PakSearch.com - Pakistan's Best Business site with Annual Reports, Laws and Articles

For business information, annual reports, laws, ordinances, regulations and articles.

EFU LIFE ASSURANCE LIFE

SIXTH ANNUAL REPORT 1997

CONTENTS

COMPANY INFORMATION

Chairman

ROSHEN ALI BHIMJEE

Managing Director & Chief Executive

TAHER G. SACHAK

Directors

ASHRAF W. TABANI

JAHANGIR SIDDIQUI

RAFIQUE R. BHIMJEE

SAIFUDDIN N. ZOOMKAWALA

HASANALI ABDULLAH

Corporate Secretary

SYED MEHDI IMAM

Chief Consulting Actuary & Advisor

MICHAEL J de H. BELL, F.I.A.

Consulting Actuary

OMERMORSHED, F.I.A., A.C.A.

Medical Director

DR. TAJUDDIN A. MANJI, F.R.C.P., M.R.C.P.

Legal Advisor

MUHAMMAD ALI SAYEED, M.A.B.L.

Auditor

HYDER BHIMJI & CO.

Chartered Accountants

Karachi.

Registered Office

70-W, A1-Malik Centre

Blue Area - F-7/G-7

Islamabad

Main Offices

37K, Block-6, P.E.C.H. Society

Karachi.

6th Floor, EFU House, 6-D, Jail Road

Lahore

MANAGEMENT

Managing Director & Chief Executive

TAHER G. SACHAK

Executive Director

S.M.H. RIZVI

National Sales Director

NASEEM A. CHAUDHARI

General Managers

S.A.R. ZAIDI

S.M. BAQAR NAQVI

Senior Manager

HASAN RIAZ

T.H. SAYYED

Managers

ADEEL H. JAFRI

MOHAMMAD ZUBAIR

SYED SHAHID ABBAS

ZAHEER ASLAM

Deputy Managers

FAZAL MEHMOOD

MOHAMMAD MUNAWAR KHALIL

EVELYN D. ABROGENA

Advisors

S.A. NAQVI

ZAHURUL HAQ BUTT

NOTICE OF MEETING

Notice is hereby given that the 6th Annual General Meeting of the Shareholders

of E F U Life Assurance Ltd. will be held at the Registered Office of the Company on 4th

Floor, 70-W A1-Malik Centre, Blue Area, F-7/G-7 Islamabad on Wednesday June 24, 1998

at 1 l:00 a.m. to transact the following business:

1. To confirm the minutes of the 5th Annual General Meeting held on June 28, 1997.

2. To receive and consider the Audited Accounts for the year ended December 31, 1997.

3. To appoint Auditors for the year 1998 and fix their remuneration.

4. To transact any other business with the permission of the Chair.

NOTES

1. A member entitled to attend and vote at the General Meeting is entitled to appoint another

member as a proxy and vote in respect of him. Forms of proxy must be deposited at the

Company's Registered Office not later than 48 hours before the time appointed for the

meeting.

2. The Share Transfer Books of the Company will be closed from June 20, 1998 to

June 30, 1998 (both days inclusive).

3. Members are requested to communicate to the Company of any change in their address.

REPORT OF THE DIRECTORS TO MEMBERS

The Directors of your Company are pleased to present to you the Sixth Annual Report of the

Company for the year ended December 31, 1997.

The economic situation in the country continued to be unsatisfactory during 1997 and this

together with inflationary pressures made the sale of life insurance difficult. In spite of these

adverse conditions your Company continued to consolidate it's position in the life insurance

market.

The Group Life business of the Company registered a growth of 9.5 % in terms of written

premium over the same period in the previous year. Premiums written amounted to Rs. 115

million of which Rs. 110.9 million were booked, representing 634 policies and over 232,000

insured lives. Group Life claims incurred during 1997 amounted to Rs. 66.9 million and your

Company continued to adhere to its high service levels including settling of claims within three

days of intimation.

Individual life business registered a significant increase during the year, with new annual

premiums written during 1997 amounting to Rs. 53.6 million as against Rs. 423 million in

1996, an increase of 26.7 %. The field force continues to grow, consisting of 571 persons in

22 branches at the end of the year. Renewal premiums continued to build up with second and

third year renewal persistency being stable. Your Company has sound investment strategies for

Policyholders' Fund and /herefore the Unit Price of the Fund continued to appreciate

throughout the year.

Your Company continues to carry out an annual actuarial valuation and set up full actuarial

reserves at the end of the each year. As the business matures reserves are increasing steadily,

being Rs. 122.1 million as at December 31, 1997 as compared to Rs. 78.2 million at the end of

1996. Consistent with the pattern of profitability anticipated by the management and indicated

in previous years' Directors Reports, your Company generated a small surplus for the year for

the first time in its brief existence. The surplus amounted to Rs. 1.4 million as compared to a

loss of RS. 4.3 million for 1996. The Board of Directors congratulates the management of the

Company for this turn around in only the fifth year of operations (and only three years and

nine months of individual life operations), which is a remarkable achievements

The administrative infrastructure of the Company continued to be strengthened with the

expansion of the computer system and enhancement of the life insurance administration

software. The Company also significantly expanded it's Main Office in Karachi to cater to its

rapidly increasing portfolio of clients and to further facilitate the provision of the high level of

service which our clients have come to expect of us.

Your Company currently offers the most comprehensive individual life product range and

continues to constantly keep it under review to ensure that it stays at the leading edge of the

market.

The Company continues to receive valuable guidance from Mr. Michael J. de H Bell, an

actuary of international fame who acts as an advisor to the Board, reviewing and monitoring

the Company's operations on a continuing basis. He also advises the Company on future

strategy and provides information on innovations in developed markets. We wish to record

our grateful appreciation for the expert guidance provided by him to your Company. We

further wish to recognize and place on record our appreciation of the contribution made by

our Consulting Actuary Mr. Omer Morshed for his invaluable advice on actuarial,

administrative and marketing policies of the Company.

We would also like to record our appreciation and gratitude to Munchener Ruckversichemngs

Gesellschaft (Munich Re) of Germany who are your Company's sole reinsurers who, apart

from providing reinsurance cover, continue to provide useful technical support to the

Company with regard to improvements in the design of existing products and development of

new products. Munich Re is the largest reinsurance company in the World with assets

exceeding Rs. 1,600 billion.

Our thanks are also due to EFU General Insurance Ltd. for their continuous support and

guidance which has enabled the Company to establish a strong presence in the market within a

short span of time.

The term of the present Board of Directors will expire on June 22, 1999.

Messrs. Hyder Bhimji & Co., Chartered Accountants, retire and being willing to continue are

recommended for reappointment as Auditors of the Company for the year 1998.

The Directors wish to record their appreciation for the tremendous contribution made by the

able and eminent officers, staff and field force of the Company towards its development and

growth. Their continuous commitment to high ethical standards, client service and hard work

has helped your Company emerge as a clear market leader amongst private sector life insurers.

Finally we would like to thank our clients for the confidence expressed in us and also to the

Department of Insurance, Government of Pakistan for the co-operation extended to us

throughout the year.

AUDITORS' REPORT TO THE MEMBERS

We have audited the annexed Balance Sheet of E F U LIFE ASSURANCE LIMITED as at

December 31, 1997, Revenue Account and Appropriation Account and the Statement of Changes in Financial

Position together with the Notes forming part thereof for the year then ended and we state that we have

obtained all the information and explanations which to the best of our knowledge and belief were necessary for

the purpose of our audit and after due verification thereof, we report that;

(a) in our opinion, proper books of account have been kept by the Company as required by the

Companies Ordinance, 1984;

(b) in our opinion:

(i) the balance sheet and the Revenue Account together with notes have been drawn up in

conformity with the provisions of the Insurance Act, 1938 and are in agreement with the

books of account and are further in accordance with the accounting policies consistently

applied;

(ii) the expenditure recurred during the year was for the purpose of the Company's business;

(iii) the business conducted,4nvestments made and expenditure incurred during the year were in

accordance with the objects of the Company;

shown by the books of the Company, the Balance Sheet, the Revenue Account and Appropriation

Account together with the notes thereto give the information required by the Insurance Act 1938, in

the manner so required and the Balance Sheet, the Revenue Account give, respectively, a true and fair

view of the state of the Company's affairs as at December 31, 1997 and of the Loss for the year then

ended.

(d) we have verified the cash and bank balances and investments by actual inspection or by the

production of certificates;

(e) as per Section 40B (2) of the Insurance Act, 1938 as amended, we certify that all expenses of

management wherever incurred whether directly or indirectly and all charges incurred in respect of Life Insurance business transacted by the Company in Pakistan have been

fully debited to the Revenue Account as expenses;

(f) as per Regulation 11 Part 1 in Third Schedule of the Insurance Act 1938 as amended we certify that

the Company has not paid to any person any commission in any form outside Pakistan in respect of

Life Insurance business transacted by the Company in Pakistan and that the Company has not

received outside Pakistan from any person any commission in any form in respect of any business

abroad; and

(g) no part of the Assets of the Life Assurance Fund has been directly or in directly applied in

contravention of the Insurance Act, 1938, relating to application and investment of Life Assurance

Fund; and

(h) in our opinion Zakat deductible at source, under the Zakat and Ushr Ordinance 1980, was deducted

by the Company and deposited in the Central Zakat Fund established under Section 7 of that

Ordinance.

HYDER BHIMJI & CO

Karachi: May 18, 1998

CHARTERED ACCOUNTANTS

REVENUE ACCOUNT FOR THE

YEAR ENDED 31 DECEMBER 1997

1997

1996

Rupees

Claims less reinsurances

37,121,657

35,301,274

Commission to Insurance Agents

24,507,189

15,941,364

Expenses of Management

Salaries & Benefits

38,743,929

29,678,978

Travelling Expenses

1,671,070

1,159,200

Audit Fee

20,000

Medical fee

1,226,411

753,129

Advertisement & Publicity

1,462,337

1,887,812

Printing & Stationery

4,264,756

2,398,057

Insurance Expenses

856,684

772,225

Zakat

7,904

Other Expenses of Management

----------

Policy Stamps

593,351

457,028

Telephone & Fax Expenses

4,058,922

3,113,693

Postage and telegram

840,913

554,540

Electricity & gas

2,300,205

1,915,729

Rent rates & taxes

4,762,692

2,610,112

Repair & maintenance

1,168,516

579,203

Computer maintenance

280,049

190,765

Training expenses

1,301,464

646,451

Entertainment

682,375

454,638

Bank Charges

405,866

256,976

Directors' Fee

6,000

5,500

Professional Charges

1,456,623

1,039,511

Lease Rent Expenses

557,670

Miscellaneous Expenses

1,686,102

1,266,049

----------

19,543,078

13,647,865

Depreciation

4,066,307

3,175,886

Preliminary & Deferred Expenses written off

1,145,010

Balance of Life Fund at the end of the year

as shown in the Balance Sheet

122,162,000

78,180,000

Surplus/(Loss) for the year carried to Appropriation Account

1,420,835

(4,273,820)

----------

258,211,263

179,794,884

==========

APPROPRIATION ACCOUNT FOR THE

Loss brought forward from previous year

(33,369,968)

(29,096,148)

Surplus/(Loss) for the year transferred from Revenue Account

1,420,835

(4,273,820)

----------

(31,949,133)

(33,369,968)

==========

NOTE: The annexed notes form an integral part of these accounts

Balance of Life Fund at the beginning of the year

78,180,000

42,524,150

Premium less reinsurances

(i) First year premium where the maximum premium

paying period is:

Two years

1,343,488

Five years

256,855

95,130

Eight years

26,594

Ten years

851,675

648,272

Eleven years

124,345

134,339

Twelve years or over (including through out life )

45,285,745

32,441,328

----------

46,545,214

34,662,557

(ii) Renewal premium - second year premium

23,327,923

20,137,380

Third year premium and over

19,578,606

5,397,723

(iii) Single premium

2,160,234

1,785,136

(iv) Group premium

67,465,703

61,083,955

----------

159,077,680

123,066,751

----------

Interest, Returns and Dividend

14,979,848

10,228,879

Less: Income Tax deducted at source

250,250

54,577

----------

14,729,598

10,174,302

Profit on sale of Investments

5,565,942

3,306,160

Profit on sale of Assets

623,589

723,521

Difference in Exchange

34,454

----------

258,211,263

179,794,884

==========

YEAR ENDED 31 DECEMBER 1997

Accumulated Loss carried to Balance Sheet

(31,949,133)

(33,369,968)

----------

(31,949,133)

(33,369,968)

==========

1997

1996

Note

Rupees

BALANCE SHEET AS AT 31 DECEMBER 1997

CAPITAL & LIABILITIES

Share Capital

Authorised

20,000,000 Ordinary Shares of Rs. 10/each

200,000,000

==========

Issued subscribed and paid-up

10,000,000 Ordinary Shares of Rs. 10 each

fully paid in cash

100,000,000

Reserve for Depreciation on Investments

50,695

Accumulated Loss

(31,949,133)

(33,369,968)

Balance of Life Fund

2 (b)

122,162,000

78,180,000

Other Liabilities

Estimated Liability in respect of outstanding

----------

claims whether intimated or not

6,286,529

4,879,500

Amounts due to other persons or bodies

carrying on Insurance business

21,545,530

13,653,851

Sundry Creditors (including outstanding

and accrued expenses)

33,498,942

21,965,736

----------

61,331,001

40,499,087

----------

251,594,563

185,359,814

==========

DIRECTORS' CERTIFICATE

We certify that:

1. Investments have been shown in the Balance Sheet at cost or book value. The market value of quoted investments in Pakistan

are as ascertained from the last published market reports and quotation of 31 December 1997.

2. The value of all the assets in Pakistan included in the Balance Sheet have been reviewed as on the date of Balance Sheet and in

our belief taking into account the provisions and reserves, on the "Liabilities" side of the Balance Sheet, the Assets in Pakistan

are shown in the aggregate at amounts not exceeding their realisable or market value under the several headings.

3. No part of the assets of Life Assurance Fund has been directly or indirectly applied in contravention of the provisions of the

Insurance Act, 1938 relating to the application and investment of Life Assurance Fund.

4. All expenses of management in respect of Life insurance business transacted by the company have been fully debited to

Revenue Account.

1997

1996

Note

Rupees

ASSETS

Investments - at cost

Deposited with State Bank of Pakistan

Federal Investment Bonds

6,100,000

Federal Investment Bonds

43,333,950

Wapda Bonds

2,000,000

Defence saving Certificates

37,250,000

Short Term Federal Bonds

2,500,000

Term Finance Certificates

8,954,720

9,221,256

Shares at cost (Market value 1997 Rs. 46,553,145)

( Market value 1996 Rs. 28,457,274 )

58,553,936

42,516,278

----------

158,692,606

103,171,484

Preliminary and Deferred Expenses

2 (c)

2,290,024

3,435,034

Current Assets

----------

Agents' balances and outstanding premium

20,345,961

14,616,185

Interest and return accrued but not due

4,967,957

2,733,770

Advances deposits prepayments and other receivables

11,826,949

4,368,698

Advance Income Tax

134,964

51,100

Cash

----------

on deposit account with Banks

12,530,000

24,750,000

on current account with Banks

15,945,754

11,802,922

----------

28,475,754

36,552,922

----------

65,751,585

58,322,675

Administrative fixed assets

Furniture, fixtures, office equipments and vehicles

At cost less accumulated depreciation

24,860,348

20,430,621

----------

251,594,563

185,359,814

=========

NOTE: The annexed notes form an integral part of these accounts

STATEMENT OF CHANGES IN FINANCIAL POSITION

FOR THE YEAR ENDED 31 DECEMBER 1997

1997

1996

Rupees

CASH FLOW FROM OPERATING ACTIVITIES

NET SURPLUS/(LOSS) FOR THE YEAR

1,420,835

(4,273,820)

Adjustment for:

Depreciation

4,066,307

3,175,886

Increase in Life Fund

43,982,000

35,655,850

Profit On Sale of Investments

(5,565,942)

(3,306,160)

Profit On Sale of Administrative fixed assets

(623,589)

(723,521)

Amortization of preliminary and deferred expenses

1,145,010

1,1