTINUATION PLAN

CREDIT LIFE PLAN

BUSINESS MODELOF EFU LIFE INSURANCE COMPANY:

EDUCATION PLAN

UNIT LINKED PLAN

KHUSHHALI PLAN

WEALTH BUILDER PLAN

SECURITY PLAN

ASASA PLAN

INFLATION PROTECTION

LOAN PROTECTION PLAN

EFU LIFE INSURANCE

COMPANY

PRODUCTS

INDIVIDUAL

PROFITS

6

tot…0.2

0.22

20122013

total asset turnover

Financial performance in past years

Ratio analysis Current ratio: It measures the liquidity of the company. How many current assets company have in order to meet their

current obligations. So we can see in 2012 their current ration 1.03 and in 2013 their current ratio is 1.07

its positive sign that company has a bit growth of around 4% in current ratio. It reflects that company

has improved its liquidity level.

Return on capital employed

This ratio reflects that how much return we have earned on capital employed. In 2012 EFU had return

on capital employed ratio of 14.5% and in 2013 they had this ratio of 13.63%. This is showing the

downward trend of EFU they have earned less than the 2012.

Total asset turnover ratio

This ratio shows how management of the company is performing. How well they are utilizing their

assets. As in 2012 this ratio was 0.21(21%) and in 2013 it was 0.22 (22%). It is showing somehow

improvement inin company performance.

Market data

Price of the share

At the end of the year

Price of the share has varied from 2012 to 2013. In 2012 its price

was 85.5 and in 2013 price was 91.92. This was the price at the

end of the year.

Highest during the year

1.01

1.02

1.03

1.04

1.05

1.06

1.07

1.08

2012 2013

Current ratio

Current ratio

0

50

100

2012 2013

mkt price per share at the end of the year

98

99

100

101

2012 2013

Highest during the year

Highest during the year

13.00%

13.20%

13.40%

13.60%

13.80%

14.00%

14.20%

14.40%

14.60%

2012 2013

return on capital employed

return on capital employed

7

Highest price in 2012 was 100.56 and in 2013 it was 99.2.

Market capitalization

Market capitalization shows the total worth of the company

In terms of market. Its market worth has increased from 10688

(2012) to 11490 in 2013.

Cash dividend per share

Cash dividend by the company to its shareholder remains same in

both years. It was PKR 5 rupees.

Current financial performance Now efu at outstanding level. Their net income of 3 quarter has increased upto 100%. In 2013 first 3 quarters income was PKR 654135000 but in 2014 is it reached around PKR 1155464000. EPS has also shown a positive impact on company performance. In first 3 quarters of 2013 it was 4.09 but in 2014 it has reached to the 7.22. It suggests that company is performing well to achieve her objectives. Total assets of company has also shown increment of 7%.

Investment analysis

Net income which is obtained from investment has decreased in 2013 as compared to income in 2012,

while total investment has increased.

As in 2012 income from investment was PKR. 850792 and in 2013 investment was PKR.771958. We can

see from this figure almost there is difference of PKR. 78000. This indicates that company has lesser

income in comparison of previous year.

On the other side, there is increment in total investments. In 2012, total investment was PKR.13404717

and in 2013, it was PKR.14771234. We can say that company’s investment has reciprocal relation with

income which is obtained from investments.

Future outlook

Strategic objectives

To retain relationship and position in market

To explore opportunities by the mean of diversifying current portfolio and introducing new

products

10000

10500

11000

11500

12000

2012 2013

Market Capitalization

Market Capitalization

8

To bring innovations, improvements and technological advancement

To enhance capabilities and motivation by skill development and reward programs

SWOT Analysis

Strengths

Company with broad customer base

Employee loyalty and commitment

Location(karachi and Lahore)

Having team of technical officers and best marketing staff

Opportunities

Expected growth in economy of the country due to policies changes

Threats

Emergence of new insurance companies

Increase in cost of operations due to law and order situations

Role of EFU life insurance in economy

Risk transfer: it reduces investment risk for investors by protecting them from losses

Information role : EFU helps the companies about the risks and how resources they put in the

best use. It also gives consultancy services about products and safety.

Capital market role: EFU also acts as a financial intermediary by meeting investment gapes

because it has huge capital to invest..

Impact on economy in case of default

If any company defaults, it has adverse effect on economy. Same effect will be there in case of

Life Insurance Company.

Following are the negative results which will be occurred when company defaults.

1) Unemployment will be increased

2) Crime rate will be increased

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3) Poverty will be increased

4) People trust will be decreased in other existing insurance companies

5) Government revenue will be decreased

6) Chances of development will be decreased

These will be the impacts of insurance company when it defaults.

When company defaults, it means employees who are employed in that company they will

become unemployed. As a result, they will not have any source of earning. For surviving

themselves they will be engaging crime activities such as, robbery, snatching or killing

people even in less price.

On the other side, people who have invested in that company for securing their loan or

returning back at their older ages, they will also become frustrated and start to do such

activities.

As company defaults, it means it does not exist anymore, definitely taxes for Government

will be reduced which ultimately leads in hindrances of development projects.

There is also negative impact upon equity market. One company, which trades in

exchanges, will be removed from list. People who purchase shares of this company, they

will not be able to purchase anymore which leads towards lesser investment in exchanges.

There will be negative image of our country in foreigners’ minds. One would be from

decrement in equity market and other would be from current worse situation of country.

Due to this fact they will be reluctant to invest in our country.

Real estate sector will also be affected. Such as, mortgage loan lenders’ risk will be

increased if insurance company defaults. They will be in trouble if borrowers become

defaults.

These were the impacts of an insurance company when it defaults. It leads economy in

depression.