Islami Insurance Bangladesh Limited's net profit jumped 167% in the last five years riding on a robust growth in foreign trade which requires mandatory insurance coverage.
A senior officer of the company, seeking not to be named, said a large part of the general insurance business comes from LCs (letters of credit).
"For import-export business, opening LCs is a must. And insurance is compulsory for every LC. Imports and exports have increased in the last five years. So the company's business has grown," he told The Business Standard.
In 2020, the insurance regulator cancelled the 15% agent commission on the sale of general insurance policies. And insurance companies had to spend a lot of money every year on the agent commission. Which did not happen in 2021. Therefore, the profit increased by 60% in that year.
With the increase in the profit of Islami Insurance, the rate of paying dividends to the shareholders has also increased. The company, which has been paying dividends at the rate of 10% for the last seven years, has paid a 12.50% cash dividend to its shareholders for 2021.
Although the business looks good, there are allegations against the company for not complying with rules and regulations.
It does not comply with the guidelines of the Insurance Development and Regulatory Authority (Idra) for holding a minimum of 60% shares jointly by its sponsors and directors.
The Insurance Act-2010 has clear guidelines in this regard. Last year, Idra again issued circular asking sponsors and directors of insurance companies to hold 60% shares.
Islami Insurance's sponsors and directors have sold 8.33% of the shares in the last year. They did not even announce the sale of shares to stock exchanges in line with the securities law. At present, sponsors and directors jointly hold a 31.16% stake in the company.
In the year following the general holidays due to the coronavirus outbreak in 2020, the share price of the company on the Dhaka Stock Exchange rose by 285% to Tk77 without any reason. But at present, its shares are being traded at Tk43.
Share market insiders said a group manipulated the share price of the company. The names of more than one person behind this manipulation were under discussion.
However, the regulatory body did not take any action against them. And with this opportunity, some sponsors of the company have sold their shares.
Islami Insurances' Company Secretary Mujibur Rahman did not answer when he was called on his mobile phone for comments on this matter.
Meanwhile, the auditor has raised questions about the company's premium income despite its business growth. In its 2020 report, the auditor said that the company has a deficit of Tk6.16 crore in premium income with value-added tax (VAT) returns. But they could not resolve the issue as the company could not provide any documents in this regard.