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Karachi, June 06, 2013 (PPI-OT): The Board of Directors of East West Life Assurance Company Limited in their meeting held on Friday, May 10th, 2013 have recommended for issuance of Right Share to further raise the capital by Rs. 93,835,500/- representing 9,383,550 ordinary shares of Rs.10/- each to be offered to members in the AGM being held on May 31st, 2013 at par in the ratio of 3:16, i.e. three Right Shares to sixteen shares held by existing shareholders (18.75%).
1. Purpose
In accordance with SEC (Insurance) Rules, 2002 (“Rules”) amended vide SRO 16(1)/2012 dated January 09, 2012, Life Insurance Companies are required to maintain a solvency margin in addition to policyholders’ liabilities in each statutory fluid as stipulated in the Rules. Currently, the Company is not in compliant with these Rules, in respect of the Solvency Margins required to be maintained, with respect to the shareholders fund and each of the statutory funds.
The Company vides its letter dated October 10, 2012 had written to the Securities and Exchange Commission of Pakistan (SECP) requesting to allow the Company to maintain solvency margins on December 31, 2012 in accordance with SEC (insurance) Rules, 2002 before amendments made vide SRO 16(1)/2012, The SECP did not accede to the request and which advised the Company vide their letter dated February 15, 2013 to ensure that its solvency margins are reported as per the latest solvency regulations notified by the SECP in January 2012.
The Company has written to the SECP requesting to reconsider the matter vide their letter dated February 18, 2013 for which response is awaited. After significant deliberations, in order to meet the solvency requirements at the earliest, the Board of Directors in their meeting held on May 10, 2013 have approved this rights issue to address the matter.
Further, currently, our share price is quoted in Stock Market around Rs. 5/-. Therefore, the general public will not be attracted to subscribe in this at par Right Issue, which means that the Directors of the company will finance the Right Issue, Moreover, certain directors will be out-of-country in the near future, which may result in problems in obtaining funds from them.
Besides this, the enhanced capital base will allow the company to fund expansion of its branches, invest further in technology and enhance overall business of the organization.
2. Benefits
The additional capital being inducted will create added source of funding for utilization in government securities and other investments. It will improve the solvency of the company, resulting in better profitability for the future.
Projected Balance Sheet
Aggregate Aggregate Aggregate
Projection Projection Projection
December 31, December 31, December 31,
2015 2014 2013
Share Capital and Reserves
Authorized Share Capital 600,000,000 600,000,000 600,000,000
----------- ----------- -----------
Issued, Subscribed and Paid Up Share Capital 624,291,500 624,291,500 594,291,500
Accumulated Deficit (390,390,842) (402,205,925) (409,444,315)
----------- ----------- -----------
Net Shareholders' Equity 233,900,658 222,085,575 184,847,185
Advance against Equity - - -
Balance of Statutory Fund including
Policyholders’ liabilities Rs. 232.557 million
(2011:Rs. 228.455 million) 302,274,160 269,436,382 248,131,982
Deferred Liabilities
Outstanding Gratuity 90,550 90,550 90,550
Creditors and Accruals
Outstanding Claims 30,212,696 27,466,088 26,625,289
Premiums Received in Advance 12,334,003 12,585,718 12,200,441
Taxation 4,142,491 4,227,032 4,097,633
Amount Due to Other Insurers/ Reinsurers 3,369,381 3,473,588 3,367,254
Accrued Expenses 10,814,893 11,265,514 10,920,651
Agents' Balances 1,735,194 1,807,493 1,752,162
Other Creditors and Accruals 727,375 749,872 726,916
----------- ----------- -----------
63,336,034 61,575,304 59,690,346
Other Liabilities
Dividend Payable - - -
Total Liabilities 365,700,744 331,102,237 307,912,878
----------- ----------- -----------
Contingencies and Commitments
Total Equity and Liabilities 599,601,402 553,187,811 492,760,063
----------- ----------- -----------
Projected Balance Sheet
Aggregate Aggregate Aggregate
Projection Projection Projection
December 31, 2015 December31, 2014 December 31, 2013
Cash and Bank Deposits
Cash in Hard 16,236 15,325 13,326
Current and Other Accounts 76,179,142 96,189,236 92,149,946
Deposits Maturing Within 12 Months 82,346,900 79,359,000 73,440,000
----------- ----------- -----------
158,542,328 175,563,561 165,603,272
Loans Secured Against Life Insurance Policies 12,921,300 12,612,034 10,009,551
Unsecured Advances to Employees 954,562 943,509 257,736
Investments
Government Securities 359,638,005 298,909,381 249,106,424
Other Fixed income Securities 997,862 988,768 988,768
Listed Equities 3,750,412 360,518 360,518
----------- ----------- -----------
364,386,279 300,258,667 250,455,710
Current Assets-Other
Premiums Due But Unpaid 22,735,450 22,734,450 22,736,650
Amount Due From Other Insurers/ Reinsurance 2,498,404 2,498,304 2,500,104
Prepayments 703,000 704,200 703,200
Sundry Receivables 5,986,861 5,996,861 6,001,615
Investment Income Accrued 1,862,660 1,862,560 1,861,560
Stationery 497,039 497,141 498,141
----------- ----------- -----------
34,283,414 34,293,516 34,301,270
Fixed Assets
Tangible
Furniture, Fixtures, Office Equipment and Vehicles 28,250,459 29,250,459 31,250,459
Intangible
Software 263,060 266,065 282,065
----------- ----------- -----------
28,513,519 29,516,524 31,532,524
----------- ----------- -----------
Total Assets 599,601,402 553,187,811 492,760,063
----------- ----------- -----------
Projected Profit and Loss Account
2015 2014 2013
Projection Projection Projection
Investment Income Not Attributable to Statutory Funds
Return on Government Securities 9,727,886 8,543,533 8,039,578
Return on Other Fixed Income Securities and Deposits 286,776 260,705 237,005
Amortization of Discount/ Premium Relative to Par 2,021,144 1,497,144 1,108,995
Dividend Income - - -
Capital Gain - - -
----------- ----------- -----------
12,035,806 10,601,382 9,385,576
Gain on Sale of Investments 5,809,690 4,841,408 4,034,507
Provision for Impairment in the value of
Available for Sale Investment - - -
----------- ----------- -----------
17,845,498 15,442,790 13,420,083
Other Revenue
Gain on Sale of Fixed Assets 1,432,219 1,145,775 603,040
----------- ----------- -----------
Miscellaneous Income
Total Investment Income 19,277,715 16,588,565 14,023,122
Expenses Not Attributable to Statutory Funds -5,662,632 -7,660,178 -10,066,901
----------- ----------- -----------
Share of Loss/ Profit in Associated
Profit before Tax 13,615,083 9,038,390 3,956,221
Taxation -1,800,000 -1,800,000 -1,500,000
----------- ----------- -----------
Profit before Tax 11,815,083 7,283,390 2,456,221
----------- ----------- -----------
Earnings per share 0.19 0.12 0.04
Projected Statement of Change in Equity
Total
Projected Balance as at January 01, 2013 88,555,464
Capital Issued during the Year 93,835,500
Contribution to Universal Life Fund -
Profit for the Year 2,456,221
-----------
Projected Balances as at December 21, 2013 184,847,185
-----------
Projected Balance as at January 01, 2014 184,847,185
Capital Issued during the Year 30,000,000
Contribution to Universal Life Fund -
Profit for the Year 7,238,390
-----------
Projected Balance as at December 31, 2014 222,085,575
-----------
Projected Balance as at January 01, 2015 222,085,575
Capital issued during the Year -
Contribution to Universal Life Fund -
Profit for the Year 11,815,083
-----------
Projected Balance as at December 31, 2015 233,900,653
-----------
Projected Revenue Account
Aggregate Aggregate Aggregate
Projection Projection Projection
December 31, December 31, December 31,
2015 2014 2013
Income
Premiums Less Reinsurances 241,273,343 219,339,403 199,399,457
Net Investment Income 18,877,930 17,978,981 17,122,839
----------- ----------- -----------
Total Net Income 260,151,274 237,318,384 216,522,297
Claims and Expenditure
Claims, Including Bonuses, Net of Reinsurance Recoveries 180,955,008 164,504,552 149,549,593
Management Expenses Less Recoveries 46,358,489 51,509,432 57,232,702
----------- ----------- -----------
Total Claims and Expenditure 227,313,496 216,013,984 206,782,295
----------- ----------- -----------
(Deficit) of Income Over
Claims and Expenditure 32,837,778 21,304,400 9,740,002
Add: Policyholders' Liabilities at Beginning of Year 241,952,281 237,208,119 232,556,979
Less: Policyholders' Liabilities at End of Year 246,791,327 241,952,281 237,208,119
----------- ----------- -----------
(4,839,046) (4,744,162) (4,651,140)
----------- ----------- -----------
Deficit 27,998,732 16,560,233 5,088,862
Movement in Policyholder Liabilities 4,839,046 4,744,162 4,651,140
Transfer from Shareholders’ Fund
Capital contribution from Shareholders’ Fund - - -
Balance of Statutory Fund at Beginning of Year 269,436,382 248,131,981 238,391,980
----------- ----------- -----------
Balance of Statutory Fund at End of Year 302,274,159 269,436,382 248,131,981
----------- ----------- -----------
Represented by:
Capital Contributed by Shareholder Fund 293,125,426 293,125,426 293,125,426
Accumulated Deficit -237,642,593 -265,641,325 -282,201,563
----------- ----------- -----------
55,482,833 27,484,101 10,923,863
Policyholders’ Liabilities 246,791,327 241,952,281 237,206,119
----------- ----------- -----------
Balance of Statutory Fund 302,274,163 269,436,382 248,131,962
----------- ----------- -----------
For more information, contact:
Sohail Nazeer
Company Secretary
The Karachi Stock Exchange Limited
Tel: (92-21) 111-001122
Fax: (92-21) 3241 0825, (92-21) 3241 5136
Email: info@kse.com.pk
Web: www.kse.com.pk