Padma Life Insurance’s life fund Tk272cr in the red, claims due surge 215% since S Alam takeover

Infographics: TBS

Since S Alam Group took over the leadership of Padma Islami Life Insurance in 2018, it has faced significant financial difficulties.

Its latest financial report states that as of 30 June, its life fund shows a deficit of Tk272 crore, while outstanding claims have risen to Tk230 crore.

However, when S Alam Group joined the company board, its life fund was Tk45 crore in the positive, and the outstanding claims were Tk70 crore, according to previous financial statements of the company. But over the years, these figures have worsened drastically.

A life fund is a fund paid to and invested by insurance companies for life insurance, from which money is paid when a policyholder dies. 

A senior officer of the Insurance Development and Regulatory Authority (IDRA) said a negative life fund means that the company does not have enough money to pay the claims of the insurance customers.

In October 2018, Padma Life's board underwent restructuring following the transfer of 44.78% of its shares to S Alam Group's sister concerns, including Pavilion International, Crest Holdings, Unitex LP Gas, Unitex Petroleum, and Affinity Assets.

However, there were already allegations of various irregularities and corruption against the previous owners of Padma Islami Life Insurance, which were stated as the reasons for its financial crisis at that time.

NRM Borhan Uddin, the designated representative of S Alam Group and then chairman of Padma Life Insurance, said in the company's annual report of 2018, "I am pleased to announce that a board representing the new controlling owners has taken over from the outgoing sponsor directors in October 2018 when the life insurer was facing a lot of high risk and extreme challenges."

"Among the challenges are business stagnation, severe liquidity crisis, huge unsettled claims, overstaffing, wanton mishandling of assets, mismanagement," he said.

He noted that the board has been trying to effect an organisational transformation which included a change in functional structure, policy improvement, establishment of operational and financial control, and, most of all, paying off outstanding claims. 

"The new board is determined to continue the business of Padma Islami Life Insurance with utmost honesty and transparency within the boundaries of Shariah," he said in the annual report.

After his resignation, Fakrul Islam became a director nominated by Unitex Petroleum and was later elected as the chairman of the company.

On the issue, Fakrul Islam told The Business Standard, "I resigned from the company in August, so I am not the appropriate person to comment on the company's current matters.

Attempts were also made to contact Morshed Alam Siddiqui, the chief executive officer of Padma Life, for comments via mobile phone, but he did not respond. 

Later, Padma Life's Company Secretary Aktaruzzaman said the company's financial condition could not be improved mainly due to the negative impact on the country's economy during Covid and the Russia-Ukraine war.

He also said that the company's life fund has become negative due to bad investments. 

He said the company had bought land all over the country, and a lot of investment had to be made in the construction of Padma Life Tower. "And this money cannot be liquidated at will," he added.

"The most promising thing is that there is no problem with our board. Only the chairman has resigned, but other directors are on duty, and we are trying to improve the condition of the company," he continued.

According to the Padma Islami Life Insurance's financial report, S Alam group provided Tk154 crore as loan to the company to cope with its financial crisis.

Padma Islami Life Insurance was listed on the stock exchanges in 2012 through an initial public offering (IPO) by issuing 1.20 crore shares at a face value of Tk10 each. 

Since 2018, when the S Alam Group took over, the company managed to pay only a 2% cash dividend to shareholders in 2022. 

Currently, it is traded under the Z category due to its failure to consistently declare dividends.

Its share closed at Tk21.70 on Thursday (12 September) at the Dhaka Stock Exchange.

According to DSE information, general shareholders hold 50.86% shares of Padma Islami Life Insurance as of August this year.