Dear Student

Dear Student,Your work needs ImprovementYour Work is also plegiarised ar 34% which is not acceptable. Your plegiriasm report is also attached We always cross verify each and every figure from annual reports so you are advised to take correct figures.Guidelines for Interpretation of Ratios The following guidelines will help to understand what interpretation means and how it should be done. What does interpretation of ratios mean? Interpretation means explanation of the ratios results. It does not mean definition of ratios rather it should enable the readers to understand what the calculated ratio indicates and what the trend for that particular ratio is. You should keep in mind following four points while interpreting the ratios: A) Result understanding: i.e. what does the answer derived from ratio calculation indicates? You have to critically analyze the result of calculated ratio by explaining the relationship of numerator with that of a denominator. B) Trend Analysis: i.e. what are the variations in a company’s ratio results i.e. the trend for the same company and the reasons for that change in trend? All two selected companies should be analyzed in this way. C) Comparison: i.e. between the two selected companies which company is leading/ taking edge and why? For any relevant query and information, you can contact via MDB, Email ( HYPERLINK “mailto:[email protected][email protected]) and telephone ( 92-42-99201505 Extension: 8846) in this regard. For plagiarism: Rules for Plagiarized/Copied ; Non-Referenced Material1. The student shall be declared fail and strictly dealt with if copied and non-referenced work/material i.e. taken from any secondary source (web sites, journals, books, articles, other students etc.) is found in thee written work, even if it is found at any instance.2. Virtual University reserves the right to cancel the degree of any student involved in plagiarism, even if it is found at any instance. ZERO TOLERANCE POLICY• Virtual University has Zero Tolerance Policy for plagiarized work. Such cases are dealt very strictly as per HEC rules.• Submission of any fake/forge document is a crime which shall NOT be excused in any case.Ratio Analysis of
Askari General Insurance Company Limited
EFU General Insurance Limited
And
Adamjee Insurance Company Limited for Year 2015, 2016 and 2017
A FINAL PROJECT SUBMITTED TO THE DEPARTMENT OF MANAGEMENT SCIENCES, VIRTUAL UNIVERSITY OF PAKISTAN
IN PARTIAL FULFILLMENT OF THE REQUIREMENTS FOR THE DEGREE OF MASTERS IN BUSINESS ADMINISTRATION
Submitted By
MC160402830
Hina Zulfiqar
DEPARTMENT OF MANAGEMENT SCIENCES
VIRTUAL UNIVERSITY OF PAKISTAN
-1009650-552450
-1009650-533400
DEDICATIONS
I dedicate all of my work to my Mother, who always taught me to trust in yourself and trust in Allah. She always taught me to believe in hard work and your abilities which Allah has given to us. I also dedicate my work to my father who always encouraged and support me in my life. To my Teachers who give me the right direction to achieve the goals of my life. To my Manager, for being such kind of favours during my educational career. I whole dedicate this project to my friends, and love ones who encouraging me to complete this project successfully.

ACKNOWLEDGEMENT
I would like to thank my Instructor of FIN619 who gave me the an opportunity to do this informative and learning project of Ratio Analysis on “Insurance Companies” Mr. Ashfaque supervisor of Project also helped me very much to completion this project. I learned many things which was not known to me before so I really thanks to him. Secondly, I am also very thankful to my parents and to my friends who all helped me to complete this project.

EXECUTIVE SUMMARY
This project emphasizes comparing three companies in Insurance Sector of Pakistan. These companies are askari general insurance company limited, efu general insurance limited and adamjee general insurance limited. The period of the study is year 2015 to year 2017. In this study, the financials of each company for the recent three years have been evaluated and ratio analyses made of all three companies. The study is of much valuable for all the stakeholders of the companies especially the lenders and investors.

The study is done to apply the knowledge of Financial Statement Analysis. In this study Ratio Analyses is made of the three insurance companies. This analysis covers all the three companies’ income statements and balance sheets, statement of investment, statement of claims, and statement of expenses ratios such as debt ratio, profitability ratio, and return on asset ratio and return on equity ratio from year 2015 to year2017.

It is found during the analysis, the overall liquidity position of EFU General Insurance Ltd. is sound and comparatively much better than other two companies. This is a good sign that attracts investors and lenders.

Further, it is found during the analysis, profitability of EFU General Insurance Ltd is sound but its underwriting expense ratio is less than satisfactory. Profitability of Adamjee Insurance Company Ltd is very low and management should take measure for better use of resources of the company.
The earnings per share of EFU General Insurance Ltd are satisfactory but earning per share of other two companies is decreasing in each coming year. The situation is alarming for the management of the company.

However return on investment of Adamjee Insurance Company Limited is satisfactory but has decreased in year 2017 which is not a positive sign for the management. Rate of return on investment of Akari General Insurance Company Limited is decreasing in each coming year. So management should take measures to rectify the situation.

TABLE OF CONTENTS
Page No.

CHAPTER 1: INTRODUCTION………………..………………… 1
Financial Period under Consideration………………… 7
Objectives…………………………………………… 7
Significance………………………………………… 8
CHAPTER 2: METHODOLOGY………………………………… 9
Data Collection Source……………………………… 9
Data Processing and Analysis Tools……………………… 9
CHAPTER 3: DATA /RATIO ANALYSIS……………….….… 10
Debt / Equity Ratio…………………………………… 10
Return on Assets (ROA) Ratio………………………… 14
Return on Equity (ROE) Ratio………………………… 16
Cash flow from investing to cash flows from Operating and Financing Ratio………………………………………… 19
Earnings per share Ratio……………………………… 21
Net claim to Net premiums Ratio…………………… 25
Net premiums to Gross premiums Ratio……………… 28
Underwriting Expenses to Net premiums Ratio…… 30
Net Investment income to Total Investment Ratio…… 32
Net Premium to Total Revenue Ratio……………… 35
CHAPTER 4: CONCLUSION AND RECOMENDATIONS…….… 39
Conclusion……………………………………… 39
Recommendations……………………………… 41
SECTION – I
CHAPTER No. 1INTRODUCTION
229552538100In the most general sense of the word, Insurance companies plays macroeconomic role in life. Insurance contributes a lot to the general economic growth. Insurance provides us so many benefits like security and safety, encourage savings, raise funds for industries, Medical Support etc.
Insurance in Pakistan is regulated under ordinance 2000. With the fast developing and quickly growing market that is divided the insurance company into three types of services, Life Insurance, General Insurance, and Health Insurance. The Pakistani government established a department of Insurance in April 1948 as a department of Ministry of Commerce. The purpose of this is to take care of affairs relating to such kind of insurance industries.
The year 2015 showed improvement in Pakistan’s overall economic conditions as well as suppression of deficit in current account, because of continuing decline in international oil prices along with increase in remittances from other countries.

The life and non-life insurance industry in Pakistan witnessed by continuous growth in 2016. Our insight into the market observed similar growth in 2017 it is also expected to be continued in year 2018. In 2016, the both life and non-life insurance sectors whole improved by more than 13% in terms of annual gross written premium.

For the previous five years, both life and non-life insurance sectors, measured by gross written premium, have been grown at an average annual growth rate of 13%, increasing insurance penetration and insurance density, albeit from a low base. In year 2016, the industry’s total premium revenue generated was at PKR 265 billion with total assets of PKR 1,165 billion.

.

At present in the life insurance sector there are more than nine life insurers, it included two window Takaful operators and one insurer owned by state. In 2016, the life insurance market gross premium written grow by 11%, and the total 2016 gross premium written stood at PKR 180 billion.

Currently there are 41 non-life insurers working in industry, it included 3 general Takaful operators and one is state-owned insurer. In year 2016, a growth of greater than 18% was observed in the non -life insurance, which is due to the China Pakistan Economic Corridor (CPEC) and other related infrastructure development in the country. The total gross written premium of the nonlife insurance sector in 2016 was PKR 85 billion, excluding reinsurance.

Keeping in view the above statistics, I figure out the significant of Insurance companies of Pakistan and decide on three enormous companies listed with Karachi Stock Exchange of Pakistan.

Askari General Insurance Company Limited
EFU General Insurance Limited
Adamjee General Insurance Limited
Now, I would present a short-lived preface of these companies and their business activities.

Askari General Insurance Company Limited:
056515Askari General Insurance Company Limited was incorporated under the repealed Companies ordinance 1984. It is a public limited company which was came into existence on 12 April, 1995. The business of the company is to provide non-life Insurance including fire, Health, motor, marine, and others. The company started its operations on 15 October 1995.
In 1996 Listing on Stock Exchange. Shares of the company are listed on Pakistan Stock Exchange Limited. In 1997 this company expands the footprints to Faisalabad, Sialkot and Multan. Since 1997 to 2004 this companies has cover Hyderabad and Abbottbad cities.

In 2004 AGICO Gross premium crossed Rs. 500 Million Mark and in 2007 Total Asset crossed Rs. 1 Billion Mark. AGICO got many awards for their achievement in past. In 2010 AGICO got IFS Rating “A” for the first time by PACRA & JCR-VIS. In 2011 company got Corporate Philanthropy Award by Pakistan centre of philanthropy. In 2012 company got corporate Excellence Award and in 2013 AGICO got A+ IFS Rating.

The registered office of the company and place of business of the company is located at AWT Plaza, Rawalpindi. The Company has total 19 branches in all over the Pakistan. The Company is a subsidiary of Army Welfare Trust.
EFU General Insurance Limited:
2266950205740
EFU General Insurance Limited was incorporated as a public limited company on 02 September 1932 by Mr. Ghulam Mohammad, he established Eastern Federal Union Insurance Company with financial help from the Agha Khan and the Nawab of Bhopal. The company was originally registered at Kolkata.
In 1947 EFU started business in a new country Pakistan. In Pakistan, EFU rapidly established itself as a progressive company and innovative insurer.

In 1961, EFU became the flag bearer of Pakistan insurance market on the world stage and largest life insurance company in the countries of Afro-Asian and remained up to 1972 when life assurance business and other business was nationalized in Pakistan.

Now, over 85 years after winning the customer trust EFU is Pakistan’s largest and oldest general insurance company.

EFU General Insurance got the rated by JCR-VIS and PACRA. Both the rating agencies have Assigned rating of AA+ with stable outlook. The company currently is listed on Pakistan Stock Exchange and is engaged in non-life insurance business comprising of fire motor, property, and marine, other insurance etc.

The registered office of EFU is situated in the capital city Islamabad while the place of business is situated at EFU House, M.A. Jinnah road Karachi. The Company also started Window Takaful Operations in 16 April 2015 as per Pakistan Takaful Rules, 2012 of Securities and Exchange Commission. The company operates through 52(2016: 54) branches in Pakistan it also has a branch in Export Processing Zone (EPZ).

The largest achievement of EFU is in year 2017 Eastern Federal Union General Insurance Limited also including company’s Takaful Operation have crossed the contribution figure of Rs.20 Billion. It is the first General Insurance Company in Pakistan to achieve this achievement.
Adamjee General Insurance Limited:
-5588058420Adamjee Insurance Company Limited is also a largest General Insurance Companies of Pakistan. It is also incorporated as a Public Limited Company on 28 September 1960 under the Companies Act, 1913 (now the Companies Act, 2017). The Company is also listed on Pakistan Stock Exchange and is engaged in general insurance business.

Company has an advantage of having regional presence in United Arab Emirates and maintains its standing through an unwavering commitment to its corporate policies.
Company’s competitive advantage was achieved by a combination of having the highest paid-up Capital and reserves, and as well diversified business operations portfolio.

Adamjee Insurance Company is involved in underwriting the property, fire, Transport, Motor, Marine Aviation and Accident and Health, and other insurance.
The office of the Company is at Tanveer Building, 27-C-III MM Alam Road, Gulberg III Lahore.
The Company also operates branches in the United Arab Emirates and the Export Processing Zone (EPZ). The Company was granted authorization on 23 December 2015 to undertake Window Takaful Operations in respect of general Takaful products by Securities and Exchange Commission of Pakistan (SECP) under Rule 6 of the Takaful Rules, 2012 and commenced Window Takaful Operations on 01 January 2016.

Ratio Analysis
Ratio analysis is a process of calculating financial ratios, which are mathematical indicators calculated by comparing key financial information appearing in financial statements of a business, and analyzing those to find out reasons behind the business’s current financial position and its recent financial performance, and develop expectation about its future outlook.

Financial ratio analysis is very useful tool because it simplifies the process of financial comparison of two or more companies.
There are different financial ratios to analyse different aspects of a business’ financial position, performance and cash flows. Financial ratios calculated and analysed in a particular situation depend on the user of the financial statements. For example, a shareholder is primarily concerned about a business’s profitability and solvency; a debt-holder is concerned about its solvency, liquidity and profitability in the descending order of importance; a creditor/supplier is worried mainly about the business’ liquidity, etc.

Financial ratios can be broadly classified into liquidity ratios, solvency ratios, profitability ratios and efficiency ratios (also called activity ratios or asset utilization ratios). Other categories include cash flow ratios, market valuation ratios, coverage ratios, etc.

Ratio analysis are expressed in percentages such as 0.9% or 2%, in proportion such as 1:4 and in pure number /times such as sale is 4 time of net profit.

The project is aimed to facilitate the managers, Owners, Investors, Bankers, Debtors, and creditor to review the Liquidity Position and performance of all three companies.

Financial Period Under-Consideration for Analysis:
Financial period for ratio analysis is of all the three companies is financial year 2015, 2016 and 2017.

Objectives:
The objectives of this study are to assess the performance and comparison of listed companies in regard financial situation and different ratios to bring factual view of organization conditions. The study and research on topic will boost the knowledge and will be very helpful for all the stakeholders:
Converting financial data into some use full information for further decision making.

Judge the short term and long term solvency of all the three companies.

Judge the present and future profitability of the companies.

Judge the operational efficiency of the companies.

Make a comparative study of three companies.

Significance:
The project is of much interest and valuable for:
To Management
As the investor would be able to know the performance of the company over the year and the can also compare the performance with other companies also to take the measures. The Ratio analysis will help the management to assess the performance of the business concern and improve the management functions such as planning, coordination and control. Some ratios are calculated for a number of years. These are working as guide to the management. Meaningful conclusions can be drawn from these ratios. If financial position is very weak, better co-ordination is formulated by the top management for improving efficiency.

To Shareholders / Investors
As the investor would be able to know which of the three companies is efficiently managing its working capital solvency. They are concerned to the liquidity and solvency position of the Company to make their investment safe. The safety of investment will be finding out by the shareholders using this study. Long term solvency ratios ensure the growth of the business concern and possibility of getting back their investments. Ratio analysis will be useful for deciding whether the present financial position warrants further investments or not.

To Creditors
The creditors would be able to know the health of the Companies. As creditor are always concerned to the liquidity and solvency position of the Company. The ratio analysis will ensure the payment at a specified time or not. If the short term solvency ratios are in satisfactory condition, the creditors can extent credit facilities.

To Employees
This study is also very useful for the employees of the company as they can get adequate financial increment and promotion in time and also there is a guarantee in employment.

CHAPTER NO 2: METHODOLOGY
Data Collection Source:
The data for the project is collected totally from secondary sources. The internet, and also from websites of the selected Companies annual reports of the Companies have been used in order to collect data.

The below links show the Annual Financial Reports of the Companies:
http://www.agico.com.pk/reports.phphttp://www.efuinsurance.com/FinancialReports.phphttp://www.adamjeeinsurance.com/pak/financial_reports.phpData Processing and Analysis Tools:
The Collected date has been analysed and processed according to the format provided in the project template. Following computing tools have been used for the purpose of compilation of data and to analyse and transform it into information:
Microsoft Word
Microsoft Excel
Internet
CHAPTER NO 3:DATA ANALYSIS
Ratios Analysis of Askari General Insurance Company Limited, Eastern Federal Union General Insurance Company Limited, and Adamjee General Insurance Company Limited for Financial Year 2015 to 2017:
Debt / Equity Ratio:
The debt to equity ratio is a financial, liquidity ratio that compares a company’s total debt to total equity. The debt to equity ratio shows the percentage of company financing that comes from creditors and investors. A higher debt to equity ratio indicates that more creditor financing is used than investor financing (shareholders).

Lower values of debt-to-equity ratio are favourable indicating less risk. Higher debt-to-equity ratio is unfavourable because it means that the business rely more on external lenders thus it is at higher risk, especially at higher interest rates. A debt-to-equity ratio of 1.00 means that, half of the assets of a business are financed by debts and half by shareholders’ equity. A value higher than 1.00 means that more assets are financed by debt that those financed by money of shareholders’ and vice versa.

An increasing trend in of debt-to-equity ratio is also alarming because it means that the percentage of assets of a business which are financed by the debts is increasing.

Formula:
Debt/Equity Ratio = Total Liability / Total Shareholder’s Equity
We cross verify each and every figure from annual reports so you are advised to take correct figures.You have taken wrong values you are advised to take the project serious otherwise you will declared fail. You are advised to see each and every value carefully again and recalculate the ratio for each company for each yearCalculation
Companies Year 2015
Rupees ‘000 Year 2016
Rupees ‘000 Year 2017
Rupees ‘000
Askari General Insurance Company Ltd. 1,863,604/ 975,777 =
1.91 Times 2,316,9462,341,406/ 1,385,173 =
1.67 Times 2,983,7523,026,843/
1,510,290=
1.97 Times
EFU General Insurance Ltd. 16,357,966/
15,847,012=
1.03 Times 19,169,41719,303,132/
16,901,071 =
1.13Times 21,816,71622,055,094 /
17,047,221 =
1.28 Times
Adamjee General Insurance Ltd. 16,609,410 / 14,561,315 =
1.14 Times 21,498,393/ 17,000,603 =
1.26 Times 25,314,338/ 16,794,187 =
1.51 Times
Working
Shareholders equity and total liability figures are given in Balance Sheet of all the three companies so there is no need for any working.

Trend Analysis

Interpretation & comparison
This ratio is very important for lenders point of view because this ratio show how much company has borrowing as compared to owner’s funds. Higher the ratio more risking it will to invest in the company. This ratio show a relationship between total liabilities and owners’ equity. Higher total liability and lower equity will show higher ratio which is not favourable and lower total liability and higher owners’ equity show a lower ratio which means business is more stable of the company. Normally debt-to-equity ratio is considered to be about 1, i.e. liabilities = equity.

Askari General Insurance Company Ltd:Askari General Insurance Company Ltd is not favourable company for the investors as it has about to 1.97 times liability in 2017 as compared to equity. This ratio was 1.91 times i.e. 191% in year 2015, 1.67 times i.e. 167% in year 2016. It is not performing well as it has more liabilities than equity and still it is increasing and reached 1.97 time of the owners’ equity which is not a good sign for the company. It is because the provision for outstanding claims and provision of unearned premium has increased from Rs.1.16 billion to Rs.1.53 billion, amount due to other insurer has increased from Rs.340 million to Rs.569 million, other creditors and accruals has also has increased Rs.155 million to Rs.174 million in year 2017. It shows that the investors haven’t funded the operations as much as creditors have. In other words, investors don’t have as much skin in the game as the creditors do. This could mean that investors don’t want to fund the business operations because the company isn’t performing well. Lack of performance might also be the reason why the company is seeking out extra debt financing. According to industry point of view it is not a favourable ratio for the company because is high than a normal ratio of 1.

EFU General Insurance Ltd: EFU General Insurance Ltd has less debt to equity ratio than other two companies. So it is less risky for the investor to invest in this company because company is performing well. But ratio is increasing in each year and this is alarming for the management of the company. Increase in ratio in year 2017 is because provision for unearned premium has increased from Rs.7.38 billion to Rs.8.49 billion and amount due to other insurer has increased from Rs.3.58 billion to Rs.4.99 billion which affect the ratio of the company. The ratio of company is near to optimal stage mean near to 1. This company is most favourable for the investors.

Adamjee Insurance Company Limited: Adamjee Insurance Company Limited has more debt to equity ratio than Adamjee Insurance Company Limited but less than Askari General Insurance Company Limited. But its ratio is also increasing in each coming year. So the management should take rectifying measures. An increasing trend in of debt-to-equity ratio is also alarming because it means that the percentage of assets of a business which are financed by the debts is increasing. Increase in ratio is because for increase in total liabilities of the companies about Rs.4 billion in year 2017 as compared to 2016. Ratio of the company is also high as compared to normal ratio.

Here EFU General Insurance Limited is performing better than other two companies as its total liability is 1.28 time of shareholders equity in 2017. It is also near to the 1 which is a normal debt to equity ratio.

Return on Asset Ratio:
The return on assets ratio, often called the return on total assets, is a profitability ratio that measures the net income produced by total assets during a period by comparing net income to the average total assets. In other words, the return on assets ratio or ROA measures how efficiently a company can manage its assets to produce profits during a period.

Since company assets’ sole purpose is to generate revenues and produce profits, this ratio helps both management and investors see how well the company can convert its investments in assets into profits. You can look at ROA as a return on investment for the company since capital assets are often the biggest investment for most companies. In this case, the company invests money into capital assets and the return is measured in profits.

Formula:
Return on Asset Ratio = Net Income / Total Assets x 100
Calculation
Companies Year 2015
Rupees ‘000 Year 2016
Rupees ‘000 Year 2017
Rupees ‘000
Askari General Insurance Company Ltd. 198,508/
2,849,689 x100 =
6.97% 236,805/
3,726579 x 100=
6.35 % 253,690/
4,537,133 x 100 =
5.59%
EFU General Insurance Ltd. 4,033,902 /
32,264,035 x100 =
12.50 % 2,392,442 /
36,204,203 x 100 =
6.61 % 2,343,819 /
39,102,312 x 100 =
6 %
Adamjee General Insurance Ltd. 2,554,810 /
32,255,979 x 100 =
7.92% 3,492,944 / =
38,579,911 x 100
9.05 % 1,221,228 /
42,287,139 x 100=
2.89 %
Working
There is no need for working for net income as it is given in Profit and Loss Account of all the three companies. Total assets also are also given in the Balance Sheets of the companies.

Trend Analysis

Interpretation & comparison
This ratio measures how profitable a company’s assets are. It only makes sense that a higher ratio is more favourable to investors because it shows that the company is more effectively managing its assets to produce greater amounts of net income. A positive ROA ratio usually indicates an upward profit trend as well. A higher rate of return on assets shows a better performance of the company.

Askari General Insurance Company Limited: Here Askari General Insurance Company Limited has stable return on assets. Return on asset decreased to 6.35% in 2016 but then again increased to 6.97% in year 2017. In year 2016 it has decrease because increase in assets of the company as compared to net income. In 2017 ratio has increased because the profit of the company has increase from 236 million to 253 million in year 2017 and there is less increase in assets as compared to net income of the company.

EFU General Insurance Limited: EFU General Insurance Limited has a highest return on asset 12.25% in year 2015 but after that the return on assets has decrease to 6.35% in year 2016 and again increased to 6% in 2017. Company is using its assets efficiently and it is more profitable company than other two companies. Decrease in ratio in 2017 is because of decrease in profit in the year from 2.39 billion to 2.34 billion. On other hand the fixed assets of the company has increase from 1 billion to 1.22 billion.

Adamjee Insurance Company Limited: Adamjee Insurance Company Limited is not performing efficiently. We can see that the return on asset in 2017 is decreased 2.89% which is an alarming situation for the management of the company and measures should the taken to improve the profitability of the company. Decrease in ratio in year 2017 was due to decrease in net income of the company from 3.49 to 1.22 billion. On the other hand land and building of the company has also increased 568 million to 1.59 billion in year 2017. Some other assets are also increased which has affected the return on asset ratio.

Here again the EFU General Insurance Company is performing better than other two companies because it has highest rate of return which is 9.05% in 2017.

Return on Equity Ratio:
The return on equity ratio or ROE is a profitability ratio that measures the ability of a firm to generate profits from its shareholders investments in the company. In other words, the return on equity ratio shows how much profit each rupees of common stockholders’ equity generates.

So a return on 1 means that every rupees of common stockholders’ equity generates 1 rupee of net income. This is an important measurement for potential investors because they want to see how efficiently a company will use their money to generate net income.

ROE is also an indicator of how effective management is at using equity financing to fund operations and grow the company.

Formula:
Return on Equity = Net Income / Average Shareholder’s Equity x100
Calculation
Companies Year 2015
Rupees ‘000 Year 2016
Rupees ‘000 Year 2017
Rupees ‘000
Askari General Insurance Company Ltd. 198,508/
975,777 x100 =
20.34% 236,805/
1,385,173x 100=
17.10 % 253,690/
1,510,290 x 100 =
16.80%
EFU General Insurance Ltd. 4,033,902 /
15,847,012×100 =
25.46 % 2,392,442 /
16,901,071x 100 =
14.16 % 2,343,819 /
17,047,221 x 100 =
13.75 %
Adamjee General Insurance Ltd. 2,554,810/
15646569 x 100 =
16.33% 3,492,944 / =
17,000,603 x 100
20.55 % 1,221,228 /
16,794,187 x 100=
7.27 %
Working
There is no need for working for net income as it is given in Profit and Loss Account of all the three companies. Shareholders equity is also given in Balance Sheet of the companies.

Trend Analysis

Interpretation ; comparison
Unlike other return on investment ratios, ROE is a profitability ratio from the investor’s point of view—not the company. In other words, this ratio calculates how much money is made based on the investors’ investment in the company, not the company’s investment in assets or something else.

That being said, investors want to see a high return on equity ratio because this indicates that the company is using its investors’ funds effectively. Higher ratios are almost always better than lower ratios, but have to be compared to other companies’ ratios in the industry. Since every industry has different levels of investors and income, ROE can’t be used to compare companies outside of their industries very effectively.

Many investors also choose to calculate the return on equity at the beginning of a period and the end of a period to see the change in return. This helps track a company’s progress and ability to maintain a positive earnings trend.

As this ratio show the rate of return on shareholders’ equity. It means how much profit a shareholder receives against its shares.
Askari General Insurance Company Limited: Askari General Insurance Company Limited in 2015 was more profitable as its rate of return was 20.34% but its profit decreased to 17.10% in 2016. In 2017 the profitability of the Company again has decreased to 16.8% in 2017. Income of the company is increasing in each year but equity has increased more as compared to net income which has decreased the ratio.

In 2017 the net income has increase from 236 million to 253 million but equity has increased very much because increase in paid up capital from 543 million to 625 million and retained earnings from 650 million to 693 million.

EFU General Insurance Limited:EFU General Insurance Limited is was most profitable company in 2015 but its profit decreased in 2016. It again has improved its profitability and in 2017 it is again most profitable than other two companies. Decrease in ratio in year 2016 is due to decrease in profits of the company from 4 billion to 2.3 billion. In 2017 net income of the company has decrease to some extent but more affect is of the equity which has increased because of retained earnings from 14.9 billion to 15 billion.

Adamjee Insurance Company Limited:Adamjee Insurance Company Limited is not performing very well because it rate of return is decrease to 7.27% in 2017 as it was 20.55% in 2016. Such a decrease in year 2017 is due to decrease in net profit of the company. Equity has also decreased but less as compared to net incomes. Decrease in profit is due decrease in investment income of the company from 3.5 billion to 1.48 billion.

Here EFU General Insurance is again more profitable company than other two companies as it has rate of return 25.46% in 2015 and 20.55% in 2017.
Cash Flow from Investing to Cash Flow from Operating and Financing Ratio:
It is a Cash Flow ratio. Cash flow from investing activities is an item of Cash Flow Statement that reports the aggregate change in a company’s cash position resulting from any gain (or loss) from investments or change because of any new investment and disinvestment in financial markets and operating subsidiaries and changes resulting from amounts spent on investments in Capital Asset.

Cash flow from operating activities is an item of Cash Flow Statement that reports the aggregate change in a company’s cash position resulting from operating profit or loss.
Cash flow from in financing activities is an item of Cash Flow Statement that reports the aggregate change in a company’s cash position resulting from any loans obtained or given during the financial period.
Formula:
Cash Flow from investing Activity / (Cash flow from operating activity + Cash flow from financing activity)
Calculation
Companies Year 2015
Rupees ‘000 Year 2016
Rupees ‘000 Year 2017
Rupees ‘000
Askari General Insurance Company Ltd. -137,800/
(120,099+(-1,004)=
-1.16 Time -2,27,053/
(123,594+140,099)=
-0.86 Time
-75,044/
(257,472+(-142,575)= -0.65 Time
EFU General Insurance Ltd. 135,983/
(1,342,009+(-1,249,791)=
1.47 Time 581,647/
(826,235+(-1,289,412)=
-1.25 Time
-1,248,146/
(3,087,957+(-2,112,518)=
-1.28 Time
Adamjee General Insurance Ltd. -4,136,490/
(5,995,749+(-1,070,623)=
-0.83 Time
2,225,227/
(222,446+(-1,035,824)=
-2.73 Time 125,704/
(1,149,004+(-1,382,755)=
-0.53 Time
Working
There is no need for any calculation as all the figures are given in Cash Flow Statement of all the companies.

Trend Analysis

Interpretation ; comparison
Earnings Per share Ratio:
This ratio is used to measure the earnings potential of the business against invested equity of the owners. How much earning is available for distribution against each share?
Earnings per share (EPS), also called net income per share, is a  HYPERLINK “https://www.myaccountingcourse.com/financial-ratios/market-prospect-ratios” market prospect ratio that measures the amount of net income earned per share of stock outstanding. In other words, this is the amount of money each share of stock would receive if all of the profits were distributed to the outstanding shares at the end of the year.

Earnings per share is also a calculation that shows how profitable a company is on a shareholder basis. So a larger company’s profits per share can be compared to smaller company’s profits per share. Obviously, this calculation is heavily influenced on how many shares are outstanding. Thus, a larger company will have to split its earning amongst many more shares of stock compared to a smaller company.

Earnings per share (EPS) is a profitability indicator which shows rupees of net income earned by a company in a particular period per share of its HYPERLINK “https://accountingexplained.com/financial/equity/common-stock” common stock (also called ordinary shares). Earnings per share is calculated by dividing net income for a period attributable to common stock owners by the weighted average number of common shares outstanding during the period.

Earnings per share is the same as any profitability or market prospect ratio. Higher earnings per share is always better than a lower ratio because this means the company is more profitable and the company has more profits to distribute to its shareholders.

Although many investors don’t pay much attention to the EPS, a higher earnings per share ratio often makes the stock price of a company rise. Since so many things can manipulate this ratio, investors tend to look at it but don’t let it influence their decisions drastically.

Formula:
Earnings per share = Earnings after tax ; preferred dividend / Total outstanding No. of ordinary shares
Calculation
Companies Year 2015 Year 2016 Year 2017
Askari General Insurance Company Ltd. 198,508,000/
38,834,400 =
Rs. 5.11 236,805,000/
54,368,100=
Rs. 4.36 253,690,000/
62,523,400 =
Rs. 4.06
EFU General Insurance Ltd. 4,033,902,000 /
160,000,000 =
Rs. 25.21 2,392,442,000 /
200,000,000 =
Rs. 11.96 2,343,819,000 /
200,000,000=
Rs. 11.72
Adamjee General Insurance Ltd. 2,554,810,000 /
350,000,000 =
Rs. 7.30 3,492,944,000 /
350,000,000 =
Rs. 9.98 1,221,228,000 /
350,000,000=
Rs. 3.49
Working
There is no need for working for net income as it is given in Profit and Loss Account of all the three companies.
Number of ordinary shares are calculated as follows:
Askari General Insurance Company Ltd.

No. of ordinary shares = Shareholders Equity / Face value per share
No. of ordinary shares (2015) = 543,681,000/10 = 54,368,100
No. of ordinary shares (2016) = 388,344,000/10 = 38,834,400
No. of ordinary shares (2017) = 625,234,000/10 = 62,523,400
EFU General Insurance Ltd.

No. of ordinary shares = Shareholders Equity / Face value per share
No. of ordinary shares (2015) = 1,600,000,000/10 = 160,000,000
No. of ordinary shares (2016) = 2,000,000,000/10 = 200,000,000
No. of ordinary shares (2017) = 2000, 000,000/10 = 200,000,000
Adamjee General Insurance Ltd.

No. of ordinary shares = Shareholders Equity / Face value per share
No. of ordinary shares (2015) = 3,500,000,000/10 = 350,000,000
No. of ordinary shares (2016) = 3,500,000,000/10 = 350,000,000
No. of ordinary shares (2017) = 3,500,000,000/10 = 350,000,000
Trend Analysis

Interpretation ; comparison
In analysing profitability of different companies, total net income figures alone are not very useful because they are dependent on size of the company. EPS standardizes earnings with reference to number of shares outstanding. However, EPS alone too is not very useful because different companies have different number of shares, some companies opt to have more number of ordinary shares while others prefer to have less.
Askari General Insurance Company Limited:Askari General Insurance Company Limited has lowest earing per share in first two years as compared to other two companies. It earing per share is Rs. 5.11 in 2015, Rs. 4.36 in 2016 and Rs. 4.06 in 2017.Decrease in earnings per share is due to less increased to profit available to ordinary shareholders as compared to number of shares. Company has increase its paid up capital by issuing new ordinary shares in 2016 and 2017. In 2015 ordinary shares were 38 billion which increased 54 billion in 2016 and 62 billion in 2017.

EFU General Insurance Limited:EFU General Insurance Limited has highest earning per share. In 2015 its EPS was Rs. 25.21, in 2016 its EPS has decreased dramatically to Rs. 11.96 and in 2017 it has again decreased to some extent and reached to Rs. 11.72 per share. It an alarming situation for the company as its shareholders are receiving less and less return on their investments. Decrease in earnings per share is due to decrease in revenue of the company almost all be sectors on the other hand company has issued 40 million new shares in year 2016. Its profit also decreased from 2.39 billion to 2.343 billion in year 2017.

Adamjee Insurance Company Limited:Adamjee Insurance Company Limited is not much profitable company as compared to others two companies in 2017. It was more profit able company in 2015 and 2016 as compared to Askari General Insurance Company Limited. But in 2017 is facing crises and very low earing per share which is only 3.49 in 2017.Decrease in earnings per share due to decrease in revenue of the company specially decrease in investment income of the company from 3.50 billion to 1.48 billion in year 2017.

Here the EPS of EFU General Insurance Limited is very high than other two companies.
Net Claims to Net Premiums Ratio:
It is loss ratio and measure the company’s loss experience as a proportion of premium income earned during the year. The loss ratio is a reflection on the nature of risk underwriting and the adequacy or inadequacy of pricing of risks. In this way insurance companies calculate the ratio by Claims payment divided by Net premium. It is also a known as underwriter ratio. Lower ratio is better for the companies as it show less net claims as compared to net premiums.

Formula
Net Claim to net Premium ratio = Net claims Incurred / Net premium Earned x100
Calculation
Companies Year 2015
Rupees ‘000 Year 2016
Rupees ‘000 Year 2017
Rupees ‘000
Askari General Insurance Company Ltd. 537,792/
1,091,884=
49.25% 644,502/
1,255,230=
51.35% 622,365/
1,356,189=
45.89%
EFU General Insurance Ltd. 2,998,060/
6,676,862=
44.90% 2,694,098/
7,242,821=
37.20% 2,975,071/
7,614,558=
39.07%
Adamjee General Insurance Ltd. 4,779,707/
7,747,391=
61.69% 6,210,499/
9,615,381=
64.59% 7,433,828/
11,534,999=
64.45%
Working
Net claims and net premium are given in profit and loss account of each company so there is no need for the calculations.

Trend Analysis

Interpretation ; comparison
A high loss ratio suggests that an insurance company has too many clients filing claims. It is in the insurance company’s best interest to limit the amount of claims paid. They will assess this number to determine whether they need to make adjustments, such as more stringent requirements for applicants, or raising insurance rates.In the trend analysis can see that for Askari General insurance company Ltd and EFU Insurance Limited is decreasing and for Adamjee Insurance Company limited it increasing.

Askari General Insurance Company Limited:Askari General Insurance Company Limited loss ratio for year 2015 was 49.25%, in year 2016 it was increased to some extent to 51.35% and again decreased to 45.89 in year 2017. It is a positive sign for the company as its loss ratio has decreased in 2017. But still company has to improve its underwriting. Increased in loss ratio in year 2016 is due to increase in net claims of the company as compared to net premiums. In year 2015 net claims of the company were 537 million which has increase to 644 million in year 2017. Loss ratio has decreased in year 2017 due to decrease in net claims and increase in net premium.

EFU General Insurance Limited:EFU General Insurance Limited has lowest loss ratio as compared to other two companies. Its loss ratio is decreasing continually from 2015 to 2017. It is because the Company has improved underwriting which has resulted in improvement in underwriting ratios which has reached 39.02% in year 2017. Loss ratio has decreased in year 2016 due to increase in net premiums from 6.67 billion to 7.24 billion. In year 2017 loss ratio has again increase due to increase in net claims of the company as compared to net premium.

Adamjee Insurance Company Limited:Adamjee Insurance Company Limited is at lowest level as compared to other two companies as its loss ratio is very high. Loss ratio of this company in 2015 was 61.69%, in 2016 was 64.59% and in 2017 ratio was 64.45%. It is alarming situation for the company and it has to improve it underwriting to great extent to compete the other companies. The loss ratio in year 2016 and 2017 is stable due same increase in net claims and net premium.

Net Premium to Gross Premium Ratio:
This type of Ratio indicates growth in business undertaken by the insurance entity. The amount of policies that remain after accounting for policies that are cancelled, lapsed, or ceded to a reinsurer. Business net retention represents an insurance company’s policy turnover over a specific time period, and calculated by dividing net premiums by gross written premiums. An increase in business net retention over time represents growth. Gross premium is equal to gross premium less reinsurance expenses of the company.

Formula:
Net premium to Gross Premium Ratio = Net Premium / Gross Premium
Or
Net premium to Gross Premium Ratio = Net Premium / Premium Written
Calculation
Companies Year 2015
Rupees ‘000 Year 2016
Rupees ‘000 Year 2017
Rupees ‘000
Askari General Insurance Company Ltd. 1,091,884/
2,005,056=
54.46% 1,255,230/
2,249,946=
55.79% 1,356,189/
2,583,234=
52.50%
EFU General Insurance Ltd. 6,676,862/
15,008,465=
44.49% 7,242,821/
16,099,993=
44.99% 7,614,558/
18,837,706=
40.42%
Adamjee General Insurance Ltd. 7,747,391/
13,639,368=
56.80% 9,615,381/
16,270,031=
59.10% 11,534,999/
18,521,851=
62.28%
Working
Net premium is given in Profit and Loss Account of each company and gross premium or premium written is given in Statement of Premiums of each company.

Trend Analysis

Interpretation & comparison
Companies have a number of methods of reducing risk at their disposal. In the case of an insurance group, the organization can improve the way it manages risk by streamlining the list of reinsurers they use rather than going to the open market to find a reinsurance company. The insurer can also improve its risk profile by diversifying the policies that it writes. It can broaden the types of policies (health, auto, etc.), geographic region, and demographic of policyholders
As higher ratio show growth hare we can see that the Adamjee Insurance Company Limited is growing but other two companies ratio is decreasing which is alarming for the management.
Askari General Insurance Company Limited:Askari General Insurance Company Limited has risk retention ratio 54.46% in year 2015, 55.79% in 2016 and 53.5% in year 2017. Its risk retention ratio has increase in 2016 but again decreased in 2017. Management has to improve its ratio by reducing the reinsurance expenses.

EFU General Insurance Limited:EFU General Insurance Limited has lowest ratio. It means company has very high reinsurance expenses. Risk retention ratio of this company is decreasing continuously which is alarming situation for the company. Its ratio has very low as compared to Adamjee Insurance Company limited.

Adamjee insurance company limited:Adamjee insurance company limited has highest risk retention ratio and performing efficiently. It has 56.8% in 2015, 59.1% in 2016 and 62.28% in 2017. Trend shows an increasing ratio which is positive sign for the company. It has low reinsurance expenses as compared to other two companies.
Underwriting Expense to Net Premium Ratio:
The amount of Companies net premiums that were allocated to underwriting costs. This ratio is determined by dividing the underwriting expenses total by net premiums earned. It is the measure of an insurer’s business efficiency to investor, the lower the ratio, which indicates the company, is more efficient.

The HYPERLINK “https://www.investopedia.com/terms/e/expenseratio.asp” expense ratio for an insurer is obtained by computing underwriting expenses as a percentage of premiums earned for a given period. Since the profitability of an insurer has an HYPERLINK “https://www.investopedia.com/terms/i/inverse-correlation.asp” inverse correlation with the expense ratio, insurers strive to keep this ratio in check in order to remain profitable.

The price of an insurance policy is largely the function of supply and demand. When times are good, insurers make underwriting profits, and underwriting expenses and loss ratios decrease. As a result of the fewer operational expenses and favourable pricing conditions, some insurers, driven by short-term greed, increase capacity by writing more policies.

Formula:
Underwriting Expense to net premium Ratio = Underwriting Expenses / Net Premiums
Calculation
Companies Year 2015
Rupees ‘000 Year 2016
Rupees ‘000 Year 2017
Rupees ‘000
Askari General Insurance Company Ltd. 414,548/
1,091,884=
37.97% 418,986/
1,255,230=
33.38% 451,509/
1,356,189=
33.29%
EFU General Insurance Ltd. 2,851,427/
6,676,862=
42.71% 3,421,273/
7242821=
47.24% 3,865,188/
7,614,558=
50.76%
Adamjee General Insurance Ltd. 2,683,256/
7,747,391=
34.63% 2,953,756/
9,615,381=
30.72% 3,568,143/
11,534,999=
30.93%
Working
Underwriting expenses are given in Statement of Expenses and Net premium is given in Profit and Loss Account of each company.

Trend Analysis

Interpretation & comparison
As this ratio show a relationship between underwriting expenses and net premium received. Higher the ratio unfavourable situation is, as company is accruing more underwing expenses to earn the net premium.

Askari General Insurance Company Limited:Underwriting expense of Askari General Insurance Company Limited decreasing to some extent in 2016 and 2017 as compared to 2015 which is a positive sign for the company. It is higher underwriting expense as compared to Adamjee insurance Company Limited and lower as compared to EFU General Insurance Limited.
EFU General Insurance Limited:EFU General Insurance Limited has highest underwriting expenses as compared to other tow companies and expenses are still increasing in each year which is alarming situation for the company. Underwriting expenses ratio has increased form 42.71% to 50. 76% in two year which is favourable situation for the company and rectifying measures should be taken to decrease the underwriting expenses.

Adamjee Insurance Company Limited:Adamjee Insurance Company Limited has edge in underwriting expenses as it has lowest underwriting expenses as compared to other two companies. Its expenses has decreased by about 4% in preceding two years.

Net Investment Income to total Investment Ratio:
A performance measure is used to evaluate the efficiency of an investment. It indicates how much the company is earning from investment against its investment. Company would like earn higher income on lower amount of Investment. So, higher the ratio better investment efficiency it point out. It is calculated by dividing the net investment income to total investment cost.

Formula:
Net Investment Income to total Investment ratio = Net Investment Income /Total investment x 100
Calculation
Companies Year 2015
Rupees ‘000 Year 2016
Rupees ‘000 Year 2017
Rupees ‘000
Askari General Insurance Company Ltd. 104,032/
1,157,928=
8.98% 122,238/
1,498,227=
8.16% 87,829/
1,643,014=
5.35%
EFU General Insurance Ltd. 821,287/
23,170,277=
3.54% 1,009,428/
20,336,529=
4.96% 1,202,481/
19,166,228=
6.27%
Adamjee General Insurance Ltd. 2,404,312/
15,393,433=
15.62% 3,502,042/
16,738,435=
20.92% 1,482,144/
16,618,566=
8.92%
Working
Net investment income is given in profit and loss account of each company and total investment is given in balance sheet of each company.

Trend Analysis

Interpretation ; comparison
Investment yield ratio show a relationship between return on investment and the cost of investment. Higher yield rate on investment is favourable for the company because company earn high rate of income on small investment.

Askari General Insurance Company Limited: Investment income of Askari General Insurance Company Limited is 8.98% in year 2015, 816% in year 2016 and 5.35% in year 2017. This trend shows a decreasing rate of return on investment of the company. It is not a positive sign for the company and alarming situation for the management. Investment portfolio of the company includes Government Securities like Pakistan investment bonds and treasury bills, term finance certificate, certificate of investment. The rate of interest on certificate of investment in 2016 was 6% to 9% which has decreased to 6% in year 2017. Ratio is decreasing because company is increasing its investment by investing in Treasury bill in 2017 of Rs. 6.7 million.

EFU General Insurance Limited: Rate of return on investment is increased from 3.53% to 6.27% in three years. Return rate was less than two companies in year 2015 and 2016 but in 2017 rate of return has increase from Askari General Insurance Company it is still below from Adamjee Insurance Company Limited. Increase in net income on investment in each year.

Adamjee Insurance Company Limited: Here Rate of return on investment of Adamjee Insurance Company Limited is increased from 15.62% to 20.92% in year 2016 but it has again decreased to 8.92% in 2017. This company has highest rate of return than other two companies. The investment portfolio include Term Finance Certificate, treasury bills, Pakistan investment bonds, listed shares, unlisted shares, Term Finance Certificate, NIT units, Government treasury Bills and Pakistan Investment Bonds. Rate of return on these investment has been reduced in the year 2017 due to decrease in investment income from 3.5 billion to 1.48 billion. It is due to gain on sale of investments in year 2016 of Rs. 1.916 billion has increased the return for the year. Rate of return on investment again has decreased in 2017 it is due to same effect of gain on disposal of investment in year 2016.

Adamjee Insurance Company Limited has better rate of return than other two companies. Its management has better investments portfolio and earing high rate of return on these investment.

Net Premiums to Total Revenue Ratio:
Net premium to total revenue ratio show a relationship between net premium received by the company and total revenue earned. Higher ratio shows that company is receiving more net premium which means company has more customers or better premium policy.

Formula:
Net Premiums to Total Revenue Ratio = Net Premium / Total Revenue
Calculation
Companies Year 2015
Rupees ‘000 Year 2016
Rupees ‘000 Year 2017
Rupees ‘000
Askari General Insurance Company Ltd. 1,091,884/
1,262,774=
86.47% 1,255,230/
1,446,903=
86.75% 1,356,189/
1,528,220=
88.74%
EFU General Insurance Ltd. 6,676,862/
10,735,188=
62.20% 7,242,821/
9,285,556=
78% 7,614,558/
9,542,743=
79.79%
Adamjee General Insurance Ltd. 7,747,391/
10,342,761=
74.91% 9,615,381/
13,305,822=
72.26% 11,534,999/
13,200,640=
87.38%
Working
Net premium is given in Profit and Loss Account of each company.

Total revenue will be calculated as follows:
All these figures are given in Profit and Loss Account of each company.

Askari General Insurance Company Ltd.

Total revenue = Net premium revenue + Net commission + Investment income + rental income + other income + Profit on bank deposit+ profit from takaful operations-loss from widow takaful operations
Total revenue (2015) =1,091,884+54,965+104,032+2,887+4,552+6,406-1952= 1,262,774
Total revenue (2016) = 1,255,230+48,722+122,238+3,652+6,310+5,208 +5,543=1,446,903
Total revenue (2017) = 1,356,189 + 46,999 + 87,829 + 4,518 + 2,957 + 5,973 + 23,755 = 1,528,220
EFU General Insurance Ltd.

Total revenue = Net premium revenue + investment income + rental income + profit on deposits + other income + share of profit of associate + profit from takaful operations
Total revenue (2015)=6,676,862+1,202,481+129,910+76,283+25,711+640,068+
198,700-3127=10,735,188
Total revenue (2016) = 7,242,821+1,009,428+140,626+65,650+18,753+802,361+5,917= 9,285,556
Total revenue (2017) = (7,614,558+821,287 + 143,813 + 83,631 + 46,170 + 786,429 + 46,855) = 9,542,743
Adamjee General Insurance Ltd.

Total revenue = Net premium + investment income + rental income + other income + window takaful operations
Total revenue (2015) = (7,747,391+2,404,312+6,339+184,719) = 10,342,761
Total revenue (2016) = (9,615,381+3,502,042+6,447+177,914+4,038) = 13,305,822
Total revenue (2017) = (11,534,999+1,482,144+8,564+108,335+66,598) = 13,200,640
Trend Analysis

Interpretation & comparison
The health of an insurance company depends on the types of policies and the risks associated with those policies. An increase in net premiums written represents an increase in new insurance policies written, while a decrease indicates fewer policies originated. Decreases in net premiums written could be the result of competitors entering the market and taking up market share, or it could be because premiums are not competitive with what other companies are offering. Companies that offer policies to a larger pool of people may reduce the possibility of declines.

As high ratio show better premium policies and more customers. In three companies under study show different net premium ratios for each company.

Askari General Insurance Company Limited: Askari General Insurance Company Limited has 86.47% net premium as compared to its total revenue including net premium. It has 86.47% net premium in 2015, 86.75% in 2106 and 88.74% in year 2017. It has increasing trend in each coming year. It may increase by two factors increase in net premium or decrease in other revenues of the company. Here net premium is increasing in each year of the company which may due to increase in premium or increase in new policy holders.

EFU General Insurance Limited:EFU General Insurance Limited also has increasing trend but its net premium to total revenue ratio is less than other two companies. It has 62.20% in 2015, 78% in 2016 and 79.75% ratio in 2017. Its ratio is also increasing in each coming year which mean its net premium is increasing as compared to total revenue.Net premium of this company is also increasing in each year. Same factor may be there like increase in premium rates or increase in number of policy holders.
Adamjee Insurance Company limited: Adamjee Insurance Company limited has 74.91% ratio in 2015 and its ratio has decreased in 2016 and again increased to 87.38% in 2017. In 2017 this company has also better position as near to EFU Insurance Company limited which has 88.74% ratio. The company’s premium rate has decreased in year 2016 due to increase in investment income and profit from window takaful operations.

Here Askari General Insurance Company limited has edge on other two companies as it has highest net premium to total revenue ratio.

CHAPTER NO. 4CONCLUSION AND RECOMENDATIONS
Conclusion
Askari General Insurance Company Limited
The overview of analysis states the general outlook of Askari General Insurance Company is satisfactory. Company has satisfactory net claims to net premium ratio which is average about 48% in three year. Risk retention ratio of the company is also satisfactory as it has 54.46% retention ration in year 2015, 44.95% in year 2016 and 52.50% in year 2017.

It is improving its underwriting expenses ratio in each year which has decreased to 33.29% in year 2017 but its return on investment is decreasing in each year which has reached to 5.35% in year 2017. It is lowest return as compared to other companies.

However, a few observations have been made are listed as follows:
Its liquidity ; solvency health is not good because the company has highest total liabilities as compared to its equity. Its liabilities are increasing and reached to 2 times of the equity in year 2017.
Return on asset is also has decreased in year 2016 but again has reached the same rate of 6.97% in year 2017. Still company’s return is less than EFU General insurance company. Return should be improved by the management of the company.

Company has average Rs. 4 earnings per share in three year which is less than EFU Insurance which has highest earning per share.

EFU General Insurance Limited
In overall analysis we find EFU General Insurance Limited get stand at first position. The company has no liquidity risks and has lowest total liabilities as compared to its equity. Return on assets is also very good as it was 12.50% in year 2015 which decreased to 6.61% in year 2016 but company has again improved its return. Earnings per share of the company are also very high as compared to other two companies.

Net claims to net premium ratio are also better than other two companies. It has lowest net claims to net premium ratio.
Company is improving its return on investment in each year. It has improved from 3.54% to 6.27% in three years. But is still less than Adamjee Insurance Company limited.

However, a few observations have been made are listed as follows:
Risk retention ratio is not satisfactory of the company. It has lowest ratio as compared to other companies. It also has highest underwriting expenses ratio as compared to other companies which is not satisfactory.

Adamjee Insurance Company Limited
In our study we found that company has satisfactory performance. For risk retention ratio it stands at highest rank as compared to other two companies. Although it performance is not satisfactory but its retention ratio is very good. The underwriting expenses ratio is also very low of this company as compared to other companies which is 30.93% in year 2017. It means company has lowest underwriting expenses.
It has highest return on investment as compared to other companies. But its return on investment is decreasing in each year. It has reached to 8.92% in year 2017 which was 20.92% in year 2016.

However, a few observations have been made are listed as follows:
It is found that the company’s liquidity issues are increasing in each year. Its total liabilities are increasing more than its equity.

Return on asset of the company is not satisfactory at all it has lowest return on assets. It has only 2.89% percent rate of return in year 2017 which was 6.47% in year 2016.Earnings per share is also has decreased in year 2017. Its earnings per share were satisfactory in year 2015 and 2016.
Net claims to net premium ratio are also not satisfactory of the company. It has highest net claims to net ratio. It means company’s claims are increasing or its premium is decreasing.

Recommendation
Askari General Insurance Company Limited:
Company has improved its liquidity solvency health by reducing its total liabilities. The structure of capital should be made balanced by reducing debt and inducting capital. Currently, the proportion of debt in the capital is much higher as compared to other companies.
Company has also improved it return on investment by restricting its investment portfolio.

Company should also improve its return on total assets by increasing its revenues and decreasing its expenses.

EFU General Insurance Limited:
Company has to improve its risk retention ratio.

Company should also decrease its underwriting expenses to improve its underwriting expenses ratio.

Adamjee Insurance Company Limited:
Company has improved its liquidity solvency health by reducing its total liabilities. The structure of capital should be made balanced by reducing debt and inducting capital. Currently, the proportion of debt in the capital is much higher as compared to other companies.
Company should also improve its return on total assets by increasing its revenues and decreasing its expenses.

Company should improve its net claims to net premium ratio by better management of claims and by changing its policies about premium.

SECTION – II
Introduction of the Student
Last Degree Obtained : Bachelor of Commerce
Organization’s Name : GS Pharma
Designation : Account Officer
Experience (Years) : 6 Years
Appendix / Appendixes
As the financial statements of all three companies has been downloaded from website of the companies. The related web links of companies are as under:
http://www.agico.com.pk/reports.phphttp://www.efuinsurance.com/FinancialReports.phphttp://www.adamjeeinsurance.com/pak/financial_reports.phpBibliography
REFERENCE ; SOURCES USED
HandoutsonFinancialStatementsAnalysis(FIN621),VirtualUniversityof PakistanHandoutsonResearch Methods(STA630),VirtualUniversityof Pakistan
Annual Reports of Askari General Insurance Company Limited Online
Web URL: http://www.agico.com.pk/reports.phpAnnual Reports of Adamjee Insurance Company Limited Online
URL: http://www.adamjeeinsurance.com/pak/financial_reports.phpAnnual Reports of EFU General Insurance Limited Online
URL: http://www.efuinsurance.com/financialreports.phpFinancialRatiosOnline
Liquidity Ratios, Retrieved from
http://www.managementstudyguide.com/liquidity-ratios.htmLiquidity Ratios, Retrieved from
https://www.myaccountingcourse.com/financial-ratios/liquidity-ratiosLiquidity Ratios, Retrieved from
https://www.investopedia.com/articles/investing/100313/financial-analysis-solvency-vs-liquidity-ratios.aspLeverage Ratio, Retrieved from
https://corporatefinanceinstitute.com/resources/knowledge/finance/leverage-ratios/Leverage Ratio, Retrieved from
https://www.myaccountingcourse.com/financial-ratios/financial-leverage-ratiosRatios Analysis, Retrieved from
http://www.academia.edu/7439579/Ratio_analysis_of_the_insurance_companyRatios Analysis, Retrieved from
https://www.myaccountingcourse.com › Financial Ratio Analysis
Ratios Analysis, Retrieved from
https://accountingexplained.com/financial/ratios/return-on-equity