Kathmandu. Rating agency ICRA Nepal has upgraded the issuer rating of life insurer Prabhu Mahalaxmi Life Insurance. ICRA Nepal has upgraded the company’s financial strength from ‘Double B Plus’ to ‘Triple B Minus’ rating with the conclusion that financial strength has been strengthened due to increase in paid-up capital along with the increase in insurance transactions of the company.
According to ICRA Nepal, a moderate level of security is guaranteed when it comes to meeting the financial obligations of the share issuing company receiving this category within the stipulated time.
Prabhu Mahalakshmi Life Insurance in the previous fiscal year 2019/20. FY 2080 compared to 80. Net insurance revenue has increased by 22 percent in 2018. The company has grown twice the average at a time when the overall growth rate of the life insurance sector is 10 percent.
ICRA Nepal said in a statement that the improvement in the renewal rate of the policy has had a positive impact on its insurance revenue growth. Its renewal rate was 87 percent in the last fiscal year, which was only 73 percent in the previous fiscal year.
Prabhu Mahalakshmi Life’s adequate solvency margin ratio of 1.96 has also had a positive impact on the rating rating. According to regulatory provisions, such margins are 1.3 times. Banks and financial institutions own 24 per cent of Prabhu Mahalakshmi’s shares. It has also made adequate arrangements for future bonuses.
With only 3 per cent market share in terms of total insurance revenue, it still needs to work hard to get enough business. Also, since it has been in operation since 2074 BS, its operation period is short, so there is not enough basis to evaluate the competent aspects including financial strength.
Due to investment in short-term to medium term deposits, there is also a challenge in the stability of its interest income. There has also been a decrease in various investments of long-term nature. For these reasons, there is a challenge to meet the reasonable expectations of the insured. 80 percent of the total investment amount is concentrated on fixed deposits of banks and financial institutions.
As 31 per cent of the total insurance premium goes to management expenses, it should focus on business expansion to reduce the pressure on management expenses.
Prabhu Mahalakshmi last fiscal year 2080. It had earned a profit of Rs 380 million in 2018. In the last fiscal year, its total assets stood at Rs 16.57 billion.
Nepal Investment Mega Bank has the largest shareholding (7 per cent) in the company among institutional investors in recent times.
