Non-life Insurance sector posted a cumulative profits of Rs 1.393 billion for the first quarter of 2007 as compared with Rs 1.941 billion during the corresponding period last year, registering a decline of 28 percent.

Analysts said that this decline in earnings was mainly the outcome of 39 percent reduction in investment income, despite a healthy growth of 43 percent in underwriting business of the sector.

During the period under review, sector profits from the underwriting business surged by 43 percent to Rs 723 million from Rs 643 million in the same period in 2006. Net premium stood at Rs 4.3 billion, depicting a growth of 14 percent.

However, this upsurge in underwriting business and net premium could not trickle down to the bottom line of the insurance companies, as their combined profitability registered a decline of 28 percent, mainly due to the lower investment income in the first quarter of 2007, as compared to the corresponding period last year.

Haris Dagia, an analyst at JS Global Capital Limited said limited investment income of the sector stood at Rs 1.06 billion in this quarter, as against Rs 1.73 billion in the same period in 2006, depicting a decline of 39 percent.

The claim ratio showed some improvement and stood at 59 percent in this period, as compared to 64 percent previously. Similarly, combined ratio (expenses + claims) of the sector stood 77 percent in this quarter, which was 81 percent in the first quarter in 2006.

This report is based on a sample of 15 companies which represents more than 88 percent of the total market capitalisation of the 25 listed non-life insurance companies at Karachi Stock Exchange. Pakistan Re-Insurance has not been included, owing to the different nature of its business.

As per the financial results for this quarter, declining companies were including Adamjee Insurance 30 percent, Atlas Insurance 20 percent, Century Insurance 21 percent, EFU General Insurance 17 percent, East West Insurance 36 percent, Habib Insurance 9 percent, IGI Insurance 66 percent, New Jubilee Insurance 34 percent and Premier Insurance 61 percent while the figures of Picic Insurance were not available.

The companies which gained in this period, were including Askari General Insurance by 59 percent, Central Insurance 46 percent, Reliance Insurance 16 percent, Shaheen Insurance 14 percent and Silver Star Insurance 9 percent.