Sunlife Insurance has made some progress in reducing costs under its new ownership, but it has yet to achieve revenue growth to make an impact on its overall business performance.
While the company is set to publish its financial results for 2024 soon, optimistic investors have already driven share price up by 43 per cent to Tk 75.4 each in the past 13 months following the ownership change in December 2023.
The company was previously owned by Zahid Maleque, a former health minister of the ousted Awami League regime, and his family. They sold their entire 35 per cent stake to Green Delta, a better-performing listed insurer, in December 2023.
Green Delta has already cut down the operating cost of the newly-acquired company, as shown in the financial statements for the nine months through September 2024.
Under the previous ownership, Sunlife's management cost was Tk 52.56 per Tk 100 earned in premium, investment, and other income in 2023. With the new owners, this figure has decreased by 3.36 per cent to Tk 50.79 in 2024.
Claim settlement costs also fell sharply by 30 per cent to Tk 46.26 against every Tk 100 earned in the first nine months of 2024, with claims-to-premium ratios showing improvement.
However, it remains unclear whether this is due to lower claim settlement costs or other corrective measures, as the company did not provide further explanation in its financial statements. The FE could not reach the company secretary by phone for comments.
Meanwhile, the revenue fell. In the first nine months of 2024, Sunlife earned Tk 308.54 billion, 54 per cent lower than in the same period of 2023.
High management costs and poor investment choices were the main problems for Sunlife under its previous management.
The FE found out that while the life insurance industry had an average 6 per cent stock investment in 2015, Sunlife's exposure to the volatile market was 16 per cent. On the other hand, only 22 per cent of Sunlife's investments were in risk-free Treasury bonds in the same year, far lower than the industry's 47 per cent.
A wide gap was also visible in investment in fixed deposits, deemed to be a secure investment instrument. For the industry, fixed deposits accounted for 34 per cent of all investments but only 16 per cent at Sunlife.
The larger chunk of the life insurance company's fund had been diverted to land and flats by 2021, from where it hardly received any return.
A former official of the company, who declined to be named, told The FE that the business had gone downhill because of the owners' meddling with the management, irrecoverable losses in stocks, and nepotism.
The outcome was a steep decline in investment income from Tk 0.21 billion to Tk 0.06 billion between 2015 and 2021. On the other hand, the industry's income rose from Tk 25 billion to Tk 29 billion during the period.
Around the same time, the Sunlife's management costs were 50 per cent to 100 per cent higher than the industry's. For example, in 2021 the company spent Tk 57 on management for every Tk 100 earned in gross premiums, while the industry average was Tk 32.
With a big share of the gross premium spent on management and dwindling investment return, Sunlife's expenses began surpassing its earnings in 2016.
In 2021, the life insurance company spent Tk 145 on management and claim settlement for every Tk 100 earned in gross premium and return from investments.
Despite these historic challenges, the ownership change has sparked optimism. Green Delta's proven track record in the insurance sector has instilled confidence in investors, reflected in the stock price rally.
However, Sunlife Insurance's success will depend on its ability to boost revenue, diversify investment strategies, and maintain cost controls under its new management.
farhan.fardaus@gmail.com
© 2025 - All Rights with The Financial Express
