Asia Insurance LTD

01. Abstract:


The paper investigates the financial data and analyze the position oh the selected company. The business of insurance is gradually expanding in this country. It is not a new idea or proposition for4 the people of Bangladesh. About a century back, during the British ruled in then India, some insurance company started to transact insurance business.
With the emergence of the people’s republic of Bangladesh the government nationalized the insurance industry in 1972. Until 1984 insurance activities were absolutely the domain of the two nationalized insurance corporations. However because of public demand and of necessity insurance companies in the private sector were aloud under the authority of “the insurance Ordinance 1984.”













02. Introduction:

02.1 History:
Asia Insurance Limited is a leading general insurance company in private sector with a sound and strong financial footing with an Authorized Capital BD Tk. 300 million out of which sponsor Directors paid up capital of BD Tk. 60 million. We have already been taken steps to float public share of BD Tk. 90 million. The main features of the Company is stated as below-
The Company is equipped with a team of highly qualified young and experienced management personnel headed by professionally qualified Managing Director Mr. Md. Ezhar Hossain ABIA.
Within the frame work of existing tariff, this Company charges the most economic and competitive premium rate ensuring maximum security at minimum cost.
The Company has got necessary Re-insurance arrangement under which it can underwrite any risk of any value.
This Company takes utmost care in handling and settling claims with due promptitude with a view to giving timely indemnity to the unfortunate members of the clientele.

The sponsors, Directors of the Company are renowned business magnets and reputed Industrialists in the Country. Mr. Yussuf Abdullah Harun FCA, former President of the FBCCI is leading the Company as Chairman of the Board.
Our Asia Insurance Limited is only the Company among 3rd generation who are paying dividend every year from its commencement.







02.2 Objectives:

We are the student of BBA program. Practical knowledge for this course is an important part. And to acquire practical knowledge in insurance industry we have influenced to do the report. There are some other objectives we got preparing the report. These are:
1. To know insurance company more closely.
2. To know how company make ratio analysis.
3. To understand how ratio can analyzed.
4. To know the exact position of the company by ratio and trend analysis.
02.3 Limitation:

During collecting the data of this report we have faced some limitations whish have made some lacings of the report. These are
 The web page does not contain much information.
 Their employees have not enough time to provide us enough information.
 They are not willing to provide all the relevant information.
 We have not got enough time for preparing the report.
02.4 Methodology:

We collected the data form both of the following sources:
1. Primary data(direct contact to the employees)
2. Second data (internet, newspaper)
The analysis draws on a combination of internet browsing, interview of employees and documented literature on insurance industries in Bangladesh. Most of the data have been collected from the web address of the Asia Insurance Limited.


03. Analyzing:
03.1 Ratio analysis:
It expresses the relationship among selected items of financial statement data. A ratio expresses the mathematical relationship between one quantity and another. The relationship is expressed in terms of a percentage, a rate, or a simple proportion. Several types of ratio we can find in rational analysis. Here we focus on some important analysis.

ASIA INSURANCE LIMITED
Statement of Ratio Analysis
(The ratio of Asia Insurance Limited shown below based on its Audited d Financial Statements for the year period ended May31, 2008 and year ended December 31, 2007, 2006, 2005, and 2004)
Year No.1 Current
Ratio No.2
Quick
 Ratio No.3
Account Receivable
Ratio No.4
Asset
Turnover
 Ratio No.5
Gross Margin Ratio
 Current Asset/
Current Liabilities Current Asset-Inventory/
Current liabilities Gross Premium/
Receivable Gross Premium/
Total Asset Operating Profit/Gross Premium
2004 1.05 0.99 0.73 0.28 0.12
2005 1.22 1.22 0.8 0.31 0.12
2006 1.09 1.08 1.18 0.36 0.11
2007 1.11 1.11 1.77 0.46 0.06
2008 1.35 1.35 0.72 0.2 0.48
Year No.6
Operating Income Ratio No.7
Net Income Ratio No.8
Return on Asset Ratio No.9
Return
on Equity No.10
Earnings Per Share Ratio
 Operating Profit/Total Operating Revenue Profit after Tax/Total Operating Revenue Profit After Tax/Total Asset Profit After Tax/Share Holders Equity Profit After Tax/No of Shares
2004 23.78 27.46 3.77 14.79 20.22
2005 19.27 22.24 4.16 16.83 25.32
2006 18.89 19.85 4.18 16.16 26.84
2007 9.59 18.66 5.4 20.42 38.78
2008 61.69 43.68 6.72 21.55 52.16

1. Current ratio:  
 


The current ratio is a widely used measure for evaluating a company’s liquidity and short term debt-paying ability. The ratio is computing by current assets by current liabilities. Here we show the 2008, 2007, 2006, 2005 and 2004 current ratios for Asia Insurance Limited. In 2004 the ratio is 1.05 means that for every dollar of current liabilities, Asia has 1.05 of current assets. Asia Insurance’s current ratio has increased gradually by 1.22, 1.09, 1.11, and 1.35 according to year 2005, 2006, 2007 and 2008 with one year fluctuation in 2005.


2. Quick/ Acid test ratio: 

 
It measures of a company’s immediate liquidity. The more the quick ratio, company can do better to operate their company well. The quick ratio of Asia Insurance Ltd is increasing to these previous years. From 2006 to 2008 the ratio (1.08, 1.11, 1.35) has follow a trend but in 2004 to 2005 these rate (0.99, 1.22) has fluctuated.






3. Account Receivable ratio:



This ratio used to assess the liquidity of the receivables. It measures the number of times, on average; the company collects receivables during the period. The turn over improved in 2007 compared to others year 2004(0.73), 2005(0.8), 2006(1.18), 2008 (0.72). The year 2008 this rate is rapidly decreased.

4. Asset turnover ratio:



It means how efficiently a company uses its assets to generate b sales. The ratio is computed by gross premium by total assets. If we compare it with the years then we see that from 2004 to 2007 it has gradually increased by 0.28, 0.31, 0.36, and 0.46. But in 2008 this rate has fallen.

5. Gross margin ratio:



We can calculate this ratio by operating profit by gross premium. This ratio has totally fluctuated from 2004 to 2008. According to the year 2004, 2005, 2006, 2007, 2008 the ratio has 0.12, 0.12, 0.11, 0.06, and 0.48.


6. Operating Income Ratio: 
 


The formula of calculating this ratio is operating profit by total operating revenue. In 2008 this ratio has climbed in the pick point or we got the highest ratio 61.69. In 2007 the ratio is lowest (9.59) than others.

7. Net income ratio:



Calculating this ratio divide by profit after tax by total operating total operating revenue. This rate also was pick point in 2008 (43.68). From 2004 to 2007, it has been decreased slowly. The rate was 27.46, 22.24, 19.85, and 18.66 respectively.

8. Return on assets ratio: 


 


An overall measure of profitability is return on assets. We compute this ratio by dividing net income by average assets. Asia Insurance’s return on assets improved from 2004 to 2008.Its return of 6.72 % was satisfactory in 2008 compared to others years 3.77%, 4.16%, 4.18%, 5.4% and 6.72% respectively.


9. Return on equity ratio: 





Another widely used profitability ratio is return on common stockholders’ equity. It measures probability from the common stockholders’ view point. The ratio shows how many dollars of net income of the company earned for each dollar invested by the owners. The common stockholders’ equity ratio rate at the beginning 14.79% and in the last year 2008 this rate is high at 21.55%.
10. Earnings per share ratio:





It measures of the net income earned on each share of common stock. A Measure of the net income earned on a per share basis provides a useful perspective for determining profitability. This ratio in 2004 has 20.22% that increasing gradually 1n 2005 to 2008 by 25.32%, 26.84%, 38.78%, and 52.16% respectively. It indicate that the situation of that company improving day by day.


If we see the total picture of these ratio than it can be said that the performance of Asia Insurance Limited is satisfactory, but for becoming AAA grade Insurance Company in our company it must increase it’s earning per share with developing others ratio compared to industrial average.

03.2 Profit Analysis:

The profit statement of Asia Insurance Limited is given bellow:

ASIA INSURANCE LIMITED
Profit Statement
(The profit of Asia Insurance Limited shown below based on its Audited d Financial Statements for the year period ended May31, 2008 and year ended December 31, 2007, 2006, 2005, and 2004)

Profit or loss account
  2008
Jan-May 2007
 Jan- Dec 2006
Jan-Dec 2005
Jan-Dec 2004
Jan-Dec 2003
Jan-Dec
Expenses of management
(not applicable to any particular fund or account 4,289,338.00 5,917,852.00 6,863,161.00 5,784,067.00 3,678,791.00 2,698,943.00
Promotional expenses 851,415.00 347,944.00 1,106,178.00 915,961.00 391,905.00 571,465.00
Legal and other expenses 95,000.00 23,000.00 1,733,240.00 1,247,120.00 318,910.00 286,500.00
Derectors remunaration 90,000.00 197,500.00 201,250.00 175,000.00 372,250.00 212,000.00
Audit fees 280,317.00 100,000.00 100,000.00 100,000.00 150,000.00 50,000.00
Meeting expenses 181,124.00 112,292.00 157,460.00 59,363.00 112,419.00 26,182.00
Subscription 131,000.00 215,000.00 214,000.00 756,339.00 275,289.00 190,000.00
Lease rental instrument 831,630.00 1,703,585.00 143,150.00
Losson sale of assets 533,191.00
Advertisement and publicity 56,410.00 189,730.00 531,157.00 153,771.00
Dividend tax 600,000.00
Employes contribution PF 272,469.00 751,656.00 458,982.00
Depreciation 1,499,973.00 2,277,145.00 2,360,894.00 1,776,513.00 1,524,827.00 1,219,646.00
Profit for the year
transferred to profit and losss appropriation account 50,416,220.00 32,102,390.00 22,690,914.00 20,365,925.00 17,151,542.00 15,841,750.00
Total 54,705,558.00 38,020,242.00 29,554,075.00 26,149,992.00 20,830,333.00 18,540,693.00



Profit of the Asia insurance limited from the year 2003 to 2008 has been analyzed horizontally to understand easily:

  Horizontal Analysis
2004
Jan-Dec 2003
Jan-Dec Increa or decrease
during 2005 (on the basis of previous year) 2005
Jan-Dec 2004
Jan-Dec Increa or decrease
during 2005 (on the basis of previous year)
  Amount Percent Amount Percent
  3,678,791.00 2,698,943.00 979,848 36% 5,784,067.00 3,678,791.00 2,105,276 57%
  391,905.00 571,465.00 -179,560 -31% 915,961.00 391,905.00 524,056 134%
  318,910.00 286,500.00 32,410 11% 1,247,120.00 318,910.00 928,210 291%
  372,250.00 212,000.00 160,250 76% 175,000.00 372,250.00 -197,250 -53%
  150,000.00 50,000.00 100,000 200% 100,000.00 150,000.00 -50,000 -33%
  112,419.00 26,182.00 86,237 329% 59,363.00 112,419.00 -53,056 -47%
  275,289.00 190,000.00 85,289 45% 756,339.00 275,289.00 481,050 175%
  143,150.00 -143,150 -100% 0
  533,191.00 533,191 533,191.00 -533,191 -100%
  0 153,771.00 153,771
  0 600,000.00 600,000
  0 0
  1,524,827.00 1,219,646.00 305,181 25% 1,776,513.00 1,524,827.00 251,686 17%
 17,151,542.00 15,841,750.00 1,309,792 8% 20,365,925.00 17,151,542.00 3,214,383 19%
 20,830,333.00 18,540,693.00 2,289,640 12% 26,149,992.00 20,830,333.00 5,319,659 26%










2006
Jan-Dec 2005
Jan-Dec Increa or decrease
during 2005 (on the basis of previous year) 2007
 Jan- Dec 2006
Jan-Dec Increa or decrease
during 2005 (on the basis of previous year)
  Amount Percent Amount Percent
  6,863,161.00 5,784,067.00 1,079,094 19% 5,917,852.00 6,863,161.00 -945,309 -14%
  1,106,178.00 915,961.00 190,217 21% 347,944.00 1,106,178.00 -758,234 -69%
  1,733,240.00 1,247,120.00 486,120 39% 23,000.00 1,733,240.00 -1,710,240 -99%
  201,250.00 175,000.00 26,250 15% 197,500.00 201,250.00 -3,750 -2%
  100,000.00 100,000.00 0 0% 100,000.00 100,000.00 0 0%
  157,460.00 59,363.00 98,097 165% 112,292.00 157,460.00 -45,168 -29%
  214,000.00 756,339.00 -542,339 -72% 215,000.00 214,000.00 1,000 0%
  0 1,703,585.00 1,703,585
  0 0
  531,157.00 153,771.00 377,386 245% 189,730.00 531,157.00 -341,427 -64%
  600,000.00 -600,000 -100% 0
  458,982.00 458,982 751,656.00 458,982.00 292,674 64%
  2,360,894.00 1,776,513.00 584,381 33% 2,277,145.00 2,360,894.00 -83,749 -4%
 22,690,914.00 20,365,925.00 2,324,989 11% 32,102,390.00 22,690,914.00 9,411,476 41%
 29,554,075.00 26,149,992.00 3,404,083 13% 38,020,242.00 29,554,075.00 8,466,167 29%




2008
Jan-May 2007
 Jan- Dec Increa or decrease
during 2005 (on the basis of previous year)
  Amount Percent
  4,289,338.00 5,917,852.00 -1,628,514 -28%
  851,415.00 347,944.00 503,471 145%
  95,000.00 23,000.00 72,000 313%
  90,000.00 197,500.00 -107,500 -54%
  280,317.00 100,000.00 180,317 180%
  181,124.00 112,292.00 68,832 61%
  131,000.00 215,000.00 -84,000 -39%
  831,630.00 1,703,585.00 -871,955 -51%
  0
  56,410.00 189,730.00 -133,320 -70%
  0
  272,469.00 751,656.00 -479,187 -64%
  1,499,973.00 2,277,145.00 -777,172 -34%
 50,416,220.00 32,102,390.00 18,313,830 57%
 54,705,558.00 38,020,242.00 16,685,316 44%






04. Recommendations

We can derive the recommendation after investigating all relevant issues and analyzing the findings:

As we have seen that the ratios do not follow any trend thus it is very tough for the investors to determine future. Now what we think is the company should give more emphasize on a gently rising trend of the ratios or fall whenever it need.
More over the company should publish its own future plan about those ratios.




05. Conclusion:

To sum up the whole discussion it can be terminated that, Asia Insurance Limited is proud to be a company that helps people in time of trouble. A company that can and pull all steps when needed. Like the country we are young and have blended our youthful vigor with specialized knowledge and experience. Our Board of Directors includes veterans of insurance, trade & industry, doctors, chartered accountant, business professionals. Our management team comprises of qualified professionals trained from UK, Switzerland, Germany and many other advanced countries.

Asia Insurance Limited transacts a wide range of General Insurance business in Bangladesh including Health Plan Scheme and has gradually developed goodwill and expertise in the field with sound and stable financial position.





06. Reference:

\Insurance companies Bangladesh - Car Insurance, Life, Business & Home Insurance companies.htm
www.asiainsu\asiainsu.htm