SONAR BANGLA INSURANCE LIMITED

Financial Statement Analysis

Report onFinancial Statement Analysis of Sonar Bangla

Insurance Limited

Prepared for:Quazi Sagota Samina

Senior Lecturer,Department of Business Administration,

East West University, Dhaka.

Prepared by:Name ID

Arafat Rauf 2009-2-10-345Md. Rezaul Karim 2009-1-10-195

A S M Rakib-Ul-Hassan 2009-2-10-190

FIN 410Section: 2

Summer: 2011

Date of Submission: 30th July 2012

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30th July, 2012

Quazi Sagota SaminaSenior LecturerDepartment of Business AdministrationEast West University43, Mohakhali C/A,Dhaka – 1212

Subject: Submission of Report on Sonar Bangla Insurance Ltd.

Dear Madam,

We have prepared our project report on financial statement analysis, and our assigned company

was Sonar Bangla Insurance ltd.

It was an energizing experience throughout the semester and preparing this report further

enhanced our insight about insurance companies. In very sphere of our report we tried our best to

make good combination of our learning from the Risk Management and insurance course. We

have concentrated our best effort to achieve the objective of the report and hope that our

endeavor will serve the purpose. We believe that the knowledge and experience we have

gathered during the Risk Management and insurance course will enormously help us in our

future professional life.

We hope that this report fulfils your requirements and your feedback will help us in our entire

life, we will be obliged if you kindly approve this effort.

Sincerely,

Arafat Rauf A S M Rakib-Ul-Hassan

ID # 2009–2–10–345 ID # 2009-2-10-190

Md. Rezaul Karim

ID # 2009-1-10-195

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Acknowledgement

First, we would like to express our gratitude to Almighty Allah for giving us the

strength to complete the report within the stipulated time.

We are deeply indebted to our course instructor Quazi Sagota Samina, Senior

Lecturer, East West University for her guidance to prepare and to complete this

report. We would like to specially thanks for her patience and valuable time for

clearing thoughts and doubts regarding the report.

Last but not least, we like to convey our fellow classmates who always gave us

good advice, suggestions, inspiration and support.

Executive Summary

The report is enti t led “Financial Statement analysis of Sonar Bangla Insurance

Ltd.”

I t starts with the introductory part of this report including objective, scope,

l imitation and methodology of the study.

At first a short description of Sonar Bangla Insurance Ltd. has been discussed

consist ing with the company profile, background of the company, mission

vision, objective of the company, management and board of directors,

organogram of the company, etc information of and about the company.

Then company posit ion and capital structure of the company has been given as

this report is on financial statement analysis. Then their product offering has

been discussed that is what type of policy they provide to and sell to customer.

Then the ratio analysis of their f inancial statement is given. Different types of

ratio analysis have been done. Their importance and the meaning of the ratio is

also been discussed. What is the ratio for Sonar Bangla Insurance l td. for year

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2011 & 2010 has been calculated and based on comparison of two years data a

conclusion has been drawn.

Table of Content

Introduction page 6

Origin of the report 6

Objective of the study 6

Scope of the study 6

Methodology of the study 7

Limitation of the study 7

Findings and Analysis 8

Company profile 8

Executive Committee 9

Background 10

Mission & vision 11

Objective 12

Organogram 13

Company position 14

Board committee 15

Capital Structure 16

Product Offering 17

Other information 19

Ratio Analysis 19-25

Reference 26

AttachmentBalance Sheet

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Introduction

Origin of the report:

This report is prepared with respect of three month course on Risk Management & Insurance.

We are assigned to prepare a term paper on “Financial Statement Analysis of Sonar Bangla

Insurance ltd”, by our honorable course instructor Quazi Sagota Samina. Our task was to make

a report on company’s overall information of business that cover all the important aspect of

insurance and ratio analysis of the last two year financial report of Sonar Bangla Insurance ltd.

Objective of the Study:

This report has been prepared having a considerable number of objectives in front of us. Some of

the objective can be mentioned as,

To apply our knowledge, that we gathered from “Risk Management & Insurance” course,

practically.

To provide an overview of “Sonar Bangla Insurance ltd”.

To measure the important ratio of Sonar Bangla Insurance ltd

To determine the importance of those ratio for the company.

Scope of the Study:

From this report we learnt many things about insurance companies and especially about Sonar

Bangla Insurance ltd. It is one of the renowned insurance company of Bangladesh. By analyzing

it we come to know about their current business strategies, their business success and also about

the financial ability and many more other related information. We also come to know about the

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financial market position of the organization through ratio analysis. As a student of finance it is

very much essential to know about the ratio analysis. Book knowledge is not enough to

understand one company’s financial performance. For that reason we analyse thoroughly the

company to gather real life financial knowledge.

Methodology of the Study:

We have used both secondary data to conduct the study. The sources are:

Secondary sources:

Secondary information was collected from the books and the web site of Sonar Bangla Insurance ltd. We have collected much of the information through the internet and those are mentioned in the reference page.

Limitation of the Study

Although we have tried our best to make this term paper perfect but there were some limitations that obstructed us from doing so. We have faced some problems while preparing this report. Some of the limitations encountered while making this report are as follows:

Collecting information/data was little bit tough.

As the annual report of insurance company is different with the typical company’s, find out the exact data from the report was very much difficult.

It was difficult to arrange a suitable time for all members.

There was also lack of experience which made limitations in the report

We took information from their different reports & publications. So, reports may vary from time.

We also couldn’t explain everything in details as there was limitation of time.

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Findings and Analysis

Sonar Bangla Insurance LimitedSonar Bangla Insurance Limited engages in the provision of insurance products. The company

offers fire insurance for industrial all risks, consequential loss, dwelling, house and contents, and

hotel combined; marine cargo insurance comprising steamer or powered vessel, rail/lorry/truck,

inland rail or road conveyance, inland cargoes, and air cargo insurance; and motor insurance for

commercial vehicles, private vehicles, and motor cycles/scooters. It also provides marine hull

insurance, including engineering, machinery, and electronic equipment insurance, as well as

insurance for deterioration of stock, boiler and pressure vessels, erection all risks, contractor's all

risks, and consequential loss; and miscellaneous/accident insurance, which include burglary and

house breaking, cash in safe, cash in transit, cash on counter, people personal accident,

workmen's compensation, business interruption, overseas med claim and holiday, study and

employment, fidelity guarantee, health, personal accident, travel, public liability, and

professional liability insurance. The company was incorporated in 2000 and is based in Dhaka,

Bangladesh.

Company Profile for Sonar Bangla Insurance Ltd

Sonar Bangla Insurance Ltd. is an insurance company that offers a wide range of property and

casualty insurance products and services. The Company underwrites marine, fire, and accident

insurance.

Contact Information:Sonar Bangla Insurance Ltd

Address of the Company: Address:  Paramount Heights(14th floor), 65/2/1, Box Culvert Road, Paltan,

Dhaka-1000   Contact Phone: (8802) 7170453-4, 9571402   Fax: 88-02-9569164   E-mail: sbi222@yahoo.com, sonarbanglains@yaWeb Address: http://sonarbanglains.com

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Key Executive of Sonar Bangla Insurance Ltd.

Sheikh Kabir Hossain Chairman A K M Iftekhar Ahmad CEO/Managing DirectorA B M Mesbahur Rahman Deputy Managing Director

Quamrul Isllam Bitu Deputy Managing Director

Md Zakir Hossain Additional Managing Director Md Shahadat Hossain Additional Managing Director

Md Abdul Khaleque Miah Additional Managing Director

Md Wahiduzzaman Additional Managing Director

Abdur Rouf Gomosta Secretary Md Mujibur Rahman Senior General ManagerMd Jamil Ahmed General Manager Md Anwaruzzaman General ManagerK U M Mehbub Elahi General Manager A B M Hasangir General ManagerMd Jamal Uddin Hera General Manager Md Akhter Hossain General ManagerMd Delower Hossain General Manager Md Aroj Ali Miah General ManagerDulal Miah Munshi General Manager Dipak Kumar Roy General ManagerMd Kamal Sikder General Manager Md Hafiz Ullah General ManagerMd Gias UddinAsstt General Manager

Background

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Mission & Vision

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Objective

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Organogram

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Company Position

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Board Committees

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Capital Structure

The Company has a strong capital base having sufficient security deposit with Bangladesh Bank ensuring a safety valve for the Company's clientele. The Capital Structure is as follows:

a)

Authorized Capital : Tk. 20,00,00,000/- (Takes Twenty crore)

b)

Subscribed 'and paid up Capital

:Tk. 18,15,00,000/- (Taka Eighteen Crore fifteen Lac)

  i) Sponsor/Directors 35% :Tk. 6,35,25,000/- (Taka six crore Thirty Five Lac Twenty Five Thousand)

  ii) Public-65% :Tk. 11,79,75,000/- (Taka Eleven crore Seventy Nine Lac Seventy Five Thousand)

 

Claim Settlement

As a matter of principal and true our Company always attach topmost importance on prompt settlement of claim. We have already all claims lodged with complete and documents.

Re-insurance Protection

We have executed re-insurance Treaty agreement with the state owned Sadhararan Bima Corporation and have obtained adequate Re-insurance cover from them. Our business is fully protected under the said cover and therefore, we are in a position to underwrite any; amount of risk with confidence. Besides we have access to foreign insurance technical experts and can obtain any advice as may be required at the shortest possible time.

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Product Offering

The company deals in fire, marine, Motor and all kinds of Miscellaneous Insurance including Health, Personal accident etc. The Company underwrites risks involved in trade and properties and thus provides their security through insurance and re-insurance services. Some of our popular Insurance products are as follows:

Motor Insurance (comprehensive/Act Liability)

i. Motor Insurance for Commercial Vehicle

ii. Motor Insurance

iii. Motor Insurance for Motor Cycle/Scooter

Fire Insurance

i. Fire Insurance (including Allied Perils)

ii. Industrial All Risks(IAR)

iii. Fire Insurance Consequential Loss

iv. Fire Insurance Dwelling, House and Content

v. Fire Insurance Hotel Combined

Marine Cargo Insurance

I. Marine Cargo Insurance transit by Steamer or Powered Vessel(import/export)

II. Marine cargo Insurance transit by Rail/Lorry/Truck(import/export)

III. Marine cargo Insurance transit by Inland Rail or Road conveyance

IV. Marine cargo Insurance transit by Inland cargoes (water bone)

V. Marine cargo Insurance transit by Air cargo (import/Export)

Marine Hull Insurance (TLO and TC)

Engineering Insurance

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I. Machinery Insurance (Machinery Breakdown)

II. Deterioration of Stock (DOS)

III. Boiler And Pressure Vessel (BPV)

IV. Electronic Equipment Insurance(EEI)

V. Erection All Risks (EAR)

VI. Contractor's All Risks (CAR)

VII. Engineering Insurance Consequential Loss

Miscellaneous/Accident Insurance

I. Burglary And House Breaking Insurance

II. Cash in Safe (CIS)

III. Cash in Transit (CIT)

IV. Cash on Counter(COC)

V. People Personal Accident (PPA)

VI. Workmen's compensation (WC)

VII. Business Interruption

VIII.Overseas Medi Claim and Holiday Insurance

IX. Study and Employment (OMI)

X. Fidelity Guarantee Insurance

XI. Health Insurance

XII. Personal Accident (PA)

XIII.Travel Insurance (All kinds)

XIV.Public Liability (PL)

XV. Professional Liability

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Other Information of the company

Listing Year 2006   Market Category 

A

   Electronic Share 

Y

   Share Percentage: 

Sponsor/Director 31 Govt.0 Institute 0 Foreign 0 Public 69

Remark 1. The Face Value of the securities has been changed into TK 10. The No. of Shares, Market Lot, EPS, NAV and DPS have been changed accordingly.  

       Basic Information:      Authorized Capital in BDT* (mn)

1000.0    

Paid-up Capital in BDT* (mn)

224.0 52 Week's Range 23.2 - 586.75

       Face Value  10.0 Market Lot 500       Total no. of Securities 22360800 Business Segment Insurance

Ratio Analysis of Sonar Bangla Insurance Ltd (SBINS)

1. Liquidity Ratio :

Current ratio of 2011: Current Assets

Current Laibilities =

10999048.213766567.0

=.7989

Current ratio of 2011: Current Assets

Current Laibilities =

2642603136189901

=.7302

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2011 20100.68

0.70.720.740.760.78

0.8

liquidity ratio

Higher the value better for the company. It can be seen that the company position of 2011 is better then 2010.

2. Underwriting Ratios:

2.1. Loss Ratio of 2011: Claims Payment (Loss Adjustment )

Premiums Earned =

54212680.02194601766.00

=0.2785

Loss Ratio of 2010: Claims Payment (Loss Adjustment )

Premiums Earned =

36624244.50184256235.96

= 0.1987

2011 20100

0.050.1

0.150.2

0.250.3

Loss Ratio

Loss ratio shows what percentages of payouts are being settled with recipients. Lower loss ratio is better because less amount of loss the company has to pay. Higher loss ratios may be indicates that an insurance company may need better risk management policies to guard against future possible insurance payouts.

2.2. Expense Ratio of 2011: Underwriting ExpensesNet PremiumsWritten

38273290

1837700000 =0.020827

Expense Ratio of 2010: Underwriting ExpensesNet PremiumsWritten

=32449168

1514780000 =0.021421

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2011 20100.02040.02060.0208

0.0210.02120.02140.0216

Expense ratio

Underwriting expenses are the costs of obtaining new policies from insurance carriers. It shows proportion of loss of issuing share. The lower the expense ratio the better for the company, because it means more profits to the insurance company. Here 2011 is better than the 2010. Underwriting expense is the expense of policy issuance, commission pay to the seller of the insurance such cost.

2.3. Combined Loss/Expense Ratio of 2011: Loss Ratio+expense Ratio =.2785+.020827=.2993272.4. Combined Loss/Expense Ratio of 2010: Loss Ratio+expense Ratio =.1987+.021421=.220121

2011 20100

0.050.1

0.150.2

0.250.3

combined loss ratio

This figure measures claims losses and operating expenses against premiums earned. It shows proportion of loss out of premium. The lower the figure, the better for the company. The combined ratio is the total of estimated claims expenses for a period plus overhead expenses as a percentage of earned premiums. A ratio below 100 percent represents a measure of profitability and the efficiency of an insurance firms underwriting efficiency. Ratios above 100 percent denote a failure to earn sufficient premiums to cover expected claims. High ratios can usually occur either because of under pricing and/or because of unexpected high claims.

2.5. Ratio of net written premiums to policyholder Surplus of 2011: Net Premium

Surplus = 194601766

❑

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2.6. Ratio of net written premiums to policyholder Surplus of 2010 : Net Premium

S urplus =

184256235.96❑

2011 20100.02040.02060.0208

0.0210.02120.02140.0216

ratio of net written premium

This ratio is measures the level of capital surplus necessary to write premiums. An insurance company must have an asset heavy balance sheet to pay out claims. Industry statuary surplus is the amount by which assets exceed liabilities. For instances, a ratio 0.95 to 1 means that insurers are writing less than $1.00 worth of premium for every $1.00 of surplus. A ratio of 1.02 to -1 means insures are writing about $1.02 for every $1.00 in premiums.

3. Profitability Ratio:

3.1. Return on Revenue of 2011 : Net Operating Income

Total Revenues =

3664469771210873.02

=0.5145

Return on Revenue of 2010: Net Operating Income

Total Revenues =

49380163.9648836865.50

=1.0111

2011 20100

0.20.40.60.8

11.2

return on revenue

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This figure determines the profitability of an insurance company. It is the profit after all expenses and taxes are paid by the insurance company.

3.2. Return on Assets of 2011 : Net Operating Income

Total Assets =

36644697497739089.71

= 0.073622

Return on Assets of 2010 : Net Operating Income

Total Assets =

49380163.96368624780.52

= 0.13395

2011 20100

0.020.040.060.08

0.10.120.14

return on assets

USBR calculates the return on assets by dividing net operating income by Mean average assets. This figure shows the profitability on existing investment securities and premiums. The higher the return on assets the better the company is enhancing its return on existing liquid assets.

3.3. Return on Equity of 2011 : Net Operating Income

Total Equity =

36644697283359612.77

=0.1293

Return on Equity: of 2010 Net Operating Income

Total Equity =

49380163.96240518569.75

= 0.20530

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2011 20100

0.050.1

0.150.2

0.25

return on equity

The figure shows the net profits that are returned to shareholders. The higher the return on equity, the more profitable the company has been become and the possibility of enhanced dividends to shareholders.

3.4. Investment Yield of 2011 : Investment Assets

Investment Income 7176647721581059

=3.3254

Investment Yield of 2010 : Investment Assets

Investment Income 19762351.96

12850917 = 1.537816

2011 20100

0.51

1.52

2.53

3.5

investment yield

This is the return received on an insurance company’s assets. The investment yield is obtained by dividing the average investment assets into the net investment income before income taxes.

4. Leverage Ratio:

Debt Ratio of 2011: Total Liabilities

Total Assets

214072846.84497739090

=0.430090

Debt Ratio of 2010: Total Liabilities

Total As sets

127904640.77368624780.52

=0.346977

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2011 20100

0.10.20.30.40.5

debt ratio

Proportion of total liabilities out of total assets. lower the ratio the better for the company. The condition of 2010 was better then 2011.

5. Market Ratio:

5.1. Price Earnings Ratio of 2011: Market Price Per Share

Earning Per Share =

44.511.73

= 25.73

Price Earnings Ratio of 2010: Market Price Per Share

Earning Per Share =

91.571.66

= 55.16

2011 20100

102030405060

price earning ratio

Higher the ratio the better market condition of the company.

5.2. Market/Book Value of Equity of 2011 : Market Price Per ShareBook Value Per Share

=44.5113.94

=3.1929

Market/Book Value of Equity of 2010 : Mar ket Price Per ShareBook Value Per Share

=91.57

132.52=0.69

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5.3. Book Value Per Share of 2011 : Total Share Holders Equity

No of Share ¿

283359612.7720328000

= 13.94

Book Value Per Share of 2010 : Total Share Holders Equity

No of Share=¿

240518569.751815000

= 132.52

Reference

1. Sonar Bangla Insurance official website ,see http://www.sonarbanglains.com/site/index.php 2. Bloomberg Business Weak, “Sonar Bangla Insurance Ltd (SBINS:Dhaka)” see

http://investing.businessweek.com/research/stocks/snapshot/snapshot.asp?ticker=SBINS:BD accessed 25th July 2012

3. Bloomberg, “Sonar Bangla Insurance Ltd” see http://www.bloomberg.com/quote/SBINS:BD accessed 25th July 2012

4. Website of Dhaka Stock Exchange see http://www.dsebd.org/displayCompany.php?name=SONARBAINS accessed 25th July 2012

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