investment

Green Delta Insurance is expected to make a turnaround as it takes over Sunlife

Sunlife Insurance has been sold to non-life insurance company Green Delta Insurance as the former has failed to stem mismanagement and made investments in immovable assets with no return since its 2013 listing.

As the income flow dried up and the burden of unsettled claims piled up over the years, the owners of Sunlife – Zahid Maleque, MP and health minister of the immediate past government, and his family members — offloaded their entire holdings, which was equivalent to more than 35 per cent share of the company, to Green Delta in December 2023.

An analysis of the FE dug up anomalies in the Sunlife’s investment landscape and a lack of transparency in cost management. The correspondent even found financial reports missing for the years before the floating of the IPO [initial public offering] and for several years after the listing, including 2022.

The financial data available, however, cast a light on what went wrong in the business.

While the industry of life insurance had an average 6 per cent stock investment in 2015, Sunlife’s exposure to the volatile market was 16 per cent. And assets in the form of risk-free high return Treasury bonds accounted for 47 per cent of total investments of the industry in 2015, while it was just 22 per cent in the case of Sunlife.

A wide gap is visible in investment in fixed deposits too. For the industry, fixed deposits took up a pie of 34 per cent of all investments but Sunlife had only 16 per cent assets in fixed deposits deemed to be secure investment instrument.

Sunlife’s presence in stocks, Treasury bonds, and fixed deposits together constituted 54 per cent of its overall investments in 2015. That was reduced to 29 per cent in 2021, with 1 per cent in govt debt securities and 20 per cent in fixed deposits, as per the latest data available on the company website.

The larger chunk of the life insurance company’s fund had been diverted to land and flats by 2021, from where it hardly received any return.

A former official of the company, who does not want to be named, told the FE that the business had gone downhill because of the owners’ meddling with the management, irrecoverable losses in stocks, and nepotism.

The outcome was a steep decline in investment income from Tk 0.21 billion to Tk 0.06 billion between 2015 and 2021. On the other hand, the industry’s income rose from Tk 25 billion to Tk 29 billion during the period.

Around the same time, the Sunlife’s cost of management was 50 per cent to 100 per cent higher than the industry’s. For example, in 2021 the industry spent Tk 32 in management out of Tk 100 earned in gross premium, while Sunlife’s management expenditure was Tk 57.

With a big share of the gross premium spent on management and dwindling investment return, Sunlife’s expenses began surpassing its earnings in 2016. The scenario has never improved.

In 2021, the life insurance company paid Tk 145 on management and claim settlement for every Tk 100 earned in gross premium and return from investments.

Why did Green Delta buy rundown Sunlife?

“When life insurance companies earn less than what they have to pay, they are in trouble. Big enterprises, such as MetLife, can handle such a situation but small companies cannot,” said Chief Executive Officer of Chartered Life Insurance S M Ziaul Hoque.

“Green delta Insurance has an innovative management team. They may be able to manage Sunlife better than how it was managed before,” he added.

Green Delta had been looking for a way into the business of life insurance as the sector has high potential than the non-life insurance sector.

In 2021, the total premium received by non-life insurance companies amounted to Tk 46 billion whereas life insurance companies draw Tk 114 billion.

Sheikh Kabir Hossain, president of the Bangladesh Insurance Association, said, “Life insurance companies can do better business than non-life insurance companies, which is why, maybe, Green Delta wanted to purchase Sunlife Insurance.”

Green Delta’s Managing Director Farzanah Chowdhury had been contacted repeatedly by phone for comments but she did not respond until the report was filed around 9:00pm on Monday.

Sunlife Insurance Managing Director Muhammad Nurul Islam also did not respond to SMSs and phone calls by the FE correspondent.

Meanwhile, clients of Sunlife have been complaining against the company for non-settlement of claims.

Sheikh Kabir Hossain, president of the Insurance Association, said, “I have got many letters from clients of Sunlife that they are not paid back even after the maturity [of the policies purchased]. I have forwarded those letters to IDRA [the Insurance Development and Regulatory Authority].”

He said he had also communicated the matter to the Sunlife board before the ownership transfer but to no avail.

According to the IDRA, Sunlife could settle only 55 per cent of the claims made in 2021.

source: thefinancialexpress.com.bd

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