CHAPTER: ONE

INTRODUCTION & BACKGROUND

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 1.1 Background of the Report

Insurance is a system of spreading the risk of one to the shoulders of many. It is a contract
whereby the insurers, on receipt of a consideration known as premium, agree to indemnify
the insured against losses arising out of certain specified unforeseen contingencies or perils
insured against. Today, people are quite concerned about their present and future protection
for various purposes. They are concerned about their health protection, educational protection
and so on. Life Insurance companies are providing them those opportunities to make it real.
They provide unique financial services to the growth and development of every economy.
Not only in Bangladesh rather throughout the world, insurance industry has evolved as an
important sector of the financial system side by side the banking industry. The business world
without insurance is unsustainable since risky business may not have the capacity to retain all
kinds of risks in this ever changing and uncertain global economy. This study on the perfor-
mance appraisal based on National Life Insurance Company Limited with an special focus on
fire insurance was carried out as an internship project supported by the internship program as
part of the requirement of completing the Bachelor of Business Administration (BBA) from
Jatyia Kabi Kazi Nazrul Islam University facilitated by the, Zonal Branch, Mymensingh. The
internship program was conducted over the course of three months from November 5, 2015
through January 31, 2016, and included working full-time as an intern under this Branch as
well as meetings and in-depth interviews with the top management of National Life Insurance
Company Limited, Zonal Branch, Mymensingh.

1.2 Origin of the Report

Internship Program of Jatyia Kabi Kazi Nazrul Islam University is a Graduation requirement
for the BBA students, which is also a partial requirement of the Internship program of BBA
curriculum. The main purpose of internship is to get the student exposed to the job world.
Being an intern the main challenge was to translate the theoretical concepts into real life ex-
perience. The internship program and the study have following purposes:
 To get and organize detail knowledge on the job responsibility.
 To experience the real business world.
 To compare the real scenario with the lessons learned in the University
 To fulfill the requirement of BBA Program.
To accomplish the internship, I was placed at in National Life Insurance Company Limited
(Mymensingh, Zonal Branch), under the guidance of Md. Tariqul Islam, my academic super-
visor. The report topic was approved by the supervisor to satisfy the organizational require-
ments and fulfillment of the internship program. As a requirement of the completion of the
internship program, I had to submit this report, which includes Financial Performance Analy-
sis of National Life Insurance Company Limited.

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 1.3 Objectives of the Study

To develop the research objectives, I have considered the followings:

 Broad Objective:
To analysis the risk and profitability of National Life Insurance Company Limited.

 Specific Objectives:
The specific objectives of the study are as follows:

1) To find out the liquidity risk of life insurance companies in Bangladesh.

2) To find out the solvency risk of life insurance companies in Bangladesh.

3) To find out the operational risk of life insurance companies in Bangladesh.

4) To find out the profitability of life insurance companies in Bangladesh.

5) To find out the limitations of National Life Insurance Company Limited in terms of its
financial performance, if any and to suggest some measures for the problem encountered.

1.4 Rationale of the Study

The Insurance business is one of the most important commercial sectors in Bangladesh that
fosters financial stability by enabling economic agents to undertake various transactions with
the facility of transfer and dispersion of risks. So, Knowledge of insurance is as much essen-
tial as trading business for the society. But I have never got any chance to acquire knowledge
on Insurance business. Because none of research work has previously done by any JKKNIU
student on Life Insurance Sector of Bangladesh and there is no article in BUP Library related
to insurance business. Therefore, this study was a great experience for me to work in the in-
surance sector of Bangladesh and it will enrich the resources of BRACU Library, which will
be used as reference for future research. The other beneficiaries of this research are as fol-
lows:
i) Management of National Life Insurance Company Limited.
ii) Insurance Development & Regulatory Authority, Bangladesh (IDRA)

1.5 Methodology of the Study

The methodology of the study has been discussed in the following sub-heads:

 Type of Study: This study was a descriptive research where I have been analyzed
mainly secondary data to find out the situation of risk and profitability of a life insur-
ance company.

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  Sources of Data:
All the data has gathered for report writing during the course on internship. Information col-
lected to furnish this report is mainly from secondary in nature. Primary information from the
organization was gathered through informal discussion.
 Primary Sources:

i) Face to face conversation with the respective officers and stuffs of National Life Insurance
Company Limited.
ii) Practical work experience in different departments of National Life Insurance Company Limited.

 Secondary Sources:

i) Annual reports of different life insurance company in Bangladesh.

ii) Website of different life insurance Companies.

iii) Different internal manual of National Life Insurance Company Limited.

iii) DSE and SEC Library

Sources of Data

Primary Sources Secondary Sources

1. Practical desk work 1. Annual report of the NLICL

2. Oral interview of the respective
officers and staffs of NLICL
3. Direct observations of the func-
tions of various department of
NLICL
4.Relevant document’s studies as
provided by the officers concerned
2. Report of Bangladesh Insurance
Academy
3. Report of Insurance Development
and Regulatory Authority
4. Text Books on Insurance
5. Insurance Journals

5. Informal Discussion with clients 6. Extensive literature search on the

basis of these documents of publica-
tion
7. NLICL Website
(www.nlicl.gov.bd)

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These reports and documents have been analyzed in the light of analytical review. Some
graphical presentation, growth rate and trend analyses have also been used.
 Reliability of Data
The data collected are highly reliable in the sense that all data generated in the report are
used exclusively by National life insurance company limited.The auditors’ report on the fi-
nancial statements and the correspondence with different desks generate the reliable infor-
mation to compose the report successfully.

 Presentation of Results and Recommendations

Recommendations are made based on the critical evaluation of the different phases that are
able to remove the existing reasons of inefficiency of insurance business in Bangladesh.

1.6 Scope of the Report

This study is conducted on life insurance sector of Bangladesh. This report gives an overview
of NLICL including its products, services, operating activities, and its business environment.
The scope of this study is to analysis the risk and profitability of National Life Insurance Com-
pany Limited, which also has compared with its competitors using data of last five years (2010
to 2014). The scope of the study is confined within the Dhaka Stock Exchange (DSE) listed
life insurance companies.

1.7 Limitation of the Study

While preparing this comprehensive report we have faced a few problems which limit to
make the best output. If we were not supposed to deal with these challenges we could make it
a better one.
 Lack of available up-to-date information
 Confidential information that no organizations inclined to share due to their business
interest was another limitation.
 Also, for the first time I have made report on insurance company and industry so it
was quite difficult for me to understand the financial terms.
 Only few months’ internship’s experience is not enough to find out all the pros and
cons of such a vast project.
 There is lack of report and research papers relating Fire Insurance Industry which has
made our way difficult to enrich our report.
 Sufficient records, publications, facts and figures are not available. These constraints
narrowed the scope of the real analysis.

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 1.8 Literature Review

The focused literature is particularly concerned with the profitability and risk issues of life
sector in Bangladesh. This will simulate the reader as well as the researcher for getting a
deeper understanding of the sector and its financial performance. Literature review will help
emphasize the reason why this study is important and relevant to the current scenario. Litera-
ture review involves extensive reading and helps the researcher to get a closer look at various
insurers are performing. This section is further divided into many sections. The principal
function of insurance as an economic institution is the equitable distribution of the financial
losses of the few over the many. In insurance, each policy holder contributes an amount in
insurance with the risk he introduced to a fund, established and administered by the insurer
and out of the fund; the losses are paid to the insured members. The main function of an in-
surance organization then becomes the management of the fund and the assessment of the
equitable contributions to be made by the policyholders.

Arifur Rahman, a student of Faculty of Business Studies of Dhaka University performed a

research work titled “Problems & Prospects of Life Insurance Sector in Bangladesh” in De-
cember, 2006. He has identified some problems of life insurance business in Bangladesh and
recommended some suggestions to overcome these problems. Summary of his viewpoint is
stated bellow:

Problems of life insurance business in Bangladesh

1. Government’s indecision and delayed decision regarding the future pattern of industry af-
ter liberation affected the industry’s progress;
2. Uncontrolled penetration of Insurance Market with unhealthy competition,
3. New venture in insurance industry i.e. Islam Insurance and small savings Insurance (Mi-
cro Insurance) but real insurance act is absent.
4. Lack of modern Marketing concept and adequate training.
5. Lack of trained insurance executives.
6. Though the world is running with the Computerization but he insurance industry is ad-
versely facing the proper computerization of insurance system.
7. Life Insurance companies have failed to develop and achieve people confidence owing to
the institutional weakness;
8. Life Insurance companies are incurring heave expenditures because to the huge staff and
multi tier organizational set up and also the increasing trend of prices of the necessary ar-
ticles the materials etc.
9. Non reliability of investments have caused financial hardship for the life insurance com-
panies;
10. Life insurance has becomes less attractive in the context of inflationary situation;
11. Life insurance companies aim of diffusion the benefits of insurance to the people of all
areas is no being pursued through integration of short and long-term plans;
12. Policyholders attitudes towards insurance is not satisfactory;
13. Increasing trend of price of bare necessary goods and services have seriously affected the
policyholders for which many of them are in problems to continue their policies and
many especially the fixed earning groups discontinued their policies;
14. Agent’s performance is no satisfactory and there is the lack of good public image of in-
surance salesmen;

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15. With the nationalization of insurance and with the declaration of socialization of econo-
my people are hesitant to buy insurance.

Suggestions to overcome the Problems of life insurance business in Bangladesh

1. Desires changes in insurance act are not adequate though there are sum amendments
made into insurance act after independent of the country. So regulatory changes are re-
quired with proper man power & skill person in government regulatory function.
2. As there are no standard for insurance industry both home office and field office in the
area of designation, Agency office setup rule. Standard collection formulation and stand-
ard commission structure guided by govt. insurance authority an unhealthily competition
in observed in selling.
It we determine the problems one after another and be able to make a slandered marketing
rule then the abnormality may come under control.
3. In 1984 when privatization bill passed and private concerns are come to the market then
insurance companies are also come out into the market where national life insurance co.
ltd. started journey in 1985 as a first private concern with conventional insurance con-
cept.
When Mr. Shafat Ahmed Chowdhury arrives Bangladesh in 1986 he stars a new idea about
micro insurance in Delta Life in the name of Grameen Bima and GonoBima to cover poor
people under a risk umbrella but no insurance act was observed in the business performance.
Now this micro insurance is very popular in our country (With high Lapsation of insurance
policy and no agent and employer of agent concept.
So insurance act and regulatory should changed or make new rules to handle such problems.
4. Any marketing demands motivation, perfection negotiation and achievement for these,
proper idea should required to design appropriate are of marketing and continuous train-
ing. So in life insurance industry to sell the proper idea to the prospect, modern motiva-
tion should apply with proper training.
5. In 1973 when insurance industry nationalization and life insurance office come to there
office (a) JBC (b) ALICO& Postal Life first category up to 1985 from 1985-1990 an-
other 3 life insurance (a) National Life (b) Delta Life (c) Sandhani Life Started operation
second category takes the executive from first category companies. After then 1990 to
1999 another 2 life office (a) Meghna Life (b) Home Land Life insurance Ltd 3rd catego-
ry and 2000 another 11 life office come to the market there as follows:
i. Rupali Life Insurance Company Ltd.
ii. Fareast Life Insurance Company Ltd.
iii. Pragati Life Insurance Company Ltd.
iv. Prograssive Life Insurance Company Ltd.
v. Sunflower Life Insurance Company Ltd.
vi. Popular Life Insurance Company Ltd.
vii. Prime Life Insurance Company Ltd.
viii. Baira Life Insurance Company Ltd.
ix. Padma Life Insurance Company Ltd.
x. Sun Life Insurance Company Ltd.
xi. Golden Life Insurance Company Ltd.
Where most of the original executives come from 1st category and 2nd category companies.
Now it is reasonable to all of as what a terminally shortage of real insurance executive in the
insurance industry.

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It is a real problem to the nation to overcome the problem this proper trainer and trainee inti-
mate are required with a mandatory system i.e. each and every executive must learned a
training it possible insurance trainer may be arranged from our neighbor in country or abroad.
People confidence can insurance in the field of life insurance industry by giving them actual
benefits as stated in the insurance policy and their relationship with the sales personal and
6. Life Insurance companies are incurring heave expenditures because to the huge staff and
multi tier organizational set up and also the increasing trend of prices of the necessary ar-
ticles the materials etc. It has to be resolve properly.
7. In the insurance act there are guide lines investment portfolios. Which investments re-
turns are not adequate to declared hansom bonuses and proper fund diversification are
also not observe in the insurance investment rules. This has to be lock after and resolve
properly.
8. Pricing of life insurance product must be matched with the cost of living stretchers of a
country considering long term in factionary factors of financial aspect. The product may
be revised time to time considering present socioeconomic condition.
9. The benefit of insurance for example death lone. Surrender value paid up value and ma-
turities are most properly communicated to the policy owners.
10. Policyholder’s attitudes to the insurance industry is not satisfactory because there not
properly communicated with the real massage of insurance benefits and also sum fraud
activities by some of the insurance development sales people.
11. Performance of insurance sales people are not good as accepted
12. Selections of proper prospects may be no good enough for reason under selling & over
selling are occurred in the selling process Hans’s policy holder financial constant effect
to continue the policy.
13. Main case of policy holder hesitation in buying life insurance just for the ignorance
about life insurance concept.

The focused literature is particularly concerned with the profitability and risk issues of life
sector in Bangladesh. This will simulate the reader as well as the researcher for getting a
deeper understanding of the sector and its financial performance. Literature review will help
emphasize the reason why this study is important and relevant to the current scenario. Litera-
ture review involves extensive reading and helps the researcher to get a closer look at various
insurers are performing. This section is further divided into following way:

8
 CHAPTER: TWO
OVERVIEW OF NATIONAL LIFE INSURANCE

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 2.1 Origin of the Report

This internship report is a requirement of BBA Program and includes experiences during pre-
paring this report. This report is all about the different types of policy and overall business
activities of National Life Insurance Co. Ltd. here the report contains different types of poli-
cy, system, services, features and benefits of different policy.
National Life Insurance Company Limited is the first private sector life insurance company in
Bangladesh, incorporated on 12 February 1985 as a private limited company under the Com-
panies Act 1913 to engage in life insurance business according to the provisions of the Insur-
ance Act 1938 and Rules 1958 and other applicable laws and rules. The company com-
menced business 23rd April of 1985.
In 2015, the company had 1200 branches and area offices of Jana Bima throughout the coun-
try. It had 5166 personnel, including 39 executives headed by the managing director.

2.2 Insurance Background of Bangladesh

National Life Insurance Company Limited is the first private sector life insurance company in
Bangladesh, incorporated on 12 February 1985 as a private limited company under the Com-
panies Act 1913 to engage in life insurance business according to the provisions of the Insur-
ance Act 1938 and Rules 1958 and other applicable laws and rules. The company com-
menced business on 23 April of 1985 with an authorized capital of Tk 200 million divided
into 2 million ordinary shares of Tk 100 each. Its paid up capital on 31 December 2008 was
Tk 93.15 million fully paid by four types of shareholders namely, sponsors (50%), compa-
nies, financial institutions, and general public. The company is listed with the Dhaka and
Chittagong Stock Exchanges in 1995.

Premium incomes of the company in 2015 were Tk 4069.20 million comprising first year
premiums, renewal premiums, and premiums of group insurance and Jana Bima, a special
insurance scheme to provide the yield and the benefits of life insurance to very low income
group people of the country. First year premium of Tk 1024.83 and Renewal premium of Tk
3010.72 were earned during the year on account of Ordinary Life Insurance, Jana Bima, Is-
lami Takaful Insurance & National Pension Deposit Insurance and Tk 32.56 and Tk 1.09 mil-
lion on Group Term Insurance and Personal Accident Insurance respectively.

Life insurance claims paid by the company in 2015 were Tk 1385.45 million. The company
maintains a life fund to pay the unexposed risk in future and in 2015 the fund accumulated an
amount of Tk 11404.49 million.
Types of life insurance services provided by the company are death claim-ordinary life, death
claim-group life, death claim-Jana Bima, survival benefit-ordinary life, accident and FIR
benefit, ex-gratis claim-ordinary life, ex-gratis claim, Jana Bima and group insurance
The company has income from its investments in Pratirakkha Sanchaya Patra (defense sav-
ings certificates), shares and debentures of companies, National Investment Bond, T&T
Treasury bond, and Agrani Bank Shilpa Unnayan Bond. These incomes totaled Tk 976.69
million in 2015. As a part of further diversification of its investment portfolio, the company

10
participated in the equity of a multi-national company named Industrial and Infrastructure
Development Finance Company Ltd. It sponsored that company in association with 7 banks
and few other insurance companies.
The assets of the company were valued at Tk 13140.97 million on 31 December 2015.The
company paid dividends at varied rates depending upon the volume of its profits and on the
basis of valuation by the actuary and audited accounts. Dividend paid by the company in
2015 was 50% stock on its paid up capital

In 2015, the company had more than 1200 branches and area offices throughout the country.
It had 3166 personnel, including 39 executives headed by the managing director.

2.3 Company Structure

National Life Insurance Co. Ltd. has its head office at Karwan Bazar and more than 1200
branches and area office all over the country. In head office it has different department to
maintain the insurance business and serve the people. The works performed by the different
departments are described below:

 Central Underwriting Department:

This department gives decisions on the proposal of insurance policy. In case of life insurance,
risk means death or permanent disability of human life because of illness or accident. By
considering all of those matters that increases the death or accident, calculate the premium of
a policy for standard life at a standard rate, impose special condition or lien for below stand-
ard life that means whose life is more risky than others, and refuse the policy for ineligible
person in life insurance is called underwriting. Who perform this task is called an underwrit-
er.

 Policy Service Department

Policy service department give daily services to the policyholder. After making a deed the
policyholders have to make payment against their policy at an installment basis. All of these
services like make original receipt, revive of lapse policy, give survival benefit, make loan
against surrender value, give claims against death, accident or maturity etc is done by policy
service department.

 Administration and Risk Management

Although it is a financial institution itself National Life Insurance Co. Ltd. needs financing to
run its operation. Finance, Administration and Risk Management department are ones that are
primarily concerned with maintaining a level of cost incurred that do not cross the threshold
leading the company to bankruptcy.

 Commission Department:
In case of life insurance, commission means the amount, which is calculated on the basis of
works done by the agents of the company. Company agents collect policy from the people.
For each policy, they get certain percentage amount of total sum-insured. This percentage
amount is varied on the basis of their designation or position. Actually this commission is the
reward or motivation of the agents so that they can collect more policy willingly. The main
task of the commission section is checking of the commission sheet those are coming from

11
different branches of the company. After verifying the commission sheet they send these
sheets to the accounts section to make payment.

 Information Technology Center

This department is instrumental is running of the entire computerized operations o the com-
pany. They help implementation and generation of computerized report. Another major duty
of this department is to maintain communication with all over the country.

 Human Resource Department

This department manages recruitment, training and career progression plan. National Life
Insurance Co. highlights the importance o developing its people to create a culture of cus-
tomer service, innovation, teamwork and professional excellence.

 Legal and Compliance

National life Insurance Co. ltd. is regulated by all the rules and regulation of the Ministry of
Commerce of Bangladesh. It also encouraged its staff to conform to an internal culture of eth-
ical behavior and sensitiveness to the culture and religion of the country. Some of the key ar-
eas that he legal& compliance department has to take care of are: any kind of legal issues, to
advice the CEO regarding all the matters and the management on legal issues and supervise
internal audit

 Sales & Promotion Department

This is the most important section of National Life Insurance Co. Ltd. the main business of
insurance co. is collect policy from field level people. Personnel of this department are al-
ways concerned how to collect policy at a large scale. All the time they are trying to improve
their strategy for policy collection and try to motivate the agents of the company. To motivate
agents they declare attractive bonus, incentives etc. for the agents. This department also deals
with advertisement, public relations, promotion, partial marketing etc. that disseminating new
products and services to customers and all ensuring service quality.

 Establishment Department
This department maintains daily purchase and sales of the company. To run the daily opera-
tions of the company it need different stationary, furniture, building, equipment etc. the per-
sonnel of this department meet their needs and fulfill all the requirement of the company. To
purchase of the commodities they call tender or for small amount purchase they purchase
from their registered company.

2.4 Vision, Mission and Goal

 Vision of the company

 To be a world class insurance & reinsurance organization.

 Mission of the company

 To be the premier organization in Bangladesh for all insurance and reinsurance business
and to provide quality at affordable cost.
 To be the insurer of the first choice in Bangladesh by offering top class security, com-
prehensive, efficient services and professional conduct of business.

12
 Maintain NLICL‟s leading position in the insurance market of Bangladesh.
 To become an insurance organization of international standard by attaining the highest
confidence and the trust of all concern form home and abroad through improve services,
dedication customer care and efficiency.
 To place innovation, technology and knowledge at the heart of the organization’s
growth.
 Goals of the company
 Venture into other areas in Bangladesh and abroad on the strength of SBC‟s core compe-
tency.
 Enter into and expand new insurance product and services to meet the changing needs of
clients.

2.5 Objectives of the Company

 Objectives of the company

 To achieve business targets.
 To increase share of private sector business through marketing efforts.
 To build, maintain and improve the commercial image of the organization and
gain recognition as a competent and professional insurer as well as re-insurer.
 To overhaul and simplify administrative system & procedure.
 To attain full computerization and to utilize IT to its full potential.
 To reduce operating cost.
 To enhance the skills and flexibility of the employees through continuous training.
 To ensure better return from NLICL‟s investment.
 To improve maintenance of existing real estate and expansion of it.

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2.6 Organization Organogram

Chairman

Vice-chairman

Managing Director

Deputy Managing Director

Executive Vice President

Senior Vice President

Vice President

Deputy Vice President

Assistant Vice President

Executive Officer

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 Senior Principal Officer

Principal Officer

Senior Officer

Officer

Junior Officer

2.7 Products and Services of NLICL

 ORDINARY LIFE INSURANCE:

Endowment Assurance (With Profit):

This type of policy is normally issued for a specific time period or specific age of an insured
when the claim is paid. The maturity period is normally 10-35 years. But the age of a life-
assured will never be 70 years when the policy will be matured. If death is occurred of a life-
assured during the maturity period, then sum- insured will be paid with bonus earned. the
main feature of this policy are:
The minimum amount of sum-insured is Tk.30000.
In this policy premium will be given semi-annually or yearly but in case of semi- annually,
2% extra premium will be charged.

Anticipated Endowment Assurance (With Profit):

This type of policy is normally issued for the maturity period of 12, 15, 18 or 21 years. Under
this policy some- insured is paid by installment basis during the maturity period. If the death
is occurred during the maturity period, the whole amount of sum insured is paid with bonus
to the nominee. Life-assured can invest this installment amount in profitable sector because
insurer give assurance of giving whole amount of sum- insured with profit even at the death

15
of the assured. In this policy premium will be given semi-annually or yearly but in case of
semiannually, 2% extra premium will be charged. The minimum amount of sum- insured is
Tk 30000.

Whole-Life Assurance (With Profit):

In this policy premium will be given until 85 years of the assured or until death of the life-
assured if death is occurred before the maturity period. That means total sum- insured is giv-
en with profit at the time of death. In this policy premium will be given semi-annually or
yearly but in case of semi- annually, 2% extra premium will be charged. The minimum
amount of sum- insured is Tk 30000.

Five Payment Endowment Assurance (With Profit):

Under this type of policy, sum-insured is given at a specific amount on five installment basis
during the maturity period. Though assured was withdrawing some installment in several
times, but whole amount is given to the nominee with profit even at the death of the assured.
This type of policy is generally issued for the maturity period of 10, 15, 20, 25, and 30.the
main feature of this policy is:

After 1/5th maturity period, 10% o total sum-insured is given to the assured.
After 2/5th maturity period, 15% of total sum-insured is given to the assured.
After 3/5th maturity period, 20% of total sum-insured is given to the assured.
After 3/5th maturity period, 20% of total sum-insured is given to the assured.
Rest 30% is given at the maturity of the policy.

Child Protection Policy (With Profits):

This type of policy is issued for giving protection to the children’s life. Generally father of
the child is considered as life-assured. Mother can also be assured but in this case she must be
educated & service holder. None can be life-assured except father or mother of the child in
this case.
Under this policy, the age of the child must be 18-30 at the maturity date. Whole amount of
sum- insured is paid with bonus to the child even at the death of the life-assured. And at the
death of the child sum insured is given to the insured at a specific terms and conditions.

Double Security Assurance (With Profit):

In this policy premium will be given until maturity of the policy or until death of the life- as-
sured if he dies before the maturity period. Here total sum- assured is given with profit at the
maturity period but if death is occurred during the policy period, then double amount of sum-
assured will be given to the nominee.

In this policy premium will be given semi-annually or yearly but in case of semi- annually,
2% extra premium will be charged. The minimum amount of sum- assured is Tk 30000. DI-
AB or PDAB can also be taken along with this policy by giving ex-gratis premium.

Children Education Security Plan:

This policy is taken to meet the educational expenditure of the children in future. The major
advantages of these policies are:
At the death of the life-assured, premium will be exempted. Then @ 1% of total sum-insured
will be given to the child on monthly basis until the maturity period of the policy as educa-
tional expenditure.

16
But at the maturity date @ 2% of total sum-insured will be given with profit
In case of death of the child this policy can be transferred to another child or to life- assured
own life.
In this policy premium will be given semi-annually or yearly but in case of semi- annually,
2% extra premium will be charged. The minimum amount of sum- insured is Tk 30000.

Family Income Rider (Fir):

This is one kind of supplementary insurance. This policy is only taken along with endowment
insurance. The maturity of this policy cannot be more than the maturity of the original policy.
The following benefits are provided at the death of life-assured:

1. 25% of sum-insured will be given with bonus.

2. 10% of sum-insured will be given at semi-annually until the maturity of the supplementary
insurance.
3. Remaining 65% of sum-insured will be given at the maturity of the supplementary insur-
ance.

Pension Insurance (Without Profit):

Any professional person can take these types of policy but in case of female, life-assured
must be service holder. This policy is generally taken to get pension after their retirement.
The major advantages of these policies are:

 In this policy, assured get advantages both the life assurance and whole life pension.
That means, if life-assured dies before start the pension he get advantages of life assur-
ance benefits. Bet he alive, he/she gets whole life pension benefit after their retirement.
 If life-assured dies during 10 years of starting pension, then pension will be given to
his/her nominees until ten years. If he/she alive after 10 years, he/ she gets pension until
their death.
 If life assured dies before starting pension, then his/her nominees get five times more
than the yearly pension amount at a time. By meeting this claim the policy is exhausted.
 This policyholder can get tax rebate from the amount of sum-assured.
 DIAB, PDAB or FIR cannot be taken along with this policy.
 In this policy premium will be given semi-annually or yearly but in case of semi- annual-
ly, 2% extra premium will be charged.

Multiplan Insurance:
This policy is introduced to meet various necessities of the life-assured with various benefits.
This policy provides benefits to his/her family, to aid in educational expenditure of children,
to aid in marriage of daughter etc. At the death of life-assured this policy provide following
benefits:
At the death of life-assured specific amount is given at monthly basis to his family for re-
maining policy period. (Not more than 1%of sum-insured)
At the time of death, specific amount is given to meet extra expenditure of death at a time.
(Not more than 10% of total sum-insured).
Remaining 90% of sum-insured will be given after maturity of the policy.

If life-assured alive, total amount of sum-insured would be given with bonus earned after ma-
turity of the policy.

17
Mortgage Insurance:
Business person sometimes take loan from various financial institution to meet various ex-
penditure of business e.g. to provide capital, to construct building, to purchase vehicles etc.
financial institutions have give these loan against mortgage of asset or another extra collat-
eral. These loans have to repay within a specific maturity period. Mortgage insurance give
assurance to repay the loan if life-assured dies before repayment of loan. The maturity of this
policy will be equal to maturity of the loan. Premium will be made annually only. PDAB or
DIAB cannot be taken along with this policy. The advantages of this policy are:
Insurance company will pay remaining balance of the loan to the bank if life-assured dies
during the specific maturity period.
If life-assured alive, then he will get total sum-insured after the maturity period.

Group Insurance:
This type of assurance is commonly used by a group of employees of an organization. All the
employees working in an organization get insured themselves less than one policy and a cer-
tificate of insurance is given to each member of the group individually.

 JANA BIMA:
National Life Insurance Co. Ltd provides this type policy to encourage the low-income group
for savings. Because most of the people of our country is poor and their earning is very low.
Different types of policies under Jana Bema are described below:

Small Saving Insurance:

The advantages of this policy are:
 Any person can take this policy but their age must be in between 18-45 years. Policy
amount is TK. 6000-50000.
 Maturity period of the policy is 10 years. But at the date of maturity the age of the as-
sured cannot be more than 55 years.
 The premium is made monthly basis. The policy will be lapse if assured will
 failure to make premium during one yare from starting the insurance.
 Company provide surrender value if policy is continue two or more years.

Children Education Security Plan:

This policy is taken to meet the educational expenditure of the children in future. The maturi-
ty period of the policy is 10, 15, &20years. The major advantages of these policies are:
 At the death of the life-assured, premium will be exempted. Then @ 1% of total sum-
assured will be given to the child on monthly basis until the maturity period of the policy
as educational expenditure.
 But at the maturity date, @ 2% of total sum-insured will be given with profit for 5 years
 In case of death of the child this policy can be transferred to another child or to life- as-
sured own life.
If life-assured alive, total sum-insured will be given with bonus @ 2%, after maturity of the
policy.

Family Savings & Income Insurance Plan:

This policy is taken for a specific time period. This time period is usually 10 years but in this
case the age of the assured cannot be more than 55 years. The following benefits are provided
at the death of life-assured:

18
 25% of sum-insured will be given with bonus.
 10% of sum-insured will be given at semi-annually until the maturity of the supplemen-
tary insurance.
 Remaining 75% of sum-insured will be given at the maturity of the insurance

If life-assured alive, total sum-insured will be given with bonus earned after maturity of the
policy.

Child Protection Policy (With Profits):

This type of policy is issued for giving protection to the children’s life. Generally father of
the child is considered as life-assured. Mother can also be assured but in this case she must be
educated & service holder. None can be life-assured except father or mother of the child in
this case.

Under this policy, the age of the child must be 18-30 at the maturity date. The maturity period
of this policy is usually 10-20 years. Age of child is at least 6 months and at most 10 years.
Whole amount of sum- insured is paid with bonus to the child even at the death of the life-
assured. And at the death of the child sum insured is given to the insured at a specific terms
and conditions.

 NATIONAL PENSION DEPOSIT INSURANCE:

This policy is issued to encourage in savings o to the low-income group people. To collect
deposit from all sphere of society the company provides this monthly basis insurance policy.
This policy provide pension to the insured after their retirement. The major feathers of this
policy are:

 If life-assured dies during the policy period the total sum-insured will be given to his
nominees with profit.
 Life-assured can withdraw money after 2 years of the policy continued.
 The age of life-assured must be not more than 45 years when life-assured take this poli-
cy.
 The age of life-assured must be not more than 55 years, when policy is matured.
 The minimum amount of monthly premium will be TK.100
 Maximum sum-insured is TK250000.
 Minimum maturity period is 10 years and maximum is 25 years.

19
 2.8 SWOT Analysis of NLICL

A SWOT analysis (alternatively SWOT matrix) is a structured planning method used to evalu-
ate the strengths, weaknesses, opportunities and threats involved in a project or in a business
venture. Specifically, SWOT is a basic, straightforward model that assesses what an organiza-
tion can and cannot do as well as its potential opportunities and threats.

SWOT refers to:

SWOT
Strengths Weakness Opportunities Threats

Strengths of NLICL

 Gigantic structure all over the country

 Large number of capital
 Bigger amount of life insurance
 Proper allocation of human resources
 Proper settlement of claim
 Sole state owned general insurance company
 Solvency of the company
 It has a history of higher competency in insurance.
Weaknesses of NLICL

 Hierarchy problem
 Unskilled and untrained manpower
 Advertisement problem
 Insufficient training to the employees
 Traditional insurance marketing system
 In availability of commission to clients
Opportunities of NLICL

 Diversification
 To spread in foreign countries
 Ensuring every level of assets
 To be a pioneer in life insurance company
 Control and monitoring
 Minimum risk

20
Threats of NLICL

 A barrier such as formality in case of decision making

 private life insurance company
 Obstacles of expansion
 Mass publicity and new technology of the private companies
 Unstable political condition.
 default culture

21
CHAPTER: THREE
OVERVIEW OF INSURANCE

22
 3.1 Historical Background of Insurance

Marine is the oldest form of insurance which was introduced in Northern Itally sometime be-
tween the 12th and 13th century but the insurance business got the institutional shape in the
United Kingdom after establishment of Lloyds insurance company in the late 17th century.
The coffee houses of London play a vital role in developing trade and commerce in United
Kingdom.
The merchants and traders used to gather in these coffee houses for their business transac-
tions. Edward Lloyd opened such coffee house in 1680. In late 17th century this coffee house
virtually turned into the most famous Lloyds insurance company of the UK.
During British role, some insurance companies started functioning in India. These companies
were of various origin including British, Australia and also India. After independence, the
Bangladesh government nationalized the insurance industry in 1972 by the presidential order
no.95 Known s Bangladesh Insurance (Nationalization) Order, 1972. By virtue of this order,
save and accept postal life insurance and foreign life insurance companies (other than the Pa-
kistani companies), all companies and organization transacting all types if insurance business
in Bangladesh came under this nationalization order. At the same time five insurance corpo-
rations were initially established by the Government.
Jatiya Bima Corporation (National Insurance Corporation);TeestaBima Corporation (Teesta
Insurance corporation);Karnaphuli Bima Corporation (Karnaphuli Insurance Corporation);
Rupsa Jibanbima Corporation (Rupsa Life Insurance corporation); and Surma JibanBima
Corporation (Surma Life Insurance Corporation).
The JatiyaBima Corporation was not an underwriting corporation instead a central corpora-
tion to supervise and contron the activities of remaining four subsidiary corporation. As per
this order TeestaBima Corporation and KarnaphuliBima Corporationis were made responsi-
ble for general insurance business named as SadharanBima Corporation. Similarly, Rupsa-
Jibanbima Corporation and SurmaJibanBima Corporation were made responsible for life in-
surance business named Jibanbima Corporation.

3.2 Insurance

In a simple sense, Insurance is nothing but a process of risk management.

In a broad sense, Insurance is the system of spreading the risk of one to the shoulders of
many. Insurance is a contract (policy) according to which one party (a policy holder) pays an
amount of money (premium1) to another party (insurer) in return for an obligation to com-
pensate some possible losses of the policy holder. The aim of such a contract is to provide a
policy holder with some protection against certain risks. Death, sickness, disability, motor
vehicle accident, loss of property, etc. are some typical examples of such risks.

23
“Insurance is a co-operative form of distributing a certain risk over a group of persons who
are exposed to it”.
- M. K. Goash & A. N. Agarwala
“Life insurance may be defined as a contract, whereby the insurer, in consideration of a pre-
mium, paid either in a lump sum or in periodical installments, undertakes to pay, annuity or a
certain a sum of money either on the death of the insured or on the expiry of certain number
of years.”
- R.S Sharma
“Life insurance may be defined as a contract whereby the insurer in consideration of premi-
um undertakes to pay a certain sum of money either on the death of the insured or on the ex-
piry of a fixed period.”
- M.N Mishra

3.3 Essential Elements of the Contract of Insurance

Elements of contract of insurance

Law Related Ele- Business Related Ele-

ments ments

01. Plurality of Members 01. Written contract

02. Offer and acceptance 02. Insurable interest
03. Legal relationship 03. Fiduciary relationship
04. Lawful consideration and ob- 04. Payment of premium
ject 05. Financial indemnity or pay-
05. Capacity to contract of the ment
parties 06. Cause proximity
06. Free consent 07. Proportionate contribution
07. Certainty 08. Subrogation

24
 3.4 Principles of Insurance

01. Principles of insurable interest

02. Principles of fiduciary relationship
03. Principles of financial indemnity
04. Principles of cause proximity
05. Principles of proportionate contribution
06. Principles of subrogation
07. Principles of collecting huge number of policy
08. Principles of probability
09. Principles of taking optimum risk
10. Principles of quick response

3.5 Crucial Terms Used in Insurance

Annuity
“An annuity is a periodical level payment made in exchange of the purchase money for the
remainder of the life time of a person or for a specified period”.
- M. N. mishra
Surrender value
“Surrender value is that amount of premiums paid which is returned to the policy-holder at
the time of surrendering the policy”.
- M. N. Mishra
Bonus
“Bonus means a payment added to what is usual or expected”.
- Oxford Dictionary of Business

Mortality table
“Mortality table is an instrument for anticipation future mortality rates on the basis of mortal-
ity records”.
- Goash & Agarwala

25
Jettison
“Jettison means to throw cargo from a ship into the sea to make the ship lighter”.
- P. H. Collin
Double Insurance
If the insured makes insurance of same assets to more than one insurance companies then the
insurance policy is known as Double insurance. Generally, in these types of insurance, the
insured amount is large amount and the subject matter is more precious.

Re-insurance
“Re-insurance is an arrangement whereby an original insurer who has insured a risk, insures a
part of that risk again with another insurer”.
- M. N. Mishra

26
CHAPTER: FOUR
ANALYSIS OF EXTERNAL & INTERNAL EN-
VIRONMENT

27
 4.1 Marketing Environment

No one business is large or powerful enough to create major change in the external environ-
ment. These factors are generally uncontrollable, thus market managers are basically adapters
rather than agents of change. So it is vital for NLICL to take these factors into consideration
in every step of their decision –making process and day-to-day activities.

Demographic Forces

GENERAL ENVIRONMENT
Economic Client Technological
Forces
Forces

TASK ENVIRONMENT

Management Field Officer

NLICL

Sociocultural Global Forces

Forces

Competitors

Political and Legal Forces

28
  Marketing Strategies:

“A well-organized, precise and appropriate plan is sometimes very successful in transforming

a business into a very established and profitable one.”

Planning is very crucial for an organization as it gives them direction of where they are head-
ed for. It reduces uncertainty by forcing marketers to look ahead, by anticipating changes and
by considering the impact of change and by developing appropriate responses. Furthermore,
planning minimizes wastage, and can set standards in controlling.

NLICL is managed by developing the plans –

Plans:
 To become one of the market leaders in the Insurance industry.
 To gain goodwill.
 To expand its business domestically and internationally.
 To ensure long-term existence by being profitable, successful and sustainable.
 To make a worthwhile contribution to progress of the nation.

4.2 Core Values of NLICL

 Customer First Always:

Give first priority to customer needs. Look to build enduring relationships with customers -
internal and external. Differences should be communicated in the spirit of relationship build-
ing.

29
  Organization above Self:
We believe that individual, team and department actions will be driven by organization goals.

 Trust:
We believe that there cannot be teamwork without mutual trust. Trust is fundamental to our
business and will guide all internal and external interactions.

 High Standards:
We believe that excellence can be achieved only by setting benchmarks that challenge our
full potential as an organization and as individuals.

 Shared Ownership:
We believe that ownership of success or failure in achieving organizational or team goals is
shared by all.

 Spirit of Adventure:
Uncertainty is our business and we believe in continuous innovation and creativity to meet
challenges head-on.

 Respect for Diversity:

We believe that diversity is our strength and it needs to be nurtured. We recognize that team
members have varying backgrounds, competencies and ideas and constructive action results
only when opinions are aired and understood.

 Code of Conduct:
This code of conduct is based on the values of the company. The purpose is to ensure that all employ-
ees, managers and executives within National Life Insurance Company Limited, will live an act in
accordance with these values and principles. The code is designed to give a broad and clear under-
standing of the conduct expected from all our employees everywhere we do business. Green Delta
Insurance Company Limited is committed to conduct its business in an ethical, legal, and responsible
manner. Green Delta Insurance Company Limited, therefore, has established this Social Responsibil-
ity. Code of Conduct as an application and is committed to ensuring that this code is respected in all
its facilities, all over Bangladesh. Recognized standards as the Universal Declaration of Human
Rights (UDHR) or the International Labor Organization (ILO) conventions were used as references in
preparing this code. The principles there below refer to these standards.

 Legal Compliance:
All business activities of Green Delta Insurance Company Limited must conform to all appli-
cable national and international legal requirements. Green Delta Insurance Company Limited
shall also comply with applicable anti-bribery/ anti-corruption rules and regulations in all
their business activities.

 Advertisements
A basic question that marketers must answer as they begin to develop an advertising cam-
paign is “Whom are we trying to reach with our message.”The advertising target often in-
cludes everyone in the firms target market and thus the ability to communicate to a large
number of people at once is the major benefit of advertising

30
 4.3 Controlling Method of NLICL

Regardless of the negative connotation of the word "control", it must exist or there is no or-
ganization at all. In its most basic form, an organization is two or more people working to-
gether to reach a goal. Whether an organization is highly bureaucratic or changing and self-
organizing, the organization must exist for some reason, some purpose, some mission (im-
plicit or explicit) -- or it isn't an organization at all. The organization must have some goal.
Identifying this goal requires some form of planning, informal or formal. Reaching the goal
means identifying some strategies, formal or informal. These strategies are agreed upon by
members of the organization through some form of communication, formal or informal. Then
members set about to act in accordance with what they agreed to do. They may change their
minds, fine. But they need to recognize and acknowledge that they're changing their minds.
This form of ongoing communication to reach a goal, tracking activities toward the goal and
then subsequent decisions about what to do is the essence of management coordination. It
needs to exist in some manner - formal or informal. The following are rather typical methods
of coordination in organizations. They are used as means to communicate direction and guide
behaviors in that direction. The function of the following methods is not to "control", but ra-
ther to guide. If, from ongoing communications among management and employees, the di-
rection changes, then fine. The following methods are changed accordingly.

Note that many of the following methods are so common that we often don't think of them as
having anything to do with coordination at all. No matter what one calls the following meth-
ods -- coordination or control -- they're important to the success of any organization.

4.4 Economic Contribution of NLICL

National Life Insurance by the nature of their business are constantly receiving sums of mon-
ey in the form of premiums and much of this money will be required to be paid out in the
shape of claims. All such money they receive is not in fact required at a time and, therefore,
in one position of custodians of vast sums they are able to invest it for earning interest in the
capital market. The investment is usually made on government securities, mortgages, indus-
trial loans and shares, debentures etc. Like this way, Fareast life insurance contributes much
in the overall economic development of a country. One another side, Risk minimizes the
work ability of human. So, to get relax from this risk people take insurance against life risk,
that is called life insurance. When a man feel more confident he/she then can any work freely
that is viable for economic. One the other hand, people take life insurance to form a capital
for business venture, to provide some financial benefits for his dependents in case of his
premature death, to secure a capital sum at a particular time to start a business venture, to se-
cure a loan or mortgage, to provide for his children education or marriage expenses etc, that
are very important for our economy. By providing those financial support NLICL contributes
in our economy with a great excellence. Every year it pays huge amount of money to the
government as income tax and vat on due course.

31
 4.5 Social Responsibilities Performed by NLICL

To preserve Islamic values, the company arranged Ifter Mahfil during the holy Ramadan with
due solemnity in the Head Office, Divisional, Zonal Offices. To extend our co-operation to
the helpless and have-nots, the company has established National Life Insurance Foundation
by contributing from the Valuation Surplus and fund generated from the Sadaqa, donation
etc. I expect and hope that our valued shareholders will have magnimity and fellow feeling
and would do their best in helping the foundation through collective efforts.

32
CHAPTER: FIVE
FINANCIAL PERFORMANCE ANALYSIS

33
 5.1 Financial Analysis of NLICL

1. Total Assets:

total assets(TK in million )

40000 35458.4 36363.1
29298.1
30000 23824.7 24835.2

20000 total assets

Linear (total assets)
10000

0
2011 2012 2013 2014 2015

During the financial year 2012 the total assets of National Life Insurance Company Limited
was Tk.29298.1 million andTk.35458.4 million in financial year 2013. This amount reached
at tk.36363.1 million in the year 2015. So the graph of total assets is sloping upward. These
figures indicate that every year we are becoming fundamentally stronger and stronger. It is a
sign of good prospects of National life insurance com.ltd.

2. Investment income:

Investment income(TK in million )

15000
11828.1
10544.8
9495.4
10000 Investment income(in
7029.2
6111.1 million tk)
5000 Linear (Investment
income(in million tk))
0
2011 2012 2013 2014 2015

Investment income comes from interest on FDR, dividend on investments in various shares
and debentures of joint stock company .moreover since 2012 NLICL started investing idly
money to secondary capital market. Investment portfolio will increase in near future. Statis-
tics showing income from investment in 2014and2015 are Tk10554.8 million and 11828.1
million and indicates an increase of 22.9%.

34
3. Sources of premium income:

Source of premium income

(In percentage)
Outside
Bangladesh, 5%

In Bangladesh
Outside Bangladesh
In Bangladesh,
95%

National Life Insurance Company Limited also operates its insurance and reinsurance activi-
ties outside Bangladesh. For this reason the source of premium income for National Life In-
surance is divided into two 1) In Bangladesh and 2) outside Bangladesh. The corporation
earns only 5% of its total premium income from outside Bangladesh.

Source of premium income: direct premium and indirect premium:

7000
5816
6000

5000
4085.3 4042.5
3594.3 3792.7
4000
Direct premium
(in million tk)
3000
2189.2
1974.8
2000 1613.5 1659.9 Re-insurance
1419
premium (in
1000 million tk)

0
2011 2012 2013 2014 2015

The corporation has earned a gross premium of Tk. 141.90 crore, Tk. 161.35 crore, Tk.
165.99 crore, Tk. 197.48 crore & Tk, 218.92 crore respectively for the year 2008, 2009, 2010,
2011 & 2012. The premium income has increased by 13.71%, 2.88%, 18.96% & 10.86% re-
spectively for the year 2009, 2010, 2011 & 2012. The Corporation has been successfully
handling almost 100% reinsurance requirements of private insurance companies in spite of
fact that private companies have their option to seek reinsurance coverage of 50% with any
other national or foreign re-insurer. The reinsurance premium income from home & abroad is
Tk. 359.43 crore, Tk. 379.27 crore, Tk. 408.53 crore, Tk. 404.25 crore & Tk. 581.60 crore
respectively for the year 2008, 2009, 2010, 2011 & 2012. Thus it shows the better efficiency
the premium income of the insurance business.

35
4. Underwriting profit:

Underwriting profit (in million Tk)

Underwriting profit (in million Tk)

1344.3 1432.4
834.9 986.6
625.5

2011
2012
2013
2014
2015

The underwriting profit stood at Tk.1432.4 million in2015 as against Tk.1344.3 million in
2014, registering a decrease of 9.66 % from the previous year. Although the underwriting
profit has decreased, it is much higher than financial year 2011, 2012 and 2013. However the
main reason behind this is the unusual increase in claim payment.

5. Amount of claims paid:

Amount of claims paid by National life insurance (From 2011-2015)
Year Tk in million

2011 1543.3

2012 2533.3

2013 2656.66

2014 2343.2

2015 3221.9

Claims paid(Tk in million)

4000 3221.9
2533.3 2656.66 2343.2
1543.3
2000

0
2011 2012 2013 2014 2015

36
From the graph we said that, amount of claims paid by NLICL in the year 2014 was
Tk.2343.2 million which is turned into Tk.3221.9 million in the next year 2015.More claim
payment increases confidence in the mind of general people and clients about the authenticity
and transparency of insurance business in Bangladesh. It is also a good prospect of insurance
business in Bangladesh.

6. Net profit after tax:

Net profit after tax (TK in Million)

2500 2130.2
1980.3
2000 1620.2
1415.2
1500 1020.2 1130.4 Net profit after tax (TK in
830.2
1000 Million)
500
0
2009 2010 2011 2012 2013 2014 2015

The corporation has earned a net profit of Tk.2130.2 million during the year 2015 against
Tk.1980.3 million in 2014, showing an increase of 1.51% from the previous year. The in-
crease in profit is due to the increase in underwriting profit and other income, which indicates
the sounds financial base of the corporation.

7. Relationship between revenue, expenses and profit:

Revenue, Expense and Claims
We can see an overall financial view of National Life Insurance Company Limited at a
glance. By the passing of years NLICL‟s revenue has increased gradually and reached at
BDT 8863 million. At the same time its expense has also been increased. But the increase in
profit figure (BDT 18O3.7 million) is quite satisfactory. NLICL is generating its investment
income at a slow pace.
2011 2012 2013 2014 2015

(Million (Million (Million (Million (Million

TK) TK) TK) TK) TK)

Total Revenue 5823.7 6023 4171.3 6750.8 8863

Total expense 4842.1 5008 2916.1 4872.5 5595.7

Profit 773.7 1015 1255.2 1751.7 1803.7

Net claim 1340.3 1322.2 1513.39 1125.8 1641.07

Investment income 404.7 443.3 635.2 765.90 1002.64

37
 10000 8863
8000 6750.8
5823.7 6023 5595.7
6000 4842.1 5808 4872.5 Total expenditure (in million
4171.3 tk)
4000 2916.1 Total revenue (in million tk)
2000

0
2011 2012 2013 2014 2015

In 2011, the total expenditure of National life insurance company limited was TK 5823.7 mil-
lion. In 2012, it was TK 6023 million. It had been increased by TK 199.3 million.
In 2013, the total expenditure was slow than that of 2006. The total expenditure in 2014 was
TK6750.8 million and in 2015 TK 5595.7 million. The amount was gradually increased in
2014 and in 2015,the expenditure was decreased than that of 2014. Though every year the
total expenditure has been increased, the total revenue has also been increased. So the amount
of profit has also been increased.

8. NAV (Net Asset Value):

Net asset value (in million tk)

Net asset value (in million tk)

8657.2 10432.9
5231.6 6775.2 7321.5

2011 2012 2013 2014 2015

Net Asset Value (NAV) shows the difference between total asset value and total liabilities.
The NAV for the corporation in 2015 is Tk 10432.9 million against Tk.8657.2 million in
2014 having an increase of 31.53%. This indicates the financial soundness and solvency of
the corporation.

5.2 Ratio Analysis

Financial ratios are mathematical equations derived from information presenting on a compa-
ny’s financial statements. Every ratio measures a unique association that may have an impact
on other ratios. All financial ratios are used as indicators to reveal the financial health of the
company. Financial ratios are represented in percentage or decimal format, which allow com-
paring a company's ratios to its competitors. Company owners, stockholders, or potential in-
vestors should understand how to calculate key financial ratios and their importance in ana-
lyzing the financial pulse of a firm. In this paper, I have used some ratios for analyzing the
risk and profitability of NLICL.

38
Analysis of risk typically aims at detecting the underlying liquidity risk, solvency risk, and
financial operating risk of NLICL.

1. Liquidity Analysis:
Liquidity risk can best be described as the risk of short-term funding crisis. Unexpected
events, such as a large claim or a loss of confidence, or a legal crisis, can cause such funding
crisis. Liquidity is a pre-requisite for the survival of an enterprise. But liquidity is not as big a
concern with many life insurance companies as it is in other financial institutions for one
good reason: most of their policies are less liquid than their assets. Life insurance companies
are required to maintain their investment portfolio as per insurance law. The significant por-
tion of the investment portfolio is usually kept with different banks as fixed deposit rate
(FDR) under different maturity bucket which serves the purpose of liquidity.
In addition, the companies keep a considerable amount in saving term deposit (STD) and
current account.
For unique characteristics of life insurance, the liquidity ratio of other financial institutions is
generally not applicable. Hence, I have used the following formula for analyzing the liquidity
risk of life insurer, which has suggested by Credit Rating Agency of Bangladesh (CRAB).
𝐓𝐨𝐭𝐚𝐥 𝐚𝐬𝐬𝐞𝐭𝐬
Liquidity Ratio (LR)= 𝑻𝒐𝒕𝒂𝒍 𝑳𝒊𝒂𝒃𝒊𝒍𝒊𝒕𝒊𝒆𝒔

According to CRAB, the minimum requirement for the ratio of liquid assets to total liabilities
for life insurers is 60%. Usually a high liquid ratio indicates the lower the liquidity risk and
the lower the opportunity for profit. The liquidity ratio of life insurers has obtained from the
life insurers’ annual reports (see Appendix).

1. Short-term solvency measurement ratios:

Year 2011 2012 2013 2014 2015 Aver-
age
Ratios

Current ratio 1.95:1 1.99:1 1.97:1 1.83:1 2.21:1 2.01:1

Quick ratio 1.73:1 1.7:1 1.73:1 1.59:1 2.1:1 1.7:1

39
 2.5
2.21 2.1
1.95 1.99 1.97
2
1.73 1.7 1.73 1.83
1.59
1.5 Current ratio
Quick ratio
1
Linear (Current ratio)
0.5

0
2011 2012 2013 2014 2015

Liquidity ratios measure the firm’s ability to fulfill short-term commitments out of its liquid
assets. The most commonly used measures of liquidity are the current ratio, quick ratio. An
ideal current ratio is 2:1. Quick ratio measures the firm’s ability to meet short-term obliga-
tions from its most liquid assets without any difficulty. An ideal quick ratio or acid test ratio
is 1:1.Current ratio is a measure of the firm’s ability to raise funds to meet short-run obliga-
tions. NLICL is maintaining its current ratio very close to the standard for an average of
2.01:1.So NLICL has the current assets necessary to meet its current liabilities. On the other
hand SBC is maintaining high amount of quick assets for an average ratio of 1.8:1.it is be-
cause its business activity necessitates holding a very small amount of inventory.

2. Debt management efficiency analysis:

2011 2012 2013 2014 2015 Aver-
Year age

Ratios

Debt-equity ratio 1.95:1 1.62:1 1.44:1 1.57:1 1.30: 1.57:1

1

Debt to total asset ratio .66:1 .61:1 .59:1 .61:1 .56:1 .60:1

2.5
1.95 Debt-equity ratio
2
1.62 1.57
1.44
1.5 1.3 Debt to total asset ratio

1 Linear (Debt-equity ratio)

0.66 0.61 0.59 0.61 0.56
0.5
Linear (Debt to total asset
ratio)
0
2011 2012 2013 2014 2015

40
To judge the long term financial position of the firm, financial leverage ratios are calculated.
These ratios indicate mix of funds provided by owners and lenders. The long term financial
solvency of a firm can be measured by using the ratios; viz i) Debt to total asset ration ii)
Debt-to equity ratio. The average debt-equity ratio is 1.57:1 against the standard of 50:50.
This proves that NLICL is a highly geared Corporation. The average debt to total asset ratio
was 0.60 which was much higher than the standard norm of 0.35. The above analysis implies
that NLICL was more depended on outsiders’ fund to finance for expanding their insurance
business.

3. Asset management efficiency analysis:

Year 2011 2012 2013 2014 2015 Aver-
age
Ratios

Total asset turnover .27 .30 .26 .22 .30 .27

Fixed asset turnover 1.35 1.29 1.53 .76 1.09 1.20

Current asset turnover .36 .41 .38 .33 .47 .386

2
1.53 Total asset turnover
1.5 1.35 1.29
1.09 Fixed asset tunover
1 0.76
0.41 0.47 Current asset tunover
0.38
0.5 0.27 0.36 0.3 0.26 0.22
0.33 0.3
Linear (Total asset
0 turnover)
2011 2012 2013 2014 2015

Total assets turnover equals sales or net premium income divided by total assets. It reflects
how well the company’s assets are being used to generate sales or underwrite net premium.
Fixed assets turnover is computed by dividing sales i.e. net premium income by net fixed as-
sets. This ratio indicates how intensively the fixed assets of the firm are being used. Current
assets turnover equals sales or net premium income divided by current assets. The total asset
turnover was 0.27, 0.30, 0.26, 0.22 and 0.30 during the study period 2011 to 2015 respective-
ly and on an average it was 0.27. The low turnover ratio indicates to the under utilization of
resources. The average total asset turnover of 0.27 times denotes that NLICL generated a sale
of general insurance policy or underwrote a net premium of Tk 0.27 for one taka investment
in fixed and current asset together.

41
4. Profitability analysis:
Year 2011 2012 2013 2014 2015 Aver-
age
Ratios

Net profit margin 27.41 31.84 39.45 51% 35.2 36.9%

% % % %

Return on total asset 8.04% 10.20 11.20 12.31 11.7 10.71

% % % % %

Return on total equity 23.73 26.72 27.42 31.62 26.3 27.17

% % % % % %

60.00%
50.00% 51%

40.00% 39.45%
35.21% Net profit margin
30.00% 31.84% 31.62%
27.41% 26.72% 27.42% 26.38% Return on total equity
23.73%
20.00% Return on total asset
10.00% 10.20% 11.20% 12.31% 11.76%
8.04%
0.00%
2011 2012 2013 2014 2015

The net profit margin ratio, return on investment and return on equity ratios are the three
most acceptable profitability ratios in assessing financial performance of an enterprise. The
average net profit margin was 35.21% which was much higher than the standard norm of 5 to
10%. The average ROTA ratio was 11.76% which was consistent with the standard norm of
11% to 12%. And the average ROE ratio was 26.38% which was also much higher than the
standard norm of 10 to 15%. Therefore it seems from the ratios that NLICL is high profitable
institution.

5.3 Comparative Ratio Analysis (2011-2015)

1. Liquidity ratios:
A liquid asset is one that trades in an active market and hence can be quickly converted to
cash at the going market price ,and a firms “liquidity ratios “ deal with this question :Will the
firm be able to pay off its debts as they come due over the next year or so? Liquidity ratios
demonstrate a company's ability to pay its current obligations. In other words, they relate to
the availability of cash and other assets to cover accounts payable, short-term debt, and other
short term liabilities. All small businesses require a certain degree of liquidity in order to pay

42
their bills on time, though start-up and very young companies are often not very liquid. In
mature companies, low levels of liquidity can indicate poor management or a need for addi-
tional capital. Any company's liquidity may vary due to seasonality, the timing of sales, and
the state of the economy. But liquidity ratios can provide small business owners with useful
limits to help them regulate borrowing and spending. Some of the best-known measures of a
company's liquidity include:

Ratios Year 2008 2009 2010 2011 2012 Aver-

age
Name

1.A)Current NLICL 1.95: 1.99:1 1.97:1 1.83: 2.28: 2.01:1

ratio 1 1 1

PLICL 1.43: 1.49:1 1.32:1 1.50: 1.51: 1.45:1

1 1 1

GDLIC 7.66: 8.25:1 12.23: 8.87: 5.35: 8.47:1

1 1 1 1

SLICL 3.3:1 5.32:1 4.57:1 3.90: 4.55: 4.33:1

1 1

1.B)Quick NLICL 1.73: 1.78:1 1.73:1 1.59: 2.1:1 1.7:1

Ratio 1 1

PLICL 1.43: 1.49:1 1.32:1 1.50: 1.51: 1.45:1

1 1 1

GDLIC 7.66: 8.25:1 12.23 8.87: 5.35 8.47:1

1 :1 1 :1

SLICL 3.3:1 5.32:1 4.57:1 3.90: 4.55: 4.33:1

1 1

1. A) Current ratio:
 Current Assets/Current Liabilities
It measures the ability of an entity to pay its near-term obligations. "Current" usually is de-
fined as within one year. Though the ideal current ratio depends to some extent on the type of
business, a general rule of thumb is that it should be at least 2:1. A lower current ratio means
that the company may not be able to pay its bills on time, while a higher ratio means that the
company has money in cash or safe investments that could be put to better use in the busi-
ness. The current ratio is an indication of a firm's market liquidity and ability to meet credi-
tor's demands. If the current ratio is too high, then the company may not be efficiently using
its current assets or its short-term financing facilities. This may also indicate problems in
working capital management. Low values for the current or quick ratios (values less than 1)
indicate that a firm may have difficulty meeting current obligations. Low values, however, do

43
not indicate a critical problem. If an organization has good long-term prospects, it may be
able to borrow against those prospects to meet current obligations. Some types of businesses
usually operate with a current ratio less than one. For example, if inventory turns over much
more rapidly than the accounts payable become due, then the current ratio will be less than
one. This can allow a firm to operate with a low current ratio. If all other things were equal, a
creditor, who is expecting to be paid in the next 12 months, would consider a high current
ratio to be better than a low current ratio, because a high current ratio means that the compa-
ny is more likely to meet its liabilities which fall due in the next 12 months. One should view
the relation between the operation cycle period and the current ratio .Current ratio is a meas-
ure of liquidity of a company at a certain date. It must be analyzed in the context of the indus-
try the company primarily relates to. The underlying trend of the ratio must also be monitored
over a period of time. Generally, companies would aim to maintain a current ratio of at least
1 to ensure that the value of their current assets cover at least the amount of their short term
obligations. However, a current ratio of greater than 1 provides additional cushion against
unforeseeable contingencies that may arise in the short term.
Businesses must analyze their working capital requirements and the level of risk they are
willing to accept when determining the target current ratio for their organization. A current
ratio that is higher than industry standards may suggest inefficient use of the resources tied up
in working capital of the organization that may instead be put into more profitable uses else-
where.
14
12.23
12

10 8.87
8.25
7.66 NLICL
8

6 5.32 5.35 PLICL

4.57
3.9 4.55
4 3.31 GDLICL
1.97 2.01 1.99 1.85 2.3
2 1.51 SLICL
1.43 1.49 1.32 1.5
0
2011 2012 2013 2014 2015

From the graph, we can easily say that if the condition among four companies is considered
than NLICL’s condition is best among others. NLICL is keeping current asset which may be
in some cases below than the standard but still optimal because it is maintaining idle fund. If
it maintains huge amount of current asset it have to pay interest against it .so I think NLICL
strategy is correct. However the increasing trends of ratio suggest that NLICL is going to ac-
cept conservative working capital management approach. Also the condition of GDIC and
SLICL is not good because it is maintaining high amount of current asserts which otherwise
they can invest those current asset in somewhere else where it could generate more profit.

Recommendation: As NLICL’s position is better than other three companies, So NLICL

should maintain its position. However it must ensure that the profit it is making through hold-
ing lower amount of current asset must be greater than cost of holding that asset. It should
also ensure that the current asset is optimum to meet current liabilities.

44
1. B) Quick ratio:
 Quick Assets (cash, marketable securities, and receivables)/Current Liabilities
It provides a stricter definition of the company's ability to make payments on current obliga-
tions. Ideally, this ratio should be 1:1. If it is higher, the company may keep too much cash on
hand or have a poor collection program for accounts receivable. If it is lower, it may indicate
that the company relies too heavily on inventory to meet its obligations. Quick ratio is an in-
dicator of solvency of an entity and must be analyzed over a period of time and also in the
context of the industry the company operates in. Generally, companies should aim to main-
tain a quick ratio that provides sufficient leverage against liquidity risk given the level of pre-
dictability and volatility in a specific business sector among other considerations. The more
uncertain the business environment, the more likely that companies would maintain higher
quick ratios. Conversely, where cash flows are stable and predictable, companies would seek
to keep quick ratio at relatively lower levels. In any case, companies must achieve the right
balance between liquidity risk arising from a low quick ratio and the risk of loss resulting
from a high quick ratio. A quick ratio that is greater than industry average may suggest that
the company is investing too many resources in the working capital of the business which
may more profitably be used elsewhere.
If a company has too much spare cash, it may consider investing the surplus funds in new
ventures and in case company is out of investment options it may be prudent to return the ex-
cess funds to shareholders in the form of increased dividend payments. Acid test ratio which
is lower than the industry average may suggest that the company is taking too much risk by
not maintaining an appropriate buffer of liquid resources. Alternatively, a company may have
a lower quick ratio due to better credit terms with suppliers than the competitors.
When analyzing the quick ratio over several periods, it is important to take into account sea-
sonal variations in some industries which may cause the ratio to be traditionally higher or
lower at certain times of the year as seasonal businesses experience irregular bursts of activi-
ties leading to varying levels current assets and liabilities over time.

14
12.23
12

10 8.87
8.25 NLICL
7.66
8
PLICL
6 5.32 5.35
4.57 GDLICL
3.97 4.55
4 3.31 SLICL
1.73 1.78 1.73 2.1
1.59
2 1.43 1.49 1.32 1.5 1.51
0
2011 2012 2013 2014 2015

Here, we find that NLICL is holding almost double quick assets than the standard. Its quick
ratio is1.73,1.7,1.73,1.59,2.1 respectively for the year 2011,2012,2013,2014,2015. PLICL is
at the closest position to the standard. If we consider the condition of reliance we find that it
is in the worst position, because it is holding too much quick asset.

45
Recommendation: NLICL is investing too many resources in the working capital like
cash, marketable securities and receivables of the business which may more profitably be
used elsewhere.

2. Total asset turnover:

 Net Sales/Total Assets
It measures how effectively the firm is managing its assets that are a company's ability to use
assets to generate sales. This ratio is designed to answer this question: Does the total amount
of each type of asset as reported on the balance sheet seem reasonable, too high, or too low in
view of current and projected sales level? Although the ideal level for this ratio varies greatly,
a very low figure may mean that the company maintains too many assets or has not deployed
its assets well, whereas a high figure means that the assets have been used to produce good
sales numbers.
Year 2011 2012 2013 2014 2015 Average

Ratios Name

2.Total asset NLICL .27 .30 .26 .22 .30 .27

turnover
PLICL .11 .09 .07 .08 .08 .09

GDLIC .13 .12 .18 .07 .08 .16

SLICL .35 .36 .42 .35 .34 .36

0.45 0.42
0.4 0.36
0.35 0.35 0.34
0.35
0.3 0.3
0.3 0.27 0.26 NLICL
0.25 0.22 PLICL
0.2 0.18 GDLICL
0.15 0.13 0.12 SLICL
0.1 0.11 0.09 0.07 0.08 0.08 Linear (NLICL)
0.07 0.08
0.05
0
2011 2012 2013 2014 2015

After considering the scenario it can be said that among three companies SLICL has a very
good investment turnover ratio over the five year. Compared to other companies the NLICL
was in the second position in the perspective of investment turnover ratio. However the posi-
tive thing for the NLICL is that it is maintaining a good consistency of sales which is shown
through the linear. The worst condition is for reliance whose turnover is very low. The condi-
tion of GDLIC is not good in investment turnover ratio.

46
 Recommendation: NLICL is in better position yet it has the chance to improve its posi-
tion. It can be done by focusing on that whether it is using more assets than it is actually
needed. If doing so, it should take steps to reducing its use of assets less to produce high
amount of sales.

3. Debt management efficiency:

Leverage ratios look at the extent to which a company has depended upon borrowing to fi-
nance its operations. As a result, these ratios are reviewed closely by bankers and investors.
Most leverage ratios compare assets or net worth with liabilities. A high leverage ratio may
increase a company's exposure to risk and business downturns, but along with this higher risk
also comes the potential for higher returns. Some of the major measurements of leverage in-
clude:
Ratios Year 2011 2012 2013 2014 2015 Aver-
age
Name

3.A) Debt- NLICL 1.93:1 1.60:1 1.42: 1.55:1 1.28: 1.56:1

equity ratio 1 1

PLICL 1.13:1 .97:1 .31:1 .32:1 .38:1 .62:1

GDLIC .61:1 .60:1 .61:1 .74:1 .41:1 .59:1

SLICL 1.04:1 .72:1 .69:1 .7:1 .72:1 .77:1

3.B) Debt to NLICL .66:1 .61:1 .59:1 .61:1 .56:1 .61:1

total asset ratio
PLICL .53:1 .49:1 .23:1 .24:1 .27:1 .35:1

GDLIC .36:1 .33:1 .45:1 .42:1 .28:1 .37:1

SLICL .51:1 .42:1 .41:1 .41:1 .42:1 .43:1

3. A) Debt-equity ratio:
 Debt/Total Equity
It indicates the relative mix of the company's investor-supplied capital. A company is gener-
ally considered safer if it has a low debt to equity ratio—that is, a higher proportion of owner-
supplied capital—though a very low ratio can indicate excessive caution. In general, debt
should be between 50 and 80 percent of equity. A high debt/equity ratio generally means that
a company has been aggressive in financing its growth with debt. This can result in volatile
earnings as a result of the additional interest expense. If a lot of debt is used to finance in-
creased operations (high debt to equity), the company could potentially generate more earn-
ings than it would have without this outside financing. If this were to increase earnings by a
greater amount than the debt cost (interest), then the shareholders benefit as more earnings
are being spread among the same amount of shareholders. However, the cost of this debt fi-
nancing may outweigh the return that the company generates on the debt through investment
and business activities and become too much for the company to handle. This can lead to

47
bankruptcy, which would leave shareholders with nothing. Lower values of debt-to-equity
ratio are favorable indicating less risk. Higher debt-to-equity ratio is unfavorable because it
means that the business relies 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.

2.5

1.93
2
1.6 1.55 NLICL
1.42
1.5 1.28 PLICL
1.13 1.04
0.97 GDLICL
1 0.72 0.74 0.72
0.61 0.69 0.7 SLICL
0.6 0.61 0.41
0.5 0.31 0.32 0.38 Linear (NLICL)

0
2011 2012 2013 2014 2015

Here, we see that NLICL is in worst position in terms of debt-equity ratio. The average Debt-
Equity ratio was 1.58:1 against the standard norm of (a) 65:35 prescribed by Bangladesh
Shilpa Rin Sangstha. (b) 50:50 prescribed by the Controller of Capital Issues, Bangladesh.
This proves that NLICL is a highly geared Corporation. The ratio is higher which means that
claims of creditors are greater than those of owners and it introduces inflexibility in the firm’s
operations due to the increasing interference and pressure from creditors. The above analysis
implies that NLICL was more depended on outsiders’ fund to finance for expanding their in-
surance business. Here, the condition of Reliance is best because it has been able to manage
to lower the dependence on loan and for this reason its return on equity is also low. After
2011, the condition of GDLICL became good as the percentage reduced to 40.8%. The condi-
tion of SLICL is good because it has been able to maintain higher return on equity at a man-
ageable level of high debt financing. Lastly the conditions of the three companies besides
NLICL were not so bad as the percentage are below than 100%, which means, those compa-
nies had more equity financing than debt financing over the five years.

Recommendation: The cost of this debt financing may outweigh the return that the com-
pany generates on the debt through investment and business activities and become too much
for the company to handle. This can lead to bankruptcy. So the NLICL should focus on that
issue. It will be better to increase equity financing through increasing paid up capital to res-
cue from such risky condition. However it is positive that the amount of debt financing is on
decreasing trend.

48
3. B) Debt-total asset ratio:
 Debt/Total Assets
It measures the portion of a company's capital that is provided by borrowing. A debt ratio
greater than 1.0 means the company has negative net worth, and is technically bankrupt. This
ratio is similar, and can easily be converted to, the debt to equity ratio. A company's debt ra-
tio of a company offers a view at how the company is financed. The company could be fi-
nanced by primarily debt, primarily equity, or an equal combination of both. If a company
has a high debt ratio (above .5 or 50%), then it is often considered to be “highly leveraged"
(which means that most of its assets are financed through debt, not equity). Conversely, if a
company has a low debt ratio (below .5 or 50%), this indicates that most of their assets are
fully owned (financed through the firm's own equity, not debt). In some instances, a high debt
ratio indicates that a business could be in danger if their creditors were to suddenly insist on
the repayment of their loans. This is one reason why a lower debt ratio is usually preferable.
To find a comfortable debt ratio, companies should compare themselves to their industry av-
erage or direct competitors. The higher the ratio, the greater risk will be associated with the
firm's operation. In addition, high debt to assets ratio may indicate low borrowing capacity of
a firm, which in turn will lower the firm's financial flexibility. Like all financial ratios, a
company's debt ratio should be compared with their industry average or other competing
firms.

0.7 0.64
0.59 0.57 0.59
0.6 0.53 0.51 0.54
0.49
0.5 0.45 NLICL
0.42 0.42 0.42
0.41 0.41
0.4 0.36 PLICL
0.33 0.28
0.3 0.24 0.27 GDLICL
0.23
SLICL
0.2
Linear (NLICL)
0.1

0
2011 2012 2013 2014 2015

From the graph analysis, The average debt to total asset ratio of NLICL is 0.59 which was
much higher than the standard norm of 0.35. It explains that the NLICL carried higher debt
and had been incurring a heavy burden of interest and risk during 2011 to 2015. The condi-
tion of GDLICL is the best as the debt ratio is below 50% and near to 35% over the five
year.SLICL is maintaining somewhat high debt financing although it is decreasing. Finally
we can say that except NLICL the three others are maintaining favorable debt ratio.

Recommendation: NLICL should improve that position because the higher the ratio, the
greater risk will be associated with the firm's operation. In addition, high debt to assets ratio
may indicate low borrowing capacity of a firm, which in turn will lower the firm's financial
flexibility.

49
4. Profitability ratios:
Profitability is the net result of a number of policies and decisions. The ratios examined thus
far provide useful clues as to the effectiveness of a firms operation, but profitability ratios go
on to show the combined effects of liquidity, asset management, and debt on operating result.
Profitability ratios provide information about management's performance in using the re-
sources of the small business. Many entrepreneurs decide to start their own businesses in or-
der to earn a better return on their money than would be available through a bank or other
low-risk investments. If profitability ratios demonstrate that this is not occurring—
particularly once a small business has moved beyond the start-up phase—then entrepreneurs
for whom a return on their money is the foremost concern may wish to sell the business and
reinvest their money elsewhere. However, it is important to note that many factors can influ-
ence profitability ratios, including changes in price, volume, or expenses, as well as the pur-
chase of assets or the borrowing of money. Some specific profitability ratios follow, along
with the means of calculating them and their meaning to a small business owner or manager.
The net profit margin ratio, return on investment and return on equity ratios are the three
most acceptable profitability ratios in assessing financial performance of an enterprise. The
following table shows the profitability position of the selected enterprise.
Ratios Year 2011 2012 2013 2014 2015 Average

Name

4.a)Net profit NLICL 25.41% 29.84% 38.45 49% 33.21 35%

margin % %

PLICL 69% 69% 69% 62% 58% 65.4%

GDLICL 62% 74% 73% 43% 50% 60.4%

SLICL 14% 18% 20% 20% 24% 19.2%

4.b)Return NLICL 6.04% 8.20% 9.20% 10.31 9.76% 9.7%

on total asset %

PLICL 7.35% 6.37% 4.73% 4.86% 4.62% 5.59%

GDLICL 7.98% 8.84% 13.8% 3.13% 4.17% 7.62%

SLICL 4.78% 6.4% 8.26% 6.88% 8.25% 6.91%

4.c)Return on NLICL 21.73% 24.72% 25.42 29.62 24.38 25.17%

total equity % % %

PLICL 15.68% 12.57% 6.20% 6.43% 6.38% 9.45%

GDLICL 12.92% 14.03% 18.2% 5.44% 5.87% 11.29%

SLICL 9.74% 11.04% 13.98 11.71 14.2% 12.13%

% %

50
4. A) Net profit margin:
 Net Income / Total Sales
In general terms, net profitability shows the effectiveness of management. Though the opti-
mal level depends on the type of business, the ratios can be compared for firms in the same
industry. Since, profit is the ultimate objective of the firm, poor performance here indicates a
basic failure.

80.00% 73%
69% 74%
69% 69%
70.00% 62% 62%
58%
60.00%
49% 50% NLICL
50.00% 43% PLICL
37.45%
40.00% 33.21%
29.84% GDLICL
30.00% 25.41% 24% SLICL
18% 20% 20%
20.00% 14% Linear (NLICL)
10.00%
0.00%
2011 2012 2013 2014 2015

From 2011 to2015 NLICL had an increasing trend of net profitability from 25.41% in 2011 to
49% in 2014. After that in 2015 it falls to 33.21% .In comparison to the GDLICL and
PLICL,NLICL’s net profitability is far below. The performance of PLICL was far better than
other two companies if we consider the consistency and the higher profitability together. On
the other hand, the condition of SLICL was not good at all as it had the lowest net profitabil-
ity ratio than other two companies.

Recommendation: the net profitability of NLICL is not bad but it has chance to increase
profitability further. I think it can do this by limiting the amount of interest expenses.

4. B) Return on total asset:

 Net Income / Total Asset
Return on assets indicates how effectively the company is deploying its assets. A very low
return on asset, or ROA, usually indicates inefficient management, whereas a high ROA
means efficient management. However, this ratio can be distorted by depreciation or any un-
usual expenses. ROA tells you what earnings were generated from invested capital (assets).
ROA for public companies can vary substantially and will be highly dependent on the indus-
try. This is why when using ROA as a comparative measure, it is best to compare it against a
company's previous ROA Numbers or the ROA of a similar company. The assets of the com-
pany are comprised of both debt and equity. Both of these types of financing are used to fund
the operations of the company. The ROA figure gives investors an idea of how effectively the
company is converting the money it has to invest into net income. The higher the ROA num-
ber, the better, because the company is earning more money on less investment.

51
 16.00%
13.80%
14.00%
12.00%
10.31%
9.76% NLICL
10.00% 9.20%
8.20%8.84% 8.26% 8.25% PLICL
7.98%
8.00% 6.88%
6.04% 6.40% GDLICL
7.35% 6.37%
6.00% 4.73% 4.86% 4.62%
4.78% SLICL
4.00% 3.13% 4.17%
Linear (NLICL)
2.00%
0.00%
2011 2012 2013 2014 2015

From the graph, NLICL is maintaining a high return on total asset averaging 9.7% over the
five years .this high return result from the corporation high basic earning power. Besides
NLICL, SLICL is doing well in first 3 years. GDLICL has higher ROA than PLICL and
SLICL. In 2014 GDLIC’s has drastically decreased from 13.5% to 3.1%. Again in 2015 it
was increased to 4.2%. However, PLICL has increased from year 2013 to 2014 and again it
has a decreased trend from year 2014 to 2015. Also, in 2014 the ROA ratio of SLICL is de-
creased from 8.3% to 6.9% and in 2015 it was increased to 8.3%.

Recommendation: NLICL should take necessary measures to maintain and further in-
crease this profitability.

4. C) Return on total equity:

 Net Income/Owners' Equity
It indicates how well the company is utilizing its equity investment. Due to leverage, this
measure will generally be higher than return on assets. ROI is considered to be one of the best
indicators of profitability. It is also a good figure to compare against competitors or an indus-
try average. Experts suggest that companies usually need at least 10-14 percent ROI in order
to fund future growth. If this ratio is too low, it can indicate poor management performance
or a highly conservative business approach. On the other hand, a high ROI can mean that
management is doing a good job, or that the firm is undercapitalized.

52
 35.00%
29.62%
30.00%
24.72% 25.42% 24.68%
25.00% 21.73% NLICL
20.00% 18.20% PLICL
15.68%
12.92% 14.03% 13.98% 14.20%
15.00% 12.57%11.04% 11.71% GDLICL
9.74%
10.00% 6.20% 6.43% 6.38% SLICL
5.44% 5.87%
5.00% Linear (NLICL)
0.00%
2011 2012 2013 2014 2015

Here, NLICL is the best in terms return on equity. It has been able to generate such higher
profitability because it uses huge amount of debt financing in comparison to equity financing.
Yet the rate decreased in 2015 to 24.38% from 29.62% in 2014, I think it can maintain the
situation. SLICL also had an increasing figure.
On the other hand, PLICL faced a bad situation because it had a decreasing rate. In the year
2014, SLICL and GDLICL’s ratio had been decreased which is a negative side. However in
the year 2015 those companies ratio had been slightly increased. On the other hand, in 2014
the PLICL’s ROI had been increased little bit and in 2015 it was constant.

Recommendation: So we can say that NLICL has proved its Excellencies in terms of
profitability. As it is using high debt, it is facing lower cost of capital. I will suggest NLICL
for maintaining this operational efficiency to keep up this profitability and maintain asset
management efficiency to generate profit covering the cost of debt.

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 CHAPER: SIX
FINDINGS, RECOMMENDATIONS & CON-
CLUDING REMARKS

54
 6.1 Findings

During the internship program I have found out the following findings from my study:
1. National Life Insurance Co. Ltd is the highest bonus declaring insurance company in
Bangladesh. In case of whole life insurance, they give yearly bonus Taka 90 for each one
thousand Taka if the maturity period is 20 years or more. In case of other policy, if the ma-
turity period is 20 years, then they give yearly bonus Tk70 for one thousand Tk each. If the
maturity period is less than 20 years then they give yearly bonus Tk50 for Tk one thousand
each.
2. The company highly encouraged to their agent or field worker to collect policy from field
level. They give attractive commission and all the time they innovate different strategy to
motivate the agent of the company.
3. The underwriter of the company are well trained because their amount of death claim is
very low. When they are taking policy, they examine all the medical report and family back-
ground very consciously. In 2015, their total premium is Tk 4069.20 million where their total
amount of death claim is Tk 76.74 million which is very low.
4. NLICL is a highly geared organization. The average debt-equity ratio and debt to total as-
set ratio are 1.55:1 and .59:1 respectively for the period from 2011 to 2015.
5. NLICL has a sound short-term solvency. For the period from 2011 to 2015 it has a average
current ratio of 2.01:1.
6. NLICL is a highly profitable organization. The average net profit margin for the period
from 2011 to 2015 was 35% which was much higher than the standard norm of 5 to 10%.
7. Though company earns enough profit but their salary range is not well structured. Most of
the employees are not satisfied with their salary.
8. Some of the employee is not co-operative with their customer.
9. It is becoming financially strong as its total asset and NPV is increasing year by year.
10. NLICL is suffering from huge management expenses and most of the personnel are not as
much experienced and skilled to operate insurance activities in proper way.
11. No use of latest technology and permanent IT specialist.

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 6.2 Recommendations

As a student of BBA it is very difficult job for me to give suggestions to National Life Insur-
ance Company limited to improve the efficiency of insurance business in Bangladesh. How-
ever as per my observation, I think that the following aspect should be taken under considera-
tion which ultimately helps NLICL to be efficient in insurance business:
1. The company should strict their management and personnel so that they give prompt ser-
vices to their customers cordially. In case of financial service providing organization, cus-
tomer satisfaction is the main goals of the organization. If customers are not satisfied with the
company then they can go to another organization.
2. The company should going to fully automation in their operation. In the age of modern sci-
ence most of the organizations are automated in their operation. Company should perform
their all task by computerized. By this way they can give services to their customers very fast.
3. The company should expand their salary range. Without satisfaction of the employees the
organization can not run their business properly. Because,if employees are dissatisfied, they
do not give prompt services to their customers and organization itself which will hamper the
daily operation of the company.
4. The policy holders are very much worried about the settlement of claims. Ordinary people
also consider it main constraint. Therefore, instance companies should settle the claims as
quickly as possible to create a healthy public image. For this purpose the claim settlement
procedure can be simplified and the insurers can provide proper written guidelines of claim
settlement to the policyholders. IDRA can also fixed a specific time not more than one month
to the insurance companies to settle their claim if required documents are submitted properly
by the insured.
5. “Employee Recruitment Process”- should be done in a fare process so that appropriate and
talented employees are selected through the recruitment process and increase the productivity
and quality of the service.
6. NLICL is a highly geared organization. So it should decrease dependence on debt by increasing
paid-up equity capital.

7. The pricing rules should be relaxed and made less rigid so that the companies can exercise some
autonomy. The Government should allow the insurance companies to quote different premium rates
within a specialized span.

8. NLICL should control their management expenses.

9. To ensure maximum profitability, appropriate cost accounting system should be set up in NLICL.
10. NLICL should ensure proper utilization of its resources through adopting appropriate strategy.

56
 6.3 CONCLUDING REMARKS

National Life insurance Co. Ltd still regarded as a reliable insurance company and the grow-
ing number of its customers indicates its acceptance among clients. It is very common statis-
tical saying that it is 5 times costly to get a new customer than retains the customer. That’
why NLICL always tries to increase their customer by providing different types of policy.
Since NLICL has been able to increase the number of policyholders, it now should take care
of the matter of providing quality of services. The various system of taking policy and getting
claims for customer services are a positive move towards greater quality service. But the
company should overcome the lack of internal co-ordination between the departments. To
keep up the service quality, the service providers need regular motivations. The customers
should also be enlightened regarding the service of policy and more advertisement is must to
boot the company’s reputation. Now-a-days, insurance companies are increases and they pro-
vide different types of product and provide better customer services. To exist in the large in-
surance business, National Life insurance Co. Ltd. should emphasize on serving customers
effectively and efficiently that helps to achieve the organizational goal.

57
CHAPTER: SEVEN
REFERENCE & APPENDIX

58
7.1 Insurance Companies in Bangladesh
According to Bangladesh Bank, there are 75 private & 2 public insurance companies in
Bangladesh—

LIST OF THE INSURANCE COMPANIES IN PUBLIC SECTOR

1. Sadharan Bima Corporation(Gen. Ins)
2. Jiban Bima Corporation (Life Ins.)

LIST OF LIFE INSURANCE COMPANIES

1. American Life Insurance Company (Foreign Company)

2. Baira Life Insurance Company Ltd.
3. Delta Life Insurance Company Ltd.
4. Farest Islami Life Insurance Co. Ltd.
5. Golden Life Insurance Ltd.
6. Homeland Life Insurance Company Ltd.
7. Meghna Life Insurance Company Ltd.
8. National Life Insurance Company Ltd.
9. Padma Islami Life Insurance Company Ltd.
10. Popular Life Insurance Company Ltd.
11. Pragati Life Insurance Ltd.
12. Prime Islami Life Insurance Company Ltd.
13. Progressive Life Insurance Company Ltd.
14. Rupali Life Insurance Company Ltd.
15. Sandhani Life Insurance Company Ltd.
16. Sunflower Life Insurance Company Ltd.
17. Sunlife Insurance Company Ltd.
18. Zenith Islami Life Insurance Ltd.
19. Mercantile Islami Life Insurance Ltd.
20. NRB Global Life Insurance Company Ltd.
21. Guardian Life Insurance Ltd.
22. Chartered Life Insurance Company Ltd.
23. Best Life Insurance Company Ltd.
24. Protective Islami Life Insurance Co. Ltd.
25. Sonali Life Insurance Co. Ltd.
26. Sawdesh Life Insurance Co. Ltd.
27. Diamond Life Insurance Co. Ltd.
28. Alpha Islami Life Insurance Ltd.
29. Trust Islami Life Insurance Co. Ltd.
30. Jamuna Life Insurance Ltd.

LIST OF NON-LIFE INSURANCE COMPANIES

1. Agrani Insurance Company Ltd

2. Asia Insurance Ltd.
3. Asia Pacific Gen Insurance Co. Ltd.
4. Bangladesh Co-operatives Ins. Ltd.
5. Bangladesh General Insurance Co. Ltd.
6. Bangladesh National Insurance Co.Ltd.
59
7. Central Insurance Company Ltd.
8. City Gen. Insurance Company Ltd.
9. Continental Insurance Ltd.
10. Crystal Insurance Company Ltd.
11. Desh Gen. Insurance Company Ltd.
12. Eastern Insurance Company Ltd.
13. Eastland Insurance Company Ltd.
14. Express Insurance Ltd.
15. Federal Insurance Company Ltd.
16. Global Insurance Ltd.
17. Green Delta Insurance Co. Ltd.
18. Islami Commercial Insurance Co. Ltd.
19. Islami Insurance Bangladesh Ltd.
20. Janata Insurance Company Ltd.
21. Karnaphuli Insurance Company Ltd.
22. Meghna Insurance Company Ltd.
23. Mercantile Insurance Company Ltd.
24. Nitol Insurance Company Ltd.
25. Northern Gen.Insurance Company Ltd.
26. Peoples Insurance Company Ltd.
27. Phonix Insurance Company Ltd.
28. Pioneer Insurance Company Ltd.
29. Pragati Insurance Ltd.
30. Pramount Insurance Company Ltd.
31. Prime Insurance Company Ltd.
32. Provati Insurance Company Ltd.
33. Purabi Gen Insurance Company Ltd.
34. Reliance Insurance Ltd.
35. Republic Insurance Company Ltd.
36. Rupali Insurance Company Ltd.
37. Sonar Bangla Insurance Company Ltd.
38. South Asia Insurance Company Ltd.
39. Standard Insurance Ltd.
40. Takaful Islami Insurance Ltd.
41. Dhaka Insurance Ltd.
42. Union Insurance Company Ltd.
43. United Insurance Company Ltd.
44. Sena Kalyan Insurance Company Ltd.
45. Sikder Insurance Company Ltd.

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7.2 REFERENCES
BOOKS & JOURNALS
I. Mishra, M. N., & Mishra, S. B., (2012). Insurance Principles & Practice. India: S.
Chand Publishers & Distributors
II. Bringham, Eugene F., & Ehrhardt, M.C., (2012). Financial Management. New York:
Thomson corporation
III. Ambrose, J.M., & Seward J.A., (1988). Best’s Ratings, Financial Ratios and Prior
Probabilities in Insolvency Prediction. The Journal of Risk and Insurance, Vol.55,
No.2, P. 229-244

WEBSITES
I. List of insurance in Bangladesh. Retrieved from http://www.idra.org.bd/idra-org
II. Information on Financial Ratios. From http://www.inc.com/encyclopedia/financial ra-
tios.html
III. Definition of Insurance. From http://www.investopedia.com
IV. History of insurance in Bangladesh. From http://en.wikipedia.org/wiki/Inurance

Magazines and Reports

I. Annual Report (2011 to 2015), National Life Insurance Company Limited
II. Annual Report (2011 to 2015), Green Delta Life Insurance Company Limited
III. Annual Report (2011 to 2015), Sun Life Insurance Company Limited
IV. Annual Report (2011 to 2015), Popular Life Insurance Company Limited
V. Data Collect from Insurance Development and Regulatory Authority (IDRA)

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