Life Insurer’s Profit Surge Amid High Interest Yield and Bullish Secondary Market

Kathmandu: The bullish stock market and high liquidity crunch have resulted in a profit surge for all life insurers in the second quarter of the current financial year 2079-80. According to the unaudited quarterly financial statements of life insurers, the industry’s net profit surged by 72.51 percent in Q2 compared to the same period of the last financial year 2078-79.

All 19 life insurers have earned a total of Rs. Rs. 3.37 billion net profits by the end of the second quarter in the current FY. The net profit was Rs. 1.95 billion in the same period of last FY 2078-79.

The profit declined last year amid a bearish stock market which resulted in a high volume of provisioning for a possible loss in the investments made in the secondary market. An insurer must make provisioning for possible loss if the market price of a stock falls down the purchase price. At present, the stock market is in a bullish trend so the insurers have booked profit either by selling their stocks or revoking the provisioning.

On the other hand, life insurers have taken huge advantage of double digits interest rates offered by the bank, and financial institutions (BFIs). Life insurers have a huge amount of money in their life fund. The total investment of life insurers was above Rs. 5.51 trillion by the end of the first quarter of the current financial year. The benefits of higher interest rates may not continue for long since BFIs have already announced decreased interest rates for term deposits.

Nepal Life earned a profit of  Rs. 440.1 million in Q2 against Rs. 130.4 million net profits of Q2 of last FY 78-79. Sun Nepal Life made the highest growth of 340 percent in net profit. It earned Rs. 355.9 million during the review period. During the same period last FY, it was only Rs. 80 million.

Prime Life Insurance made the lowest growth in net profit. Its profit increased by 0.26 percent.

The net profits of life insurers may change after actuarial valuation.

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