A weekly review of fundamentals enjoyed by the blue chips

By SHABBIR H. KAZMI
Updated Sep 11, 2000

While the KSE-100 index is lingering on above the psychological level of 1500, buying continues when prices go down and profit taking starts when marginal gains could be made. HUBCO still remains the center of attraction amid rumours. There seems to be some hope that the visit of the IMF mission may pave way for some disbursement within the year 2000. However, some nominal disbursement from Asian Development Bank and oil financing arrangements with Islamic Development Bank has reduced dollar volatility. Higher international crude oil prices has created some buying interest in Shell and PSO shares. However, trading volume has remained low and may remain low due to a strict watch on the exposure limit of brokers.

EFU GENERAL INSURANCE

During the first half of the year 2000 the underwriting profit of the Company improved over the corresponding period of the previous year. The underwriting profit for the six months period was Rs 73 million compared to Rs 40 million for the previous year. This was mainly due to improvement in all the classes of business resulting from better claims ratio in fire and miscellaneous business comparatively lesser reserve strain on account of un-expired risks in marine and also better return on investments and rental income. The market value of investment in shares appreciated by Rs 54 million. The total appreciation as on June 30, 2000 was Rs 119 million. It is expected that the results for the full year would be better as compared to the year 1999.

EFU LIFE ASSURANCE

The Company is striving hard to consolidate its position as the leading private sector life insurance company. The amount of gross premiums written, during the first half of year 2000, for the group life business increased from Rs 92 million to Rs 110 million — representing a growth of 19 per cent over the corresponding period of previous year. The new regular annual premiums written for individual life business increased substantially from Rs 48 million to Rs 66 million — a growth of 37 per cent over the same period of the year 1999. Besides the substantial growth in group and individual life business renewal premiums increased to Rs 79 million — a growth of 55 per cent. Income from investment increased by 26 per cent to Rs 28 million. The life fund increased to Rs 411 million from Rs 339 million at December 31 , 1999.

FIRST GRINDLAYS MODARABA

FGM has declared 30 per cent dividend to its certificates holders for the year ending June 30, 2000. It had declared 25 per cent dividend for the previous year. The Modaraba has registered an overall improvement in performance, i.e. higher operating income and lower financial charges. However, other income came down. While the Modaraba had transferred Rs 23 million to statutory reserves last year, it transferred Rs 14 million to this account for the year under review. As a result of higher operating income there was an increase in fee paid to the management company. It was over Rs 15 million as against Rs 11.5 million paid for the previous year. FGM has been paying dividend to its certificate holders regularly while many other modarabas have been facing poor cashflow.

GULF COMMERCIAL BANK

While there was increase in income there was also an increase in expenses. The policy of prudent assets management seems to be working satisfactorily. The Bank posted Rs 122 million profit before tax during the first half of the year 2000. It also decided to make provisions against doubtful loans which reduced the profit to Rs 89 million. The Bank has been trying hard to mobilize low cost rupee deposits and shedding-off high cost foreign currency deposits. The toll of slow economic activity is evident from 14 per cent reduction in foreign trade business.

PRUDENTIAL COMMERCIAL BANK

The financial results of the Bank for the first half of the year 2000 were more or less in line with the corresponding period of the previous year — a common phenomenon in the commercial banks sector. Total income registered improvement from Rs 70.6 million to Rs 110 million in 1999 and expenditures came down from Rs 68 million to Rs 36 million during this period. However, the impact of additional income was eroded due to increase in administrative expenses which increased from Rs 77.8 million to Rs 84.5 million during the period under review.

ASKARI GENERAL INSURANCE

The Company has posted Rs 19.8 million profit before tax during the first half of the year 2000 as compared to Rs 14.34 million for the corresponding period of the previous year. It has not declared any interim dividend. The gross premium increased by 30 per cent to Rs 95 million as against Rs 73 million during the corresponding period last year. The retained premium increased from Rs 43.5 million to Rs 57 million during this period. The reserves and funds increased by 31 per cent to Rs 22.82 million as on June 30, 2000 as compared to Rs 17.41 as on June 30, 1999. Total assets of the Company increased by 29 per cent to Rs 172 million during the period under review.

MOVEMENT AT A GLANCE
SCRIP	HIGH (Rs.)	LOW (Rs.)	TURNOVER  (SHARE MN)	CLOSING  PRICE
EFU General Insurance	30.00	28.00	3,100	28.00
EFU Life Assurance	28.50	27.60	18,000	28.25
First Grindlays Modaraba	17.95	17.75	324,000	17.75
Gulf Commercial Bank	9.50	8.50	171,000	9.50
Prudential Comm. Bank	10.10	10.10	—	10.10
Askari General Isurance	11.80	10.30	259,000	11.80
Source IP Securities