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Vol. 2 ::
No. 10 September, 2000 (Bhadra-Awisn) |
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| Corporate |
Among the 11 companies operating in Nepal’s non-life insurance sector, Everest Insurance may be referred to as a second-generation insurance company. It was one of the seven companies licensed to operate in the first phase of liberalization of finance and insurance sector. To be precise, Everest is the eighth oldest insurance company, as Dip Panday, General Manager of the company likes to put it. Among the seven others already in operation before Everest Insurance, were two insurance companies doing both life and non-life business and one of them was a government undertaking. Among the rest, one was a subsidiary of a public sector bank. Two Indian companies also were doing non-life business.
The objective of the company now is to achieve the leadership position in the business in a year or two by increasing its market share from present 10%. For that purpose the company’s Board has given the management a target of Rs. 165 million to raise as gross premium in the year 2000/2001, informs Panday. "But internally the management is targeting Rs. 200 million. If we are successful to achieve this target, premium collection-wise, we look forward to become the number one company", he adds. Compared to Rs. 122 million collected last year (1999/2000), the target for the current year (2000/2001) seems over-optimistic. Panday’s confidence is based on expectation to bag some high volume portfolios soon. |
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While all the leading insurance companies have their respective captive markets Panday claims that his company’s portfolio is more widespread. His indication is towards the fact that about 60% of the gross premium collection of one competitor is from aviation insurance. Similarly, competitors are associated with one or the other commercial bank thus giving them their respective captive markets. But Everest has no such advantages, Panday points out. However, Everest is associated with Khetan Group and some other business houses which have interests also in banking and finance companies apart from manufacturing and trading. "Though this has helped us in the business, we are not so much dependent on the associates as our competitors are", he claims.
This lack of the captive market of its own forced Everest to be professionalised, and the benefits of it are being realized now, according to Panday. In the very first year of its establishment, the company had collected about Rs. 10 million as gross premium and for the following years it was pinning its hopes on Kali Gandaki ‘A’ (144 MW) hydro-electricity project. But as indications started to surface that Kali Gandaki would not materialize, the company was forced to do alternate marketing. That way Everest earned some business on its own and improved professionalism. Eventually, Kali Gandaki also came under the company’s portfolio. "And that gave us a boost in terms of experience, confidence and also premium earning", he comments.
The experience of handling the mega-project gave the company further strength and now it is trying to rope in similar projects under its portfolio. The company is learnt to be trying to get the insurance business of the upcoming power projects also. Within the first two and half months of the current fiscal year, it has already collected over Rs. 100 million, Panday informs, and says, if this rate is maintained, the achievement will far exceed this year’s target. The major contribution to the premium collection this year is from two airlines that came to Everest’s portfolio only this year. While Mountain Air, Buddha Air, Flight Care Aviation and Skyline Air were already with Everest Insurance, the company has now bagged Fishtail Air and Shangri-La Air as well.
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Panday categorizes the insurance business into traditional and non-traditional segments, and says that the company is trying to achieve growth in its business by focusing in non-traditional segment. According to this classification, fire policies and those policies that people buy because they are forced to do so, while borrowing from bank for example, fall under traditional business. "We are focusing to become leaders in non-traditional segment, particularly in travel medical insurance and duty insurance", Panday reveals. Duty insurance business is for the Nepali imports and exports that pass through Indian territory, for example on the way to and from Calcutta Port. This business was started recently by Nepali companies, and the |
premium that Everest has collected from this was around Rs. 3 million last year, according to Panday, who says "this amount is not bad considering that this is a quite recent business for us." |
Panday puts the annual growth in non-life insurance business in Nepal for the last year at around 18 or 20%. But, his company has achieved 60% growth as seen from the annual premium collection figures (refer the box). Categorywise, the growth Everest has achieved is 40% in fire insurance.
Explaining the reasons for the spectacular growth in the company’s business, Panday attributes the success to three factors: good quality staff and support from the reinsurers apart from the company’s new business development. Among Everest’s total staff strength of about 70, Panday says the company has been the first job experience for about 95% of them. Training them on the job by hiring a consultant has done the miracle, he recounts. The company has connections with reinsurers from UK, USA, Italy, India, Japan, Dubai, Bahrain, Singapore, Korea and Germany. Thus, the company has been able to offer the clients the opportunity to choose from a wide range of alternatives. Backing of the Directors, who are well-known industrialists, has been the additional supportive factor for the company’s success, according to Panday.
In the process of developing non-traditional businesses, Everest Insurance is now planning to go into trekkers insurance and liability insurance. Looking at the fact that some one hundred thousand trekkers come to Nepal every year, the business volume would go up to US$ 3 million if the premium in average is at US$ 30 per trekker. But, at present the trekkers come with insurance policy bought from foreign insurance companies. Panday thinks that the government should help the Nepali companies to get this business. Talking about the liability insurance, he says, the impression that the doctors, nursing homes, engineers in Nepal have no liability risk in Nepal should be removed, and they should be made to hold liability insurance.
With his company growing in such a way, what will be the future of other weaker insurance companies? Panday’s answer is that they will be merged into, or taken over by, other bigger companies. "We’ll see such mergers of insurance companies taking place in the near future", he predicts.
Some Major Clients of Everest Insurance Hotels Everest Hotel Airlines Buddha Air Manufacturing Industries Gorakhkali Rubber Construction Project Kali Gandaki ‘A’ Hydel Project |
Financials of Everest Insurance (In Rs.)
| Particulars | 1995/96 | 1996/97 | 1997/98 | 1998/99 | Target for 1999/2000 |
| paid up Capital | 30,000,000 | 30,000,000 | 30,000,000 | 30,000,000 | 30,000,000 |
| Eaming per Share | 3.47 | 17.63 | 25.75 | 32 | 40.00 |
| Net Worth Per Share | 119.21 | 140.28 | 167.28 | 185 | 220 |
| Gross Premium | 31,264,977 | 57,074,728 | 69,443,566 | 76,361,081 | 122,000,000 |
| Net Retention | 4,088,011 | 6,049,877 | 8,109,674 | 8,232,506 | 9,000,000 |
| Net profit After Tax | 652,414 | 1,796,719 | 2,659,921 | 9,454,383 | 14,000,000 |
| Reserves | 5803,368 | 10,735,787 | 17,754,762 | 25,186,979 | 30,000,000 |
| Dividend (%) | _ | 5% | 10% | 15% | 20% |
By A Staff Reporter
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