Union Insurance to raise Tk19cr through IPO

Union Insurance Company Ltd has applied to the Bangladesh Securities and Exchange Commission (BSEC) to raise Tk19.36 crore capital by issuing 1.93 crore ordinary shares on the capital market.

The company aims to invest in fixed deposit receipt (FDR) in the capital market and purchase floor space.

The company insures: property damaged by fire incidents, marine cargo, motor, liability, and engineering projects.

Earlier, it applied to the commission but failed to comply with the securities rules.

Later that year, BSEC exempted the insurance companies from the securities rule to enable them to get listed on the stock market under the fixed price method.

Under the new facility, the insurance companies will be able to apply to the commission for IPO to raise less than Tk30 crore.

Additionally, insurance companies which have less than Tk30 crore paid-up capital must invest at least 20% of their equity in the capital market if they want to get listed.

The securities regulator took the decision in response to an application by the Insurance Development and Regulatory Authority of Bangladesh (Idra) in this regard.

After that Union Insurance applied to the commission for IPO.

Presently, the insurance company's paid-up capital is Tk29.04 crore.   

The company applied to the commission for IPO recently under the waiver of the paid-up capital rule, said Union Insurance issue manager Emam Hossain, also managing director of Sonar Bangla Capital Management.

According to the reports of nine months last year, the net profit of the company was Tk2.70 crore and its Earnings Per Share was Tk0.93.

During the period, its net premium was Tk43.11 crore and its net claim was Tk8.68 crore.

At the same time, the net asset value per share was Tk16.02.

Union Insurance Company Ltd was launched in Bangladesh as a public limited company on 24 August, 2000. 

The Insurance Act requires insurance companies to go public by issuing primary shares, but the number of those shares should not exceed two-thirds of what their entrepreneurs hold.

Experts have said Bangladesh has one of the most untapped insurance markets in terms of penetration rate.

Awareness and a strong culture of insurance service behind economic activities can help the industry thrive, they added.

Data by Swiss Re Institute, a leading global reinsurer, shows that an overall insurance penetration in Bangladesh stood at a meagre 0.49% in 2019 – the lowest among emerging Asian countries.

The penetration rate is measured as the ratio of premium underwritten in a particular year to the GDP.

Insurance penetration was 4.99% in Thailand in 2019, followed by: 4.72% in Malaysia, 4.30% in China, 3.76% in India, 2.24% in Vietnam, 1.99% in Indonesia, 1.72% in the Philippines, and 1.25% in Sri Lanka.

Taiwan has the highest penetration rate of 19.97% and Hong Kong 19.74%.

There are 78 companies in the insurance sector of Bangladesh. Of them, 32 are life insurance and 46 are non-life insurance companies.