Prime Insurance Company Ltd has failed to pay dividends to its shareholders for the first time since its listing on the share market in 2001.
The company, listed on the Dhaka Stock Exchange (DSE), has also dropped into the "Z" category for worst-performing enterprises.
Prime Insurance Chairman Md Zakiullah Shahid told The Business Standard, last week, "The company decided to withhold dividends last financial year to make an income tax provision – this reduced the retained earnings."
"Another reason for this is that we must make a provision for unrealised losses against share investments. The company has retained earnings of Tk0.55 crore, which is a very poor amount," he continued.
Zakiullah added that the non-life insurance industry is part of a highly-competitive market due to its limited number of products, and is suffering because of reinsurance adjustments from local reinsurers.
A senior official of the company, on condition of anonymity, said, "The company has an income tax provision deficit of Tk50 lakh, along with an unrealised loss of around Tk5 crore in share investments. "
"We must make a provision against those. The provision must be made with last financial years' net profit and reserve," the official added.
The company was scheduled to hold its Annual General Meeting on March 30, but it was postponed due to the coronavirus pandemic.
Prime Insurance's gross premium income increased by 29 percent to Tk71.14 crore during the previous six financial years (2014-2019).
However, during this period, the company's net premium dropped by 54 percent to Tk13.73 crore – while net profit decreased by 82 percent to Tk1.74 crore.
In the last financial year, Prime Insurance lost most of its business in the marine insurance sector – witnessing a drop of 29 percent. Its business in the fire and motor insurance sector decreased by 16 percent and 13 percent, respectively, in that period.
However, business in the miscellaneous insurance sector increased by 83 percent.
The company official further revealed, "Prime Insurance, which once operated under Prime Group, has witnessed some significant management changes along with the change of its ownership. We are trying to move forward by adjusting to the situation."
"Prime Islami Life Insurance Ltd, which also operates under the Prime Group, is not doing very well either," he said.
Discussing the business, the senior official said, "The Insurance Development and Regulatory Authority has set a limit on agent commission and management expenses. Meanwhile, many organisations have not renewed their insurance policies.
"The number of field-level staff dropped after the agent commission decreased. This prevented us from getting new business. Also, the export sector has declined in Bangladesh – negatively impacting the insurance business."
Prime Insurance's share price dropped by 41 percent on the DSE after the company failed to pay dividends to its shareholders. The current closing price of the company's share is Tk17.10.
Prime Insurance is a second-generation, private, non-life insurance company in Bangladesh established in 1996.
The company's paid-up capital is Tk40.87 crore. Of the total share, share sponsors and directors own 58.18 percent, institutional investors 11.34 percent and general investors 30.48 percent.
Fareast Islami Life Insurance Ltd owns 9.18 percent shares of Prime Insurance – the largest part of the company – while Fareast Islami Securities owns 6.35 percent.