Sagarmatha Lumbini Insurance Records Strong Premium Growth but Profit Declines in FY 2082

Sagarmatha Lumbini Insurance (SALICO) has released its unaudited fourth-quarter financial results for Fiscal Year 2082, revealing strong growth in premium income but a notable drop in annual profits.

The company’s Net Earned Premium rose by 22.86% to NPR 2.11 billion, compared to NPR 1.72 billion in FY 2081, indicating strong market demand and an expansion in policy sales. Total Income also increased by 12.50% to NPR 3.11 billion, up from NPR 2.77 billion in the previous year.

Despite these revenue gains, Net Profit for the Year fell by 12.53% to NPR 403.2 million, down from NPR 460.9 million a year earlier. This decline was primarily due to a 30.71% increase in Net Claims Incurred, which jumped to NPR 1.69 billion from NPR 1.29 billion, coupled with a 17.49% rise in Total Expenses to NPR 2.54 billion.

Earnings performance also weakened, with Earnings Per Share (EPS) dropping from NPR 17.58 to NPR 15.37. The company’s Net Worth Per Share stood at NPR 239.12, and its Price-to-Earnings (P/E) ratio was 47.23, reflecting a relatively high market valuation despite lower earnings.

On the balance sheet, SALICO’s Share Capital remained unchanged at NPR 2.62 billion, while Special Reserves held steady at NPR 2.55 billion. Catastrophe Reserves increased by 21.34% to NPR 229.3 million, strengthening the company’s ability to cover large-scale claims. Other Equity rose by 13.57% to NPR 502.3 million, while Retained Earnings declined to NPR 366.5 million.

Interpretation:
Sagarmatha Lumbini Insurance demonstrated solid premium growth and revenue expansion, showing its competitive strength in the market. However, the substantial rise in claims payouts and operating expenses eroded profit margins, resulting in a year-on-year drop in net profit. The increase in catastrophe reserves reflects prudent risk management, although it may also point to expectations of higher claim risks in the future.

While the business fundamentals remain strong in terms of revenue generation, profitability pressures highlight the need for better cost control and claims management. The high P/E ratio suggests investor confidence but also indicates that the stock may be priced optimistically relative to its current earnings performance.

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