Profits shrink for most listed insurers in January-June

Most general insurance companies in the country suffered a decline in profits in the first half of this year, due mainly to a drop in marine and fire insurance policies amid ongoing challenges in the business sector.

Of the 37 listed general insurance firms, 22 saw profits fall while 15 recorded higher earnings compared with the same period last year.

Their combined profit stood at Tk 294 crore, slightly down from Tk 295 crore in the same six months of 2024.

"The country's economy is facing several challenges, and businesses are also suffering. The insurance sector was no exception," said Md Rezaul Karim, adviser of Pragati Insurance Limited.

"Due to the squeeze in business, marine and fire insurance sales have dropped," he told The Daily Star on Tuesday.

Bangladesh's GDP grew by 3.97 percent in the recently concluded fiscal year 2024-25, the slowest in 34 years, excluding the Covid pandemic period. Weak growth in the agriculture and service sectors contributed to the slowdown, according to the Bangladesh Bureau of Statistics (BBS).

In June, inflation eased to 8.48 percent, falling below 9 percent for the first time in over two years.

Karim said that even when companies are purchasing insurance policies, they are opting for lower coverage.

"Companies which in previous years had the capacity to pay insurance premiums for coverage worth Tk 1 crore are now paying half of it," he commented.

"They are having to come to terms with the fact that this is increasing their risk exposure, as the current situation is not that favourable for business," he said.

Among the listed firms, Reliance Insurance Limited posted the highest profit of around Tk 57 crore, a year-on-year rise of 17 percent.

Green Delta Insurance PLC followed with Tk 28 crore, then Pioneer Insurance Company Limited with Tk 21 crore, and Pragati Insurance Limited with Tk 18 crore.

As the country reduced imports, the sale of marine insurance policies dropped, said SM Ibrahim Hossain, director (current charge) of Bangladesh Insurance Academy.

"When there is a drop in LC [letter of credit] openings, it impacts marine business," he said.

LC openings declined steadily throughout the six-month period. In June, LCs worth $4.14 billion were opened, the lowest in 58 months, according to the Bangladesh Bank.

"Within the country, many business firms shut down after the ouster of the previous government, while others are facing a lot of challenges, for which the sale of insurance policies has dropped," Hossain said.

Karim of Pragati Insurance also pointed to intense competition over agent commissions as a key reason for the fall in profits. "On the one hand, the situation is not that lucrative for businesses, and on the other, insurers' profits were hit due to unhealthy competition over agent commissions."

The Insurance Development and Regulatory Authority (IDRA) had capped agent commissions at 15 percent of the premium. But many companies now offer 60 to 70 percent, Karim claimed.

"If a company needs to spend 60 to 70 percent of its premium income for commissions, and it has to bear costs for management and operations, how will it make a profit?" he asked.

"There was a time when only small companies paid high commissions, but now many large companies are doing the same," he said. "As a result, the insurance companies' profits have been hit hard."

Among the 37 listed firms, only 6 made profits above Tk 10 crore. Most of the others earned between Tk 1 crore and Tk 4 crore, suggesting that the overall market size has remained largely unchanged.

"Some insurance companies are doing well year after year, mainly due to being better with their capacities and capabilities of their leaders and employees," said Hossain, adding that business was growing for those firms.

"Other companies are struggling year after year and their scope for doing business remains narrow," he said.

Bangladesh has the highest number of insurance firms in the world in comparison to economies of a similar size.

There are 80 insurers in the country, compared with 58 in India, 54 in Pakistan, 53 in Vietnam, 57 in Nigeria, 34 in Nepal, 27 in Sri Lanka, and 74 in Thailand.