performance analysis report on janata insurance company limited

PERFORMANCE ANALYSIS

of

Performance analysis

of JANATA INSURANCE COMPANY

LIMITED

Submitted To:

Md. Imran Hossain Lecturer

Department of Business Administration

Dhaka City College

Submitted By:

GROUP # 05 BBA 13th Batch


Dhaka City College

ii

Group Members

Group # 05

Name BBA ID Comments

Md. Razu Ahmed 237 Group Leader

Muntasir Minhaz 245

Harun Mia 250

Mehedi Hasan 255

Shoaib Mazumder 288

iii

October 05, 2013

Mr. Md. Imran Hossain

Lecturer,


Dhaka City College

Subject: Submission of the assigned report on Janata Insurance Company Limited

Dear Sir,

In accordance with your prescribed instructions, we have prepared a report titled

Insurance Practices in Bangladesh. We cherish this report will provide a lot of

information about various aspects of insurance businesses and you also get the critical

analysis of insurance pricing, financial statement analysis in respect of different points

of view in comparison with other company. Be assured, we can say you get the perfect

flavor of weighted ingredients of a good report.

I hope you will exalt our efforts to the utmost best possible degree and accept this

report & oblige thereby.

Sincerely Yours,

Md. Razu Ahmed

Group Leader

Group # 05

BBA 13th, Section: D


Dhaka City College

iv

Acknowledgement

We are grateful to these persons who helped us a lot to complete the report and their

magnanimous contribution of knowledge which made this report an epoch-making

success. We are thankful to these honorable persons.

Mr. Md. Shahinur Sobhan

Co-Coordinator and Assistant

Professor

Department of Business

Administration

Dhaka City College

Md. Imran Hossain

Lecturer

Department of Business

Administration

Dhaka City College

Mr.Abdul Gaffar Chowdhury

Managing Director

Janata Insurance Company Ltd.

Mr.Saifur Rahman

Secretary

Janata Insurance Company Ltd.

v

EXECUTIVE SUMMARY

General insurances are one of the supportive organizations in business organization.

The business organizations depends more on the insurance companies as they provide

the protection of goods material and assets. A general insurance company is defined as

the insurance company which provides insurance service in a non-life basis, such as fire,

marine cargo. ,motor or other miscellaneous sectors. The economy of Bangladesh is

growing and it needs more insurance company to assure its growth. Recently the

government redo the previous insurance act and established a new insurance act-

Insurance Development and Regulatory Authority Act, 2010; for speeding and

smoothing the insurance business in Bangladesh.

We are focusing on Janata Insurance Company limited (JICL); a first generation Non-Life

Insurance Company in Bangladesh in the private Insurance sector and is one of the

reputed general insurance companies of Bangladesh. Ex-President of Bangladesh

honorable Mr. Hussain Muhammad Ershad is the founding chairman of the company.

Now the Board of Directors of this company comprises a good number of eminent

entrepreneurs and personalities of the country. Members of the management team are

highly qualified professionals. The Board is chaired by Mrs.Sultana Hashem and steered

by Mr. Md.Fazlul Hoque Khan as the Managing Director of the Company.

On our study of JICL; we found that the company has many strengths, opportunities,

challenges and limitations. Strengths first; the company is an old player in market as

they are operating now for over 26 years. They maintain a good relationship with the

customers, specially the current and regular customers. Their marine and fire policies

are at good standard than other companies. However despite of this the company is

filled with limitations. Their capital structure is small and operation areas are limited.

They have only 7 brunches across the country, which is defiantly not enough.

Not only the Janata Insurance Company, the entire insurance business society facing

enormous challenges in the market. The company is small so they could get suffocated

in the market. Also recently the government approved several new Life and Non-life

insurance company. So the completion is growing in the market so the demand for the

insurance policies.

Opportunities for the company are as big as it gets. The future plans of the company

include increase of business volume by expansion of branch network, hiring of potential

man power with technical know-how in the Non-Life Insurance business arena,

vi

implementing progressive marketing strategies and rendering quality & swift services.

For this purpose the JICL is investing on developing its self as a big and recognizable

insurance company in the market.

We have included various ratio analysis and made sense of them according to the latest

financial information of the JICL (annual reports 2008-2012). We also did the SWOT

analysis of the company and also made easy to get all the information regard the finding

of the company. We have made some well thought-out and realistic recommendation for

the companys growth and prosper.

Even though we faced many obstacle, by grace of all mighty Allah we have managed to

put forward this report to you. We are glad for this opportunity. This report on Janata

Insurance Company Limited will give the through and proper idea of the companys

current situation and future prospects.

Table of Contents Serial No. Particulars Page NO.

Chapter : 01 |

Introduction 1.1 Introduction 2

1.2 Objectives of Study 3

1.3 Scope of Study 3

1.4 Methodology of Study 4

1.5 Limitations of Study 5

Chapter : 02 |

Company Overview 2.1 Company Introduction 7

2.2 Companys Vision 8

2.3 Companys Mission 8

2.4 Companys Core Values 9

2.5 Companys Mission Corporate Philosophy 9

2.6 Corporate Information & Historical Background 10

2.7 Branches 11

2.8 Management Team 12

2.9 Financial Performance and Growth 13

2.10 Company Performance Growth at a Glance 14

2.11 Companys Future Plans 15

Chapter : 03 |

Insurance Polices & Conditions 3.1 Insurance Policies 17

3.2 Policy Conditions 20

3.3 Elements of Insurance Contract 24

Chapter : 04 |

Risk Issues Of Prime Insurance Ltd .Company 4.1 Definition of Risk 27

4.2 Types of Risk 28

4.3 Risk Measurement Tools 29

4.4 Risk Management Process 30

Chapter : 05 |

Insurance Pricing , Claim Settlement ,Insurance Marketing

& Re-Insurance 5.1 Insurance Pricing: Tools, Process, Element 32

5.2 Claim Settlement Procedure 35

5.3 Insurance Marketing Techniques 38

5.4 Re-Insurance Management 42

Chapter : 06 |


& Re-Insurance 6.1 Trend Analysis (Ration Analysis For Five Year Of JICL) 45

6.2 Cross Section Analysis 53

6.3 Common Size Statement Analysis 55

6.4 Scenario Analysis 57

6.5 Sensitivity Analysis 58

Chapter : 07 |

Company Analysis 7 SWOT Analysis Of JICL 60

Chapter : 08 |


& Re-Insurance 8.1 Finding From Performance Analysis 62

8.2 Alternative Strategies And Recommendation For JICL 63

8.3 Concluding Remarks 64

Bibliography 65

Appendix 66

Chapter-ONE

INTRODUCTION

2 | Page

1.1 INTRODUCTION

Insurance, in law and economics, is a form of risk management primarily used to hedge

against the risk of a contingent loss. Insurance is defined as the equitable transfer of the

risk of a potential loss, from one entity to another, in exchange for a premium and duty

of care. Insurer, in economics, is the company that sells the insurance.

Insurance rate is a factor used to determine the amount, called the premium, to be

charged for a certain amount of insurance coverage. Insurance is not for gambling or

charity; rather it is used as a mechanism to cover the minimum loss of one person with

the help of group of persons. Insurance business has come as a blessing for all the

economic activities. It provides many succor for individual to national economy, few of

them are;

Protection against loss: Provide Protection against any contingent event that

could affect negatively on the wellbeing of the business or individual.

Cooperative System: Insurance cooperatively preventing risk as it is a device to

share the financial loss of few among many others.

Risk Measurement: Insurance determines the probable volume of risk by

evaluating various factors that could give rise any contingent risk.

Provide Certainty and peace of mind: Insurance is a device, which helps to

change from uncertainty to certainty. Insurance is device whereby the uncertain

risks may be made more certain. As policy holder is certain that any risk is

covered he or she is relived from a mental pressure.

Small capital to cover larger risks: Insurance relieves the businessmen from

security investments, by paying small amount of premium against larger risks

and uncertainty.

Contributes towards the development of industries and economy in

general: Insurance provides development opportunity to larger industries who

are taking more risks in their businesses.

Risk Free trade: Insurance promotes exports insurance, which makes the

foreign trade risk free with the help of different types of policies under marine

insurance cover.

3 | Page

1.2 OBJECTIVE THE STUDY

Our objective for studying the JANATA INSURANCE CO. LTD. LTD. and Bangladeshs

insurance industry

To know the current market situation of insurance industry in Bangladesh.

To get practical knowledge

To know the performance of the company.

To find out the different companies of Bangladesh

To know the insurance policy of the company.

To apply theoretical and practical knowledge in the study.

To know recent market situation

To find out the involvement of the company in economic progress of the

company.

1.3 SCOPE OF STUDY

We are found a lot of scope of these studies and this are given below:

To assemble information about the history of JANATA INSURANCE CO. LTD. Ltd.

To know about the performance of shares in DSE & CSE.

To know about the management system of the organization.

To learn about the financial situation of the organization.

To know about the work procedure.

4 | Page

1.4 METHODOLOGY OF THE STUDY

The word methodology refers to the methods and principles use to perform a

particulars activity. The methods can be-

a) Observation

b) Conversation

c) Previous records etc.

We have collected information from two sources:

i. Primary source of data collection

For gathering basic data we have visited the head office of JANATA INSURANCE

COMPANY LTD. at 5, Biruttom Shahid Asfakus Samad Road. The managing director of the

company; Md. Fazlul Hoque Khan has cooperated with us enormously and provided us

much information about the company. Also we have collect data from various

departments of the company.

ii. Secondary source of data

Company Prospectus

Annual Report of the company(2008-2013)

Company Web site

Internet

Newspaper

DSE

5 | Page

1.5 LIMITATIONS OF THE STUDY

We did our best to provide you a through and complete. However, in spite of this we

have faced some barriers which may reflect in this study. The following are the

limitation of this study.

The opinion expressed by the respondents may be biased.

Lack of time and resources.

Lack of expertise and experience.

Finding information was tough as they are not well presented in the sources.

Lack of scholars point of views regarding the subject matter.

Current political situation in the country.

Chapter-TWO

Company

Overview

7 | Page

2.1 Company Introduction

Janata Insurance Company Ltd. (JIC) a first generation Non-Life Insurance Company in

Bangladesh in the private Insurance sector. The company was incorporated and

commenced its business as a public limited company under Companies Act 1994 on

23rd September, 1986 with a view to run all types of Insurance business except Life-

Insurance as per Insurance Act, 1938 (subsequently repealed by the Insurance Act

2010) in Bangladesh. JIC commenced its business operations from November 6, 1986

after obtaining registration certificate from the office of The Chief Controller of

Insurance (CCI). JIC ventured its operation with a paid-up capital of Taka 30.00 million

and authorized capital of Taka 100.00 million sponsored by a group of leading

entrepreneurs/industrialist of our country having involvement in various socio-

economic sectors. By the passage of time, the Authorized and the Paid-up capital of the

company have been enhanced to Taka 1000 million and Taka 281.75 million

respectively by December 31, 2012.

JIC went for Initial Public Offering in 1994 and raised its paid-up capital by issuing

rights shares in the year 2011. The Company's ownership is prudently distributed to

Sponsor Directors 53.39% and 46.61% to General Public including Financial

Institutions.

The Board of Directors comprises a good number of eminent entrepreneurs and

personalities of the country. Members of the management team are highly qualified

professionals. The Board is chaired by Mrs.Sultana Hashem and steered by Mr.

Md.Fazlul Hoque Khan as the Managing Director of the Company. The future plans of the

company include increase of business volume by expansion of branch network, hiring of

potential man power with technical know-how in the Non-Life Insurance business

arena, implementing progressive marketing strategies and rendering quality & swift

services.

8 | Page

2.2 Companys Vision

To operate in accordance with the

law of the land.

To build sound & dependable image.

To ensure professionalism at the

highest standard of customer

service.

To contribute to national growth

both in depth and dimension.

To extend a friendly hand to the

clients at the time of need.

2.3 Companys Mission

Grow significantly.

Aim to provide prompt and personalized

services to the clients.

Bring innovation in insurance product

and selling techniques.

Work to deliver optimum value to the

shareholders, clients, employees and add

value to the nation.

Consciousness in social obligation.

9 | Page

2.4 Companys Core Values

Integrity.

Customer Focus.

Transparency.

Result Focus.

Professionalism & Excellence and

Teamwork.

2.5 Companys Corporate Philosophy

Operating activities with optimum

quality and Trust.

Discharging duties & responsibilities

with highest ethical value.

10 | Page

2.6 Corporate Information & Historical Background

Registered Office

5, Biruttom Shahid Asfakus Samad Road

(Old: 125, Motijheel C/A.),

Dhaka-1000.

Tele: 9565567, 7160574,

PABX: 9563148-9563149

Fax: 880-2-9560141

Website: www.janatainsurance.com

E-mail: [email protected]

Company Secretary

Md. Saiful Islam

Contact #8801713033551

Auditors

Ahmed Zaker & Co.

Chartered Accountants

Legal Retainer

Sk.Awsafur Rahman

Advocate

Supreme Court of Bangladesh

Rating Agency

Credit Rating Information & Services

Limited (CRISL)

Date of Incorporation

September 23, 1986

Commencement of Business

November 06, 1986

Nature of Business

All kinds of non-life insurance business

Listing with DSE

12.10.1994

Listing with CSE

10 10.1995

No. of Shareholders

6043

Authorized Capital

Taka 1000 Million

Paid-up Capital

Taka 281.75 Million

Face Value Per Share

Taka 100/=

Market Lot

20 Shares

Reserve Fund

Taka 89.15 Million

11 | Page

2.7 Branches

Local Office

5, Biruttom

Shahid Asfakus

Samad Road,

(Old: 125,

Motijheel C/A.),

Dhaka-1000.

Mirpur Branch

6/kha, Plot-39,

Mirpur-10, Dhaka

Narsingdi Branch

Jasim Manzil Suta patti,

Narsingdi

Jubilee Road Branch

Kader Tower (7th Floor)

128, Jubilee Road,

Chittagong

Dilkusha Branch

76, Dilkusha C/A,

Dhaka-1000

Rajshahi Branch

70/71, Miapara,

Shaheb Bazar,

Rajshahi.

Narsingdi Branch

Jasim Manzil Suta patti,

Narsingdi

12 | Page

2.8 Management Team

13 | Page

2.9 Financial Performance and Growth

Particulars 2012 2011 2010 2009 2008

Financial Performance

Gross Premium Income 194.25 209.70 208.27 159.81 148.22

Net Premium Income 84.58 108.16 119.27 91.96 79.64

Management Expenses 46.29 42.16 39.05 38.06 31.28

Net Commission (0.70) 9.37 13.13 9.38 9.76

Net Claims 43.81 22.16 24.45 12.41 15.38

Reserve for un-expired Risks 33.92 43.32 47.76 36.86 31.96

Underwriting Profit 5.12 39.09 28.88 31.78 20.94

Investment Income 41.56 16.84 5.99 5.51 6.92

Other Management Expenses (not applicable to any fund or account)

9.17 12.82 10.31 15.18 12.36

Net Profit before Tax 37.55 43.56 25.16 22.11 15.51

Net Profit after Tax 22.09 24.79 14.69 9.05 7.00

Basic Earnings Per Share 7.84 10.94 18.06 12.46 10.61

Dividend in percent 10% 12% 15% 10% 10%

Share Capital and Reserve

Paid-up capital 66 72.6 81.31 256.13 281.75

Shareholders Equity 89.86 99.16 113.56 458.72 480.92

Total Reserve 84.62 89.77 101.39 96.94 89.15

Assets

Total Investment 74.15 77.86 83.33 408.51 305.9

Total Assets 287.64 292.22 313 646.83 657.82

fixed assets 0.54 2.7 2.55 2.44 116.35

current assets 130.86 126.95 138.7 484.1 370.63

current liability 140.88 127.48 137.46 128.45 139.5

ss

14 | Page

2.10 Companys performance at a glance

15 | Page

2.11 Companys Future Plans

Increase of business volume by expansion of branch network,

Hiring of potential man power with technical know-how in the non-life insurance

business arena,

Implementing progressive marketing strategies and rendering quality & swift

services.

Chapter-THREE

Insurance Policies &

Conditions

17 | Page

3.1 INSURANCE POLICIES

Janata Insurance Company Ltd. has four basic policies having attractive features. They

are:

A. Marine policy

B. Fire policy

C. Motor policy

D. Miscellaneous policies

A. Marine policy

Marine is the most important sector for, the Janata Insurance Co Ltd. It is known as

transit insurance. Import and export of goods is also included under marine policy. In

1998 Janata earned Tk.85, 242,437 that are 72.03% of its total premium income.

The time period of marine policy is one year and the policy premium has to pay at once

by the policyholder. There is no installment premium payment procedure, but this rule

is not followed by the company properly. In the competitive market they have to give

policy on credit.

Procedure: To take a marine policy there is a proposal form and after filling that form

the clause of that particular policy attached with the proposal form. Then it goes to the

Underwriting Dept. who calculates the premium of that policy from the tariff rate fixed

by the Central Rating Committee. The documents of the policy are generally of four

copies that go;

1) To the bank,

2) to the insurer,

3) to underwriting department

4) To the reinsurance department (if necessary).

There are three types of marine policy in our country-

a) Cargo Insurance:

Cargo insurance means the insurance of goods being conveyed. The policy covered by

the company starts with the shipment of goods. The following documents must be

submitted to the Insurance Company before every shipment-

Invoice

Certificate of origin

18 | Page

Bill of placing

Packing list.

The risks covered under cargo insurance are-

Institute Cargo Clause A: All types of risk covered under this. The premium

rate is very much higher than other type of insurance.

Institute Cargo Clause B: Here the risk is less. So the premium rate is less.

The risk covered by this are-

Leakage of container

General average

Rust, Oxidation or Discoloration

Collision

Breakage of goods

Heating

Theft, pilferage & non-delivery

Hooks, holding, bursting &tearing etc.

Institute Cargo Clause C: It covers the least risk. Premium rate charged is

lowest in this case. It includes-

Loss of goods by sinking the ship or collision

General average

Moreover there are risks like rail risk, lorry risk, air risk that are covered by JANATA

INSURANCE CO. LTD. under cargo insurance.

b) Hull Insurance:

This refers to the ship, that is to say, hull and machinery of the vessel. For the loss of

previous years JANATA INSURANCE CO. LTD. decides not to take over any hull

insurance. Loss of marine hull for the year l998 was Tk. 108, 550.

c) Freight Insurance:

It means the consideration payable to the ship owner in respect of carriage of goods by

the owners ship. Sometimes the freight is prepaid when it is a risk of cargo-owner, and

sometimes the freight is after paid when it is at the risk of the ship owner.

B. Fire policy

All policies issued under the heading of the fire insurance primarily aim at providing

protection against financial losses arising out of the operation of fire or certain other

specified perils. The subject matters of insurance are usually building, furniture fixture

and fittings, plant & machinery, goods and merchandise, stock of all kinds etc.

19 | Page

Goods are the most important matters to go through investigation. A list of hazardous

goods is attached in appendix no.

Various types of insurances are affected under the fire insurance heading. They are:

1. Standard Fire Policy

2. Special Perils Insurance

3. Declaration Policy

4. Blanket Policies

5. Re-instatement Policy

6. Building in course of erection

7. Household Policies

C. Motor Policy

The third policy offered to the clients by Janata Insurance Company is Motor Policy.

Different types of policies may be issued for different types of vehicles. Policies are

issued usually of the following types irrespective of the class of vehicles. They are:

Comprehensive Policy

Third Party Only Policy

Act Liability Only Policy

The terms & conditions of motor policy are written in the clause that is attached to the

appendix portion of the report.

D. Miscellaneous Policies

A portion of the premium income of Janata comes from the miscellaneous sources.

There are number of policies under miscellaneous policy head. They are:

1. Burglary Insurance

Burglary (Business Premises) Insurance

Burglary (Private Dwelling) Insurance

All Risk Policy

Cash in safe & transit

2. Glass insurance

3. Engineering policy

4. Cash on counter

5. Cash in safe, etc.

20 | Page

3.2 POLICY CONDITIONS

Fire insurance

1) If there be any material misdescription of any of the property hereby insured, or of

any building or place in which such property is contained or any misdescription as

to any fact, material to be known for estimating the risk or any omission to state

such the fact, the company shall not be liable upon the policy so far as it relates to

the property affected by any such misdescription, misdescription or omission.

2) No payment in respect of any premium shall be deemed to be payment to the

company unless a printed form of receipt for the same signed by an official or duly

appointed agent of the company shall have been given to the insured.

3) The insured shall give notice to the company of any insurance or insurances already

affected, or which may subsequently be affected covering any of the property hereby

insured and unless such notice be given and the particulars of such insurance or

insurances be stated in or endorsed on the policy by or on behalf the company

before the occurrence of any loss or damage, all benefit under this policy shell be

forfeited.

4) All insurance under the policy

a. On any building or part of any building.

b. On any property contained in any building.

5) this insurance does not cover:-

a. Loss by theft during or after the occurrence of a fire.

b. Loss or damage to property occasioned by its own fermentation, natural

heating or spontaneous combustion.

c. Loss or damage directly or indirectly caused by or arising or in consequence

of or contributed to by nuclear weapons material. This insurance does not

cover loss or damage directly caused by or arising from in consequence of or

contributed to by ionizing radiations or condemnation by radioactivity from

any nuclear fuel or from any nuclear waste from the combustion or nuclear

fuel.

21 | Page

Burglary and House braking policy

1) This policy and the schedule shall be read together as one contract any word or

expression to which a specific meaning been attached in any part of this policy of the

schedule shall bear the same meaning whatever it may appear.

2) The insured shall take all due and proper precautions for the safety of the property

insured.

3) This policy does not cover-

a. Deeds, Bonds, Bill of Exchange, Cheques, Promissory Notes, Money, Securities

for Money, Stamps, Pattern, Models, Contract or Documents of title to

property unless Specifically mentioned in the Schedule.

b. Any legal liability whatsoever nature.

c. Loss or damage which can be insured under or Fire or Plate Glass insurance

policy.

d. Loss or damage during the progress of or following upon fire or explosion.

4) Nothing herein contained shall give any right against the company to any person

other than the insured unless the transferee has been approved by the company by

an endorsement on the policy.

5) 5) If at the time of the loss or damage there shall be any other subsisting insurance

covering any of the risks covered by the policy the company shall not be liable for

more than its rate able proportion thereof.

Air risk policy

1) This insurance attaches from the time the subject matter insured is loaded in to the

air craft at the place named in the policy for the commencement of the transit and

continues during the ordinary course of transit and terminates on unloading of the

cargo at the final airport of the destination named in the policy.

2) On the expiry of 30 days from the date of loading whichever shall first occur.

3) Warranted free from loss or damage unless caused by air crash due to any reason or

hijacking, forced landing and collision with any object in the air, whilst in transit.

4) Held covered at a premium to be arranged in case of change of transit or of any

omission or error in the description of the subject matter insured or of the transit.

22 | Page

5) It is the duty of the assured and their agents in all cases to ensure that all rights

against carrier, Bailees or other third parties are properly preserved and exercised.

Marine policy

1) This insurance covers except as provided in Clauses 3 and 4 below, loss of or

damage to the subject-matter insured caused by-

a. War civil war revolution rebellion insurrection, or civil strike arising there

from, or any hostile act by or against ligerent power.

b. Derelict mines torpedoes bombs or other derelict weapons of war.

2) This insurance covers general law and practice. Insured to avoid or in connection

with the avoidance of loss form a risk covered under these clauses.

3) On expiry of 15 days counting from midnight of the day of arrival of the vessel at the

final port or place of discharge whichever shall first occur.

4) Where, after attachment of this insurance, the destination is changed by the assured,

held covered at a premium and on conditions to be arranged subject to prompt

notice being given to the underwriters.

5) In order to recover under this insurance the assured must have an insurable interest

in the subject-matter insured at the time of the loss.

6) This insurance shall not insure to the benefit of the carrier or other-bailee.

23 | Page

Import Rail/Lorry/Truck Policy

1) This insurance covers all risks of loss or damage to the subject matter insured.

2) In no case shall this insurance cover

a. Loss, damage or expense attributable to willful misconduct of the assured.

b. Ordinary leakage, ordinary loss in weight or volume, or ordinary wears and

tear of the subject matter insured.

3) In no case shall this insurance cover loss, damage or expense caused by War,

Revolution, Rebellion, capture, seizure, arrest, caused by any terrorist or any

attempt thereat.

4) In respect of transits by rail only expiry of 30 days from the time of loading of the

cargo on to the railway wagon.

24 | Page

3.3 ELEMENTS OF CONTRACT

Offer and Acceptance

There must be a lawful offer by one party and a lawful acceptance of the offer by the

other party or parties. The adjective lawful implies that the offer and acceptance must

conform to the rules laid down in the Bangladesh Contract Act regarding offer and

acceptance.

Intention to create Legal Relationship

There must be an intention (among the parties) that the agreement shall result in or

create legal relations. An agreement to dine at a friends house is not an agreement

intended to create legal relations and is not a contract.

Lawful Consideration

Subject to certain exceptions, an agreement is legally enforceable only when each of the

parties to it gives something and gets something. An agreement to do something for

nothing is usually not enforceable by law. The something given or obtained is called

consideration.

Capacity of parties

The parties to an agreement must be legally capable of entering into an agreement;

otherwise it cannot be enforced by a court of law. If any of the parties to the agreement

suffers from any such disability, the agreement is not enforceable by law.

Free Consent

In order to be enforceable, an agreement must be based on the free consent of all the

parties. A person guilty of coercion, undue influence etc. cannot enforce the agreement.

The other party (aggrieved party) can enforce it.

Legality of the Object

The object for which the agreement has been entered into must not be illegal, or

immoral or opposed to public policy.

Certainty

The agreement must not be vague. It must be possible to ascertain the meaning of the

agreement, for otherwise it cannot be enforced.

Void Agreements

25 | Page

An agreement so made must not have been expressly declared to be void. Under

Bangladesh Contract Act there are five categories of agreement which are expressly

declared to be void.

Writing, Registration and Legal Formalities

The contract need to be in written, registered and maintain legal formalities to be

enforceable by law.

Chapter-FOUR

Risk Issues of

JANATA INSURACNE COMPANY LIMITED

27 | Page

4.1 RISK DEFINITION

As we know risk is the term, which refers to the probable disadvantageous, undesirable

or unprofitable outcome of a fortuitous event, risk is involved in every aspects of the

business environment. Without undertaking risk an entitys return will be very little, i.e.,

no risk no gain.

4.2 TYPES OF RISK

As we know risk is the term, which refers to the probable disadvantageous, undesirable

or unprofitable outcome of a fortuitous event, risk is involved in every aspects of the

business environment. Without undertaking risk an entitys return will be very little, i.e.,

no risk no gain.

Risk management is one of the most important factors in the business world, insurance

companies deals with all these risks. So as a business entity like JANATA INSURACNE

Co. LTD. has to do with two types of risk, viz. a) Company's own risks, b) Policys risks:

A. Companys owns risk

These risks are mainly those, which are taken on behalf of the insured, i.e. the insured

may claim against his policies anytime. To minimize these risks Janata has undergone

some techniques. They are:

1. Re-insurance policy

2. Holding cash in hand

3. Having STD and FDR accounts with the banks

4. Reserve

They are described below;

1. Re-insurance Policy

It is one of the most important technical matters of insurance business. Whenever the

insured amount is large, the company reinsures that policy to the Sadharon Bima

Corporation. This type of policy helps the company to reduce its risk for bankruptcy.

2. Holding cash in hand

Janata has I1n hold a lump sum amount of cash in hand for precautionary purposes.

3. Having STD and FDR accounts with banks

28 | Page

Janata can withdraw cash anytime from these accounts. This is somewhat like holding

cash in hand. The total of current account and cash in hand in 1998 was Tk. 11,153.075.

This technique can reduce companys risk.

4. Reserve

JANATA INSURANCE CO. LTD. holds a certain portion of its income as reserve. The

reserve for exceptional losses at December 31,1998 was Tk.46, 396,810.

B. Policys risks

When the company issued policies to the clients it automatically adopts some risks

related to those particular policies. There is a Central Rating Committee organized by

the Sadharon Bima Corporation, which calculate the risk associated with a particular

subject matter to be insured and fix up the tariff rates. All of these will be discussed later

with the particular policy. Janata insurance covers more or less all types of risks except

life, as they are a general insurance co. moreover they do not cover crop risk, aviation

risk etc. Insurance co. collects information about various types of risks by sending their

inspectors to the field. To cover the policy risks Janata charges a small amount of

premium from the policyholders.

29 | Page

4.3 RISK MEASUREMENT TOOLS

JANATA INSURANCE CO. LTD. uses some technique to minimize their risk. Those are

given in the below-

1. Risk avoidance: Risk avoidance means avoid some risk. JANATA INSURANCE CO.

LTD. avoids the aviation risk.

2. Risk Assumption: Risk assumption refers to the individual or firm assuming the

risk itself and bearing the ensuring uncertainty. Janata also assume some of their

future risk.so that they keep reserve.

3. Risk Distribution: Risk destruction involves spreading of risk by means of Group

Sharing". JANATA INSURANCE CO. LTD. group sharing with Sadharon Bima

Corporation & other co.

4. Elimination of risk: If the risk can be eliminated, it is illogical to spread risks.

JANATA INSURANCE CO. LTD. eliminates some of their risks.

5. Risk Transfer: Risk transfer refers to one person guaranteeing another against the

risk of loss. JANATA INSURANCE CO. LTD. transfer of their risk by "Re-insurance".

They usually transfer of their risk to Sadharon Bima Corporation.

6. Measuring the risk: Discovering the sources from which the loss may arise.

Janata insurance selects the most efficient method of treating the risk.

30 | Page

4.4 RISK MANAGEMENT PROCESS

Risk refers to the probable disadvantageous, undesirable or unprofitable outcome of a

fortuitous event. Risk management is one of the most important factors in the business

world. Insurance companies deals with all these risks. The risk management process of

JANATA INSURANCE CO. LTD. is discussed in the below-

1. Identification of content: JANATA INSURANCE CO. LTD. firstly identifies the

content of risk means planning, mapping of the risk.

2. Identification of risk: Then they identify the holders risk to manage their risk.

3. Assessment: Assessment means probability or rating of the risk. Janata

insurance company makes or provides the rating of the holders risk. They accept

less risky project among all.

4. Provable treatment of risk: In forth steps JANATA INSURANCE CO. LTD. finds

the provable treatment of risk. They treat the risk by choosing one of the

following-

a. Risk avoidance: Risk avoidance means avoid some risk. JANATA

INSURANCE CO. LTD. avoids the aviation risk.

b. Risk Assumption: Risk assumption refers to the individual or firm

assuming the risk itself and bearing the ensuring uncertainty. Janata also

assume some of their future risk.so that they keep reserve.

c. Risk Distribution: Risk distribution involves spreading of risk by means

of Group Sharing". JANATA INSURANCE CO. LTD. group sharing with

Sadharon Bima Corporation & other co.

d. Elimination of risk: If the risk can be eliminated, it is illogical to spread

risks. JANATA INSURANCE CO. LTD. eliminates some of their risks.

e. Risk Transfer: Risk transfer refers to one person guaranteeing another

against the risk of loss. Janata co. transfer of their risk by Re-insurance".

They usually transfer of their risk to Sadaron Bima Corporation.

5. Create a plan: Then JANATA INSURANCE CO. LTD. make a plan for risk

management.

6. Implementation of alternative: At this stage JANATA INSURANCE CO. LTD.

implement of their plan in rink management.

7. Review and evaluation of risk: Finally they review and evaluate of the risk.

Generally they don't change of their alternative.

Those steps are followed by the JANATA INSURANCE CO. LTD. to risk management.

Chapter-FIVE

Insurance Pricing, Claim Settlement,

Insurance Marketing &

Re-insurance

32 | Page

5.1 INSURANCE PRICING: TOOLS, PROCESS, ELEMENT

In order to validate a contract it must be supported by consideration. In an insurance

contract the consideration is in fact the premium. It is the cost of the risk coverage and

is determined through the mathematical valuation of a risk. Premiums are usually

computed and charged on annual basis and this is payable in advance.

Ways of Determining the Amount of Premium:

All types of policies do not contain same risk associated with the policies. So premiums

are also different. In Bangladesh Sadharon Bima Corporation has fixed rate for premium

regardless of the company. JANATA INSURANCE CO. LTD. Ltd. also follows the rate. If

any condition arises which is not included in the list published by Sadharon Bima

Corporation, it is proceeded to the Central Rating Committee. Central Rating Committee

is the organization that determines the premium considering the situation. In

determining the premium there are certain things to be measured. These are:

In case of fire insurance:

a) Situation

Name of the building

Owner of the building

Plot number

Holding number

Name of the street, Town, District

The building detached

b) Construction:

Number of storage

Construction/of-

Walls

Roofs

Floors of each store

Adjoining buildings

Building within 50 feet

c) Occupation of building

Ground floor

First floor

Upper floor

Occupation of adjoining building

33 | Page

d) Lighting, heating & power:

How is the building lighted?

How is the building heated?

Particulars of any power used in the building

e) Storage: Are hazardous goods are stored in the building?

f) General Information:

Name of the banker

Whether stock book kept in a fire proof safe

What precautions measures are taken when destroyed by fire?

Whether any existing insurance on same property

Has any office for reason whatever-

o Declined

o Cancelled

o Refused to renew any policy on this risk.

What assistance can be relied upon in case of fire?

Considering the above things, risks are ranked as first, second & third.

It should be remembered that, premium for each class is fixed by Sadharon Bima

Corporation.

In case of motor insurance:

Whether the policy is comprehensive or third party

Model and year of manufacturing

Type of body

Horse power (c/c)

Engine no.

Estimated value

Purpose of use

Driving how lone

Carrying capacity

Experience of the driver

Considering the preceding things, Sadharon Bima Corporation determines premium.

Class Risk Premium

First Less Less

Second Moderate Moderate

Third More More

34 | Page

In case of marine insurance:

Name of the commodities

Starting point and destination

Duration of the shipment

In case of marine insurance, all risks divided into three categories:

In case of burglary insurance:

Type of organization

Occupation of the building

Security system

Is it near police box

Evidence that a crime was committed

INCENTIVES:

JANATA INSURANCE CO. LTD. Ltd. does not offer any incentives for the regular payment

of premium. What it does is it allows or it gives a rebate to the client who renews

his/her policies and Sadharon Bima Corporation allows it.

Class Risk involved Premium

I.C.C.A All risks More

I.C.C.A Less than A Moderate

I.C.C.A Less than B Less

35 | Page

5.2 CLAIM SETTLEMENT PROCEDURE

Perhaps the most complex matter of general insurance is claim. Complex in the sense

that most often there are misunderstandings between the insurer and the insured about

the terms and conditions of the policy. That is why, claim is regarded as important and

when the claim is fair and logical, it should be settled instantly.

Procedure of submitting a claim:

Whenever an insured faces any loss, he/she should immediately inform the insurer and

claim of the loss, whenever submitting the claim, he/she must possess a procedure/the

right procedure is stated below step by step:

1. First, he/she should inform the insurer immediately after loss with the letter of

claim intimation.

2. Second, he/she should submit the insurance certificate (in case of motor claim)

and policy (in case of fire, marine and miscellaneous claim).

3. Third, he/she should collect and submit the survey report from the surveyor.

4. Finally, he/she should submit the supporting papers and documents in this

regard. The supporting papers and documents may be the following:

In case of Motor Policy:

Blue book of the vehicle.

Tax token

Fitness Certificate

Copy of G.D. entry

Photocopy of drivers license

Claim form (duly completed by the insured)

3 quotations from different workshops

Survey Report

Drivers statement

Photograph of the vehicles

In case of Fire Policy:

Fire Brigade Report

Copy of G.D. entry

Claim form (duly completed by the insured)

Survey Report

Local Metrological or Union Council Report(in case of flood)

36 | Page

In case of Marine Policy:

Survey Report

Claim Bill

Non-delivery Certificate

Final police investigation report

Course of Action of the Company:

As stated earlier that Janata Insurance Company tries to increase its goodwill by paying

Tk. 1.70 crore of claims 4uring the first six months of the year 1999; hence it follows a

well strategy of facing any claim. The course of action of the company are summarized

below;

1. Firstly, the company requires a letter of intimation from the looser when submitting

the claim.

2. Secondly, after receiving the letter of claim intimation, the company verities the

policy or insurance certificate and decides whether the claim is under the policy or

insurance certificate.

3. Thirdly, if the company finds the claim under the policy or insurance certificate, then

the company engages a surveyor to survey the real amount of loss.

4. Finally, according to the Survey Report and in favor of insurance claim, company

settles the claim after receiving necessary documents.

Dispute between the Company and Client:

Most often there are misunderstandings between the insurer and the insured about the

amount of claim as the interest of the client is always to get more and the tendency of

the insurer is to settle claim as few as possible. If there is any dispute between Janata &

the client regarding the amount of claim, the following situation may arises:

In case of any dispute, the .client can complain to the controller of the insurance:

The controller of the insurance then calls representatives from Janata and

require necessary documents.

Then the controllers verify the overall situation and again setup the amount of

claim.

If the company doesnt agree to the amount set up by the controller, then it

refuses to settle the claim and the overall situation goes to the court.

Incentives:

37 | Page

It is a common term regarding claim in an insurance company. Janata insurance

company has a wonderful offer to its clients in this regard. The company offers the NCB

(No Claim Bonus) for not submitting any claim. The year wise ratio of bonus is tabulated

below:

Year NCB Rate

1st 25%

2nd 35%

3rd 45%

4th 55%

5thl and above 60%

On the other hand the company charges loading to its clients if there is any claim. The

claim wise ratio of loading is tabulated below:

Yea

r

Loading Rate

1st 20%

2nd 30%

3rd 40%

4th 50%

5th The policy would be cancelled

38 | Page

5.3 INSURANCE MARKETING TECHNIQUES

A. Detail of existing product lines and list of future products to be

launch within next one year.

Attracting people through different types of insurance risk coverage policies is the main

strategies of Janata Insurance Company Ltd. Janata Insurance Company Ltd. provides

the following types of Insurance coverage;

Fire Insurance; Flood Insurance

Marine Insurance for: Marine Cargo and Marine Hull

Motor Insurance (comprehensive or third party) for: Private Car; Commercial

Vehicle, and Motor Cycle;

Miscellaneous Insurance for: Personal Accident, Personal Accident Air Travel

only, Burglary and Housebreaking, All risks, Workmens Compensation, Cash in

Transit, Contractors All Risks, Erection All Risks, Deterioration of Stock in Cold

Storage, Machinery Breakdown Insurance, Boiler and Pressure Vessel.

Janata Insurance does not provide the following insurance service due to high risk

experience:

1. Marine Hull

2. Freight Insurance

3. Comprehensive coverage for commercial vehicles.

4. Miscellaneous Insurance- Plate glass, Public liability, Fidelity guarantee, Aviation,

Livestock, Crop, Health, etc.

Details of product

A. Marine Cargo Insurance:

B. Fire policy

C. Flood policy

D. Motor Policy

E. Miscellaneous Policies

A portion of the premium income of Janata comes from the miscellaneous sources.

There are number of policies under miscellaneous policy head are issued by company as

mentioned earlier.

Janata Insurance has a plan to launch the following types of product in near future:

1. Health insurance

2. Overseas mediclaim insurance

39 | Page

B. In house businesses support in terms of percentage of total business

for the last three years.

In house business support of JIC means procurement of direct business from the

organizations of members of Board of Directors of the company.

year % of in house business

2004 35%

2005 34%

2006 36%

2007 38%

40 | Page

List of Bank and non-banking financial institutions where the company is

received in insurance business.

SL.NO. Name of institutions Gross premium

received in 2007

(Amount in lacs)

1 United commercial Bank Ltd. 325

2 Agrani Bank 15

3 Al- Arafah Islami Bank 10

4 AB Bank 35

5 B.K.B 10

6 The City Bank Ltd. 10

7 Dhaka Bank limited 10

8 Dutch-Bangla Bank Ltd. 10

9 Eastern Bank Ltd. 10

10 IFIC Bank Ltd 10

11 Islami Bank (BD) Ltd 10

12 Janata Bank Ltd 10

13 Mercantile Bank Ltd. 10

14 National Bank Ltd 10

15 NCCBL 10

16 Pubali Bank Ltd 20

17 Rupali Bank Ltd 10

18 Standard Chartered Bank 10

19 One Bank Ltd. 10

20 First Security Bank Ltd. 25

21 Shahjalal Islami Bank Ltd. 50

22 City Bank NA 30

23 Prime Bank Ltd. 20

24 Sonali Bank Ltd. 100

25 Uttara Bank Ltd. 10

26 Standard Bank Ltd. 25

27 Other Banks 25

Non-banking financial institutions:

01. United leasing company Ltd. 10

02. IDLC 10

03. Other leasing companies 10

C. Distribution channel of the company

Janata Insurance Company uses various distribution channels to carry out its

41 | Page

transactions with the potential buyers of insurance policies. The company considers to

select the best mix of distribution channels for its offerings.

The general insurance product may be marked in various ways of which the three

methods are noteworthy: (1) selling directly by the insurer (2) Selling through salaried

marketing forces (3) Selling through commission agents.

The company uses the following mix:

1. Insurer (JIC) customer (Insured)

2. Insurer (JIC) Marketing forces customer (Insured).

3. Insurer (JIC) Development forces financial organization like Bank, Leasing

Company to customer.

4. Insurer (JIC) Agentcustomer.

42 | Page

5.4 REINSURANCE MANAGEMENT

Broadly speaking reinsurance is insurance of insurance. There are many risks in almost

all classes of business that may be too big for an insurer to bear on its own account.

Because the financial strength of the insurer on that account may not be potent enough

to bear such a big loss. In this case the insurer takes the whole risk and reinsures any

balance beyond its retention capacity with the reinsurers. It is not exceptional for the

JANATA INSURANCE CO. LTD. In Bangladesh there are two re-insurers:

1. Jibon Bima Corporation (for life insurance companies)

2. Sadharon Bima Corporation (for general insurance companies)

Janata like all other insurance companies reinsures to Sadharon Bima Corporation since

1986. Now a days; they are trying to open an account with foreign reinsurance

companies, but have not yet finalized of foreign reinsurance.

Ratio of Reinsurance

Janata Insurance Company reinsures with Sadharon Bima Corporation and the ratio of

respective reinsurance is stated below: -

Types of

reinsurance

Retention of JANATA INSURANCE CO. LTD. Ltd. (Tk. In lacs)

Fire 20 Marine cargo 15 Marine hall No business Miscellaneous 7.5

Engineering 5

Motor No specific ratio as it is loss based Insurance Treaty.

Methods of Reinsurance Policy

JANATA INSURANCE CO. LTD. ltd. follows both of the following methods;

1. Facultative reinsurance;

2. Treaty reinsurance

43 | Page

Choice of Firms for Reinsurance

JANATA INSURANCE CO. LTD. Ltd. has no specific choice. Each & every kind of policies is

taken in this company. But some hazardous &too risky firms are chosen for reinsurance.

They are ranked below:-

Petrol pumps

Textile mills

Jute mills

Chemical industries

Engineering firms

Cold storage

Chapter-SIX

Performance Analysis of JIC & Comparison with and

Industry Average

45 | Page

6.1 TREND ANALYSIS (RATION ANALYSIS FOR FIVE YEAR OF

JICL)

CLAIM ON PREMIUM

Claim on premium is measured by dividing the premium by the Claims.

Claim on premium = Claim Premium

Particulars 2008 2009 2010 2011 2012

claim on premium

(loss ratio)

0.52 0.55 0.67 0.32 0.3

*amounts in million taka

Judgment: The claim on premium seems increasing year by year from 2008 to 2010

except 2011 and 2012 due to the reason of fall in sundry income such as trustee fee,

profit on sale of share, rental, and underwriting commission etc. during the years.

0

0.2

0.4

0.6

0.8

20082009

20102011

2012

0.52 0.55 0.67

0.32 0.3

claim on premium(loss ratio)

46 | Page

FIXED ASSET TURNOVER

Fixed asset coverage ratio is measured by dividing the total premium by total asset of

the company.

Fixed Asset Turnover = Fixed Asset Total Premium

Particulars 2008 2009 2010 2011 2012

fixed asset turnover 0 0.02 0.01 0.01 0.6


Judgment: The Fixed asset turnover ratio seems decreasing consistently year by year

due to increase in book value .here abruptly the fixed asset trends upward at 2012.

0%

20%

40%

60%

80%

100%

20082009

20102011

2012

FIXED ASSET TURNOVER

fixed asset turnover

47 | Page

TOTAL ASSET TURNOVER

Total asset turnover is measured by dividing the total premium by total asset of the

company.

Total Asset Turnover = Total Premium Total Asset

Particulars 2008 2009 2010 2011 2012

Total Asset turnover 52 55 67 32 30


Judgment: total assets turnover is increasing from 2008 to 2010 except 2011 and 2012

due to trustee fee, profit on sale of share, rental, and underwriting commission etc

during the years.

0

0.1

0.2

0.3

0.4

0.5

0.6

0.7

20082009

20102011

2012

TOTAL ASSET TURNOVER

Total Asset turnover

48 | Page

NET PROFIT MARGIN

Net profit margin measures the percentage of net earning after tax of the company on

its net sales/net premium.

Net Profit Margin = (Net profit after tax Net premium) 100

Particulars 2008 2009 2010 2011 2012

net profit margin 9 10 12 23 26


Judgment: The net profit margin seems increasing year by year from 2008 to 2012.so

net profit margin is in good position.

0

0.05

0.1

0.15

0.2

0.25

0.3

2008 2009 2010 2011 2012

NET PROFIT MARGIN

net profit margin

49 | Page

NET WORTH TO TOTAL ASSET RATIO

Net worth to total asset ratio measures that how much percentage of total asset a firm

worth in term of its common equity.

Net Worth to Total Asset Ratio = (Total Common Equity Total Asset) 100

Particulars 2008 2009 2010 2011 2012

net worth to total asset ratio 0.31 0.34 0.36 0.71 0.73


Judgment: The net worth to total asset increasing from 2008.it peaks at 2012.

0

0.1

0.2

0.3

0.4

0.5

0.6

0.7

0.8

2008 2009 2010 2011 2012

Axi

s Ti

tle

Axis Title

net worth to total asset ratio

50 | Page

Return on Equity

Return on Equity measures the percentage of net earning after tax of the company on its

total Equity.

Return on Equity = (Net profit after tax Total Equity) 100

Particulars 2008 2009 2010 2011 2012

return on equity 0.08 0.09 0.13 0.05 0.05


Judgment: The return on equity seems increasing year by year from 2008 to 2010

except 2011 and 2012 due to the reason of fall in sundry income such as trustee fee,

profit on sale of share, rental, and underwriting commission etc. during the years.

0.08 0.09

0.13

0.05 0.05

2008 2009 2010 2011 2012

return on equity

return on equity

51 | Page

CURRENT RATIO

Current ratio is calculated by dividing firms current asset by current liability.

Current Ratio = Current Asset Current Liability

Particulars 2008 2009 2010 2011 2012

current ratio 0.928875639 0.995842485 1.009020806 3.768781627 2.656845878


Judgment: The current ratio between 1 and 1.5 is considered as standard .here up to

2010 is below standard but6 after that it peaks at 2011. Now it is stable situation.

2008 2009 2010 2011 2012

current ratio 0.928875639 0.995842485 1.009020806 3.768781627 2.656845878

0

0.5

1

1.5

2

2.5

3

3.5

4

Axi

s Ti

tle

current ratio

52 | Page

RETURN ON ASSET

Return on Asset measures the percentage of net earning after tax of the company on its

total asset.

Return on Asset = (Net profit after tax Total Asset) 100

Particulars 2008 2009 2010 2011 2012

return on asset 0.02 0.03 0.05 0.04 0.03


Judgment: The return 2012 due to the same reason of fall in sundry income such as

trustee fee, profit on sale of share, rental, underwriting commission etc. during the

years on asset seems increasing year by year from 2006 to 2010 and it falls down to

2011.

return on asset

0

0.01

0.02

0.03

0.04

0.05

20082009

20102011

2012

Axi

s Ti

tle

2008 2009 2010 2011 2012

return on asset 0.02 0.03 0.05 0.04 0.03

return on asset

53 | Page

6.2 Cross sectional analysis

Cross Sectional Analysis is the practice of comparing a firm's results to those of similar

companies or competitors. For potential performance, peer analysis is essential to

investment research and market positioning. Companies most commonly use peer

group analysis to evaluate compensation plans at other organizations and make sure

theirs are competitive. Here, for cross sectional analysis, we have compared JANATA

INSURANCE COMPANY LIMITED (JICL) with GREEN DELTA INSURANCE COMPANY

(GDIC) and PRIME INSURANCE COMPANY (PIC) for the year 2011 and 2012.

CROSS SECTIONAL ANALYSIS TABLE

JANATA INSURANCE COMPANY LIMITED

GREEN DELTA INSURANCE COMPANY

PRIME INSURANCE COMPANY

Particulars 2012 2011 2012 2011 2012 2011

Current Ratio 2.65 3.76 1.18 2.50 1.95 1.67

Total Asset Turnover

0.30 0.32 0.32 0.31 0.41 0.35

Net Profit Margin

26% 23% 40.00% 67.70% 50.61 80.82

Return on Asset

3% 4% 7.52% 9.25% 8.87% 12.80%

Return on Equity

5% 5% 11.94% 14.94% 28.68% 40.44%

Claims on premium

0.30 .32 0.62 0.54 0.55 0.50

54 | Page

Here we can see the JANATA INSURANCE COMPANY LTD.s overall ratio is below in

comparison with green delta insurance company (GDIC) and prime insurance company

(PIC) but marginally current ratio of JICL is flourishing than that of companies.

JICL

GDIC

PIC

0

0.5

1

1.5

2

2.5

3

CurrentRatio Total

AssetTurnover

NetProfit

Margin

Returnon Asset Return

on Equity Claimson

premium

JICL

GDIC

PIC

55 | Page

6.3 Common size statement

Common size statement is a financial statement that displays all items as a percentage

Common Size Income Statement Total 100% 100%

Interest and Dividend Income 88.97% 73.73%

Profit/(Loss) Transferred from

Revenue Account 10.95% 9.08%

Total 100% 100%

Expenses of management: 19.63% 16.26%

Profit before Tax 80.37% 83.74%


56 | Page

Common Size Balance Sheet Particulars 2012 2011

Assets

Investment 2% 2%

Outstanding Premium Accrued Interest On FDR &

BGTB

0.52% 3%

accrued interest on FDR and BGTB 3% 0.88%

Amount Due From Other Persons or Bodies Carrying

On Insurance Business

19% 19%

Sundry Debtors (Including advances, deposits and

prepayments)

12% 12%

Cash And Bank Balances 45% 63%

Other fixed and liquid assets 18% 0.78%

Total 100% 100%

LIABILITIES

Shareholders' Equity 73% 70%

Balance Of Fund And Accounts 5% 7%

Premium Deposit 0.53% 3%

Other Liabilities And Provisions 21% 20%

Total 100% 100%

57 | Page

6.4 SCENARIO ANALYSIS

Scenario analysis shows how a company will perform at the best and worst situation

changing some positive and negative variables based on average income statement

analysis

PARTICULARS WORST

(-15 OF AVG.) AVERAGE

BEST

(+15 OF AVG.)

Gross Premium Income 82.2137 96.722 111.2303

Net Claims 20.0957 23.642 27.1883

Investment Income 13.0594 15.364 17.6686

Net Profit after Tax 13.1954 15.524 17.8526

Here, shown in the form of average case, worst case and best case. All confer that the

particular items rate in increasing and decreasing and also average mood. Decreasing

rate indicates worst case and increasing rate indicates best case.

58 | Page

6.5 SENSITIVITY ANALYSIS

Sensitivity analysis shows how a company will perform when there are positive and

negative changes of one specific variable of average income statement based on some

specific percentages. Here we have analyzed the effect on performance of JICL by

changing consequentially Net Premium, Operating Expense and Tax both positively and

negatively by 15% and 20%.

In case Of Change in Net Premium Particulars Decrease average Increase

20% 15% 15% 20%

Net Premium 65.77096 77.3776 96.722 111.2303 77.3776

other Incomes 40.526 40.526 40.526 40.526 40.526

Operating Expense 51.336 51.336 51.336 51.336 51.336

Profit Before Tax 19.56904 23.0224 28.778 33.0947 23.0224

tax 9.001758 10.5903 15.524 15.22356 10.5903

Profit After Tax 10.56728 12.4321 53.94398 17.87114 12.4321


In Case Of Change in Operating Expense Particulars Decrease average Increase

20% 15% 15% 20%

Net Premium 65.77096 77.3776 96.722 111.2303 77.3776

other Incomes 40.526 40.526 40.526 40.526 40.526



tax 9.001758 10.5903 15.524 15.22356 10.5903

Profit After Tax 10.56728 12.4321 53.94398 17.87114 12.4321


Chapter-SEVEN

Company

Analysis

60 | Page

7.1 SWOT ANALYSIS OF JICL

SWOT is an important tool for making changes

in the management and marketing strategy of

the organization. It analysis is the

comprehensive study of an organizations

exposure and potential in perspective of its

strength, weakness, opportunity and threat.

SWOT facilitates the organization to make their

existing line of performance and also foresee

the future to improve their performance in

comparison to their competitors.

Strength

Old player in market.

Good customer relationship.

Fire and marine policies are widely held.

Backed by the influential individuals and institutes.

Weakness

Capital structure is small and fragile.

Marketing activities are slung.

Management system is maladroit.

Companys policies are complicated.

Blundering workforce.

Opportunities

Management system to be digitalized.

Market share will grow.

New investment possibilities.

Better trained workforce

Threats

Due to small and weak capital structure, company may suffocate in

market.

Political hostility.

Economic instability of country.

Chapter-EIGHT

Findings, Recommendations,

& Conclusion

62 | Page

8.1 Findings from performance analysis

The current ratio of Janata Insurance Company LTD. is wide-ranging and handful.

For that reason it is strong enough to meet up current liabilities in case of

unexpected situation.

The return on equity is not pretty good because starting return was gradually

increasing and then decreasing so far as fluctuation.

The net worth to total asset is sound because of having consistently increasing in

total asset.

Net profit margin is thorough. So, Janata Insurance Company LTD. can operate its

business without any intension and be confidently we can say Janata Insurance

Company LTD. will be able to gain its continuous net profit margin.

The total asset turn over arises ups and downs conditions as increasing and

decreasing rate come by turns.

The fixed asset turn over looks very frustrated and in that situation anyone could

not be predicted Janata Insurance Company LTD. as good for future business

existence because fixed assets turnover does not defend against fixed liabilities in

case of liquidation of Janata Insurance Company LTD..

The claim on premium is not affluent much .it is not said that Janata Insurance

Company LTD. is not good insurance company but at the time of claim settlement of

policy holders the Janata Insurance Company LTD. may not be agreed to settle down

the claim payment of policy purchasers because of very tiny premium income.

Common size statement analysis shows that bank and cash balance is higher other

than liabilities and capital structure is good so far as equity is 73% and rest of the

debt.

Cross sectional analysis confers the Janata Insurance Company LTD. is not better

than green delta insurance and prime insurance company. Only their current ratio is

more than those companies.

In scenario analysis, we have performed best case, worst case and average case for

testing Janata Insurance Company LTD.s various sources of income or premium

income.

Although it is one of the oldest insurance companies in Bangladesh, their financial

position is not attractive at all.

63 | Page

8.2 Alternative Strategies and Recommendations

Capital structure of JICL should be enhanced and has to achieve swift growth

JICL should invest more in profitable long term assets and securities rather than

holding huge amount cash and bank balance.

Stronger amount of reserve should be grown to face any kind of worst situation.

Consistency in positive growth rate of dividend should be taken under

consideration.

To create more demand of company shares to the general investors, JICL should

declare more dividends which will help them to hold a strong position in stock

market.

More sound competition with the common group should be taken under

consideration for financial growth of the company.

Corporate inceptives should be declared to attract the giant clients which will help

JICL to generate more profit.

Innovate more effective insurance tools where other companies are remaining in

market with typical tools and introduce them with the customer.

Marketing strategies should be more aggressive, advanced and updated to capture

the maximum portion of the target market. Online marketing mediums such as

facebook, twitter, yahoo should be used to make more people noticed about the

company.

Semi-skilled human resources should be trained up for making more effective &

professional.

Give more concentration on using updated technologies that makes the operations

of the organization faster.

JICL should have established more brunches throughout the whole country.

JICL should have played an important role in inflationary situation in the economy of

state.

JICL should have to standardize their marketing channels and marketing

management systems or strategies.

64 | Page

8.3 Concluding Remarks

JANATA INSURANCE COMPANY LTD. belongs some limitations but at present market

condition, JANATA INSURANCE COMPANY LTD.S sustainability is growing. JANATA

INSURANCE COMPANY LTD plays a greater role in developing in the business society of

Bangladesh. It follows the rules & regulations prescribed by state.

If JANATA INSURANCE COMPANY LTD use the digital technology & develop its

structure, one day it will be the market leader of insurance businesses in Bangladesh.

They will get more customers in near future.

65 | Page

BIBLIOGRAPHY

Websites

Company website: http://www.janatainsurance.com

DSE website: http://www.dsebd.org

Insurance notes and report tips: http://www.edu-article.blogspot.com

Texts

Elements of Insurance by Azizul Huq Chaudhuri.

Insurance, Principles and Practice by M.N. Mishra.

Insurance and Risk Management by Dr. P.K. Gupta.

JICLs Annual Report of 2008, 2009, 2010, 2011 and 2012.

Written Materials Provided by JICL.

66 | Page

Appendix

Particulars 2008 2009 2010 2011 2012

Gross Premium

Income

148.22 159.81 208.27 209.7 194.25

Total Assets 287.64 292.22 313 646.83 657.82

0.5152968

99

0.5468824

86

0.6653993

61

0.3241964

66

0.2952935

45

claim on premium

(loss ratio)

0.52 0.55 0.67 0.32 0.3

Particulars 2008 2009 2010 2011 2012

fixed assets 0.54 2.7 2.55 2.44 116.35

Gross Premium Income 148.22 159.81 208.27 209.7 194.25

fixed asset turnover 0 0.02 0.01 0.01 0.6

Particulars 2008 2009 2010 2011 2012

Gross Premium

Income

148.22 159.81 208.27 209.7 194.25

Total Assets 287.64 292.22 313 646.83 657.82

0.5152968

99

0.5468824

86

0.6653993

61

0.3241964

66

0.2952935

45

0.52 0.55 0.67 0.32 0.3

Total Asset

turnover

52 55 67 32 30

Particulars 2008 2009 2010 2011 2012

Net Profit after

Tax

7 9.05 14.69 24.79 22.09

Net Premium

Income

79.64 91.96 119.27 108.16 84.58

0.087895

53

0.0984123

53

0.1231659

26

0.2291974

85

0.2611728

54

0.09 0.1 0.12 0.23 0.26

net profit margin 9 10 12 23 26

Particulars 2008 2009 2010 2011 2012

Shareholders Equity 89.86 99.16 113.56 458.72 480.92

67 | Page

Total Assets 287.64 292.22 313 646.83 657.82

0.3124043

94

0.3393333

79

0.3628115

02

0.7091817

02

0.7310814

51

net worth to total

asset ratio

0.31 0.34 0.36 0.71 0.73

68 | Page

Particulars 2008 2009 2010 2011 2012

Net Profit after

Tax

7 9.05 14.69 24.79 22.09

Shareholders

Equity

89.86 99.16 113.56 458.72 480.92

0.0778989

54

0.0912666

4

0.1293589

29

0.0540416

81

0.0459327

95

return on equity 0.08 0.09 0.13 0.05 0.05

Particulars 2008 2009 2010 2011 2012

current assets 130.86 126.95 138.7 484.1 370.63

current

liability

140.88 127.48 137.46 128.45 139.5

current ratio 0.92887563

9

0.99584248

5

1.00902080

6

3.76878162

7

2.65684587

8

Particulars 2008 2009 2010 2011 2012

Net Profit after

Tax

7 9.05 14.69 24.79 22.09

Total Assets 287.64 292.22 313 646.83 657.82

0.0243359

76

0.0309698

17

0.0469329

07

0.0383253

71

0.0335806

15

return on asset 0.02 0.03 0.05 0.04 0.03

CROSS

SECTIONAL

ANALYSIS

TABLE

JANATA INSURANCE

COMPANY LIMITED

GREEN DELTA

INSURANCE

COMPANY

PRIME INSURANCE

COMPANY

Particulars 2012 2011 2012 2011 2012 2011

Current Ratio 2.65 3.76 1.18 2.50 1.95 1.67

Total Asset

Turnover

0.30 0.32 0.32 0.31 0.41 0.35

Net Profit

Margin

26% 23% 40.00% 67.70% 50.61 80.82

Return on Asset 3% 4% 7.52% 9.25% 8.87% 12.80%

Return on 5% 5% 11.94% 14.94% 28.68% 40.44%

69 | Page

Equity

Claims on

premium

0.30 .32 0.62 0.54 0.55 0.50

70 | Page

Common Size Income Statement

Total 100% 100%

Interest and Dividend Income 88.97% 73.73%

Profit/(Loss) Transferred from

Revenue Account

10.95% 9.08%

Total 100% 100%

Expenses of management: 19.63% 16.26%

Profit before Tax 80.37% 83.74%

71 | Page

PARTICULARS WORST

(-15 OF AVG.)

AVERAGE BEST

(+15 OF AVG.)

Gross Premium Income 82.2137 96.722 111.2303

Net Claims 20.0957 23.642 27.1883

Investment Income 13.0594 15.364 17.6686

Net Profit after Tax 13.1954 15.524 17.8526

Common Size Balance Sheet

Particulars 2012 2011

Assets

Investment 2% 2%

Outstanding Premium Accrued Interest On FDR & BGTB 0.52% 3%

accrued interest on FDR and BGTB 3% 0.88%

Amount Due From Other Persons or Bodies Carrying On

Insurance Business

19% 19%

Sundry Debtors (Including advances, deposits and

prepayments)

12% 12%

Cash And Bank Balances 45% 63%

Other fixed and liquid assets 18% 0.78%

Total 100% 100%

LIABILITIES

Shareholders' Equity 73% 70%

Balance Of Fund And Accounts 5% 7%

Premium Deposit 0.53% 3%

Other Liabilities And Provisions 21% 20%

Total 100% 100%

72 | Page

In case Of Change in Net Premium

Particulars Decrease average Increase

20% 15% 15% 20%

Net Premium 65.77096 77.3776 96.722 111.2303 77.3776

other Incomes 40.526 40.526 40.526 40.526 40.526



tax 9.001758 10.5903 15.524 15.22356 10.5903

Profit After Tax 10.56728 12.4321 53.94398 17.87114 12.4321

In Case Of Change in Operating Expense

Particulars Decrease average Increase

20% 15% 15% 20%

Net Premium 65.77096 77.3776 96.722 111.2303 77.3776

other Incomes 40.526 40.526 40.526 40.526 40.526



tax 9.001758 10.5903 15.524 15.22356 10.5903

Profit After Tax 10.56728 12.4321 53.94398 17.87114 12.4321

CoverTittle PageGroup MembersLetter of TransmittalAcknowledgementExecutive SummaryTable of ContentsCH:1 | Introduction1.1: Introduction to report1.2 Objective of the Study1.3: Scope of StudyUntitled1.5: Limitations of the Study

CH:2 | Company Overview2.1: Company Introduction2.2: Comany's Vision2.3: COmpany's Mission2.4: Company's Core Values2.5: Comany's Corporate Philosophy2.6: Corporate Information and Historical Background2.7: Branches2.8: Management Team2.9: Fianacial Performance and Growth2.10: Company's Perforamce at a Glance2.11 Comany's Future Plans

CH:3 | Insuracne Policies and Conditions3.1: Insuracne Policies3.2: Policiy conditions3.3: Elements of Contract

CH:4 | Risk Issues of JANATA INSURANCE COMPANY LIMITED4.1: Risk Defination4.2: Types of Risk4.3: Risk Measurement Tools4.4: Risk Management Process

CH:5 | Isuracne Pricing, Claim Settlement, Insurance Marketing and Reinsurance5.1: Insuracne Pricing5.2: Claim Settlement Procedure5.3 Insurance Marketing Techniqies5.4: Reinsurance Management

CH:6 | Performace Analysis of JIC6.1: Trend Analysisclaim on premiumfixed asset turnovertotal asset turnovernet profit marginnet worth to total asset ratioreturn on equitycurrent rationreturn on asset

6.2: Cross Sectional Analysis6.3: Common Size Statement6.4: Scenario Analysis6.5: Sensitivity Analysis

CH:7 | Company Analysis7.1: SWOT Analysis of JICL

CH:8 | Finding, Recommendations and COnclusion8.1: Findings from performance analysis8.2: Alternative Strategies and Recomandations8.3: Concluding Remarks

BibliographyAppendix

performance analysis report on janata insurance company limited

Documents

general insurance company

insurance service

insurance practices

previous insurance act

private insurance sector

business organizations

group members group

good report