Prime Islami Life in trouble with its Tk340cr investment

Prime Islami Life Insurance has fallen into trouble with its Tk340 crore investment in various projects as the recovery of the amount seems unlikely.

Of the amount, the life insurer had lent Tk320 crore to two of its concerns – PFI Securities Limited and Prime Islami Securities, Tk15 crore to four concerns of the Sterling Group, and invested Tk5 crore in a zero-coupon bond issued by Banglalion.

Prime Life's auditor – Mahfel Huq and Co – expressed doubts about the company's recovery of the loans in its audit report for 2021.

The auditor also said in its qualified opinion that the company failed to follow the insurance regulator's guidelines about investing in government securities and subsidiaries.

Furthermore, the auditor mentioned that the company failed to maintain the minimum shareholding percentage by sponsors and directors, as they jointly hold 38.08% shares, whereas, it should at least be 60% of the paid-up capital.

However, amid this loan recovery uncertainty, Prime Life declared a 2% cash dividend for 2021 at a board meeting that was held last Thursday. But in the previous year, it failed to pay any dividend to its shareholders.

Anatomy of the investment

Prime Life's Tk320 crore loan to PFI Securities and Prime Islami Securities has remained unrecovered since 2018, according to the auditor's qualified opinion in Prime Life's financial statements.

A senior officer at Prime Life said, "This money was lent to both the firms for them to invest in the capital market. But they did not repay us yet. So, we filed a case against both to recover the money."

The investment has been outstanding for a long time and the financial conditions of both the brokerage firms are not up to the mark. Hence, the recoverability of the money is uncertain, the auditor further stated in its opinion.

PFI Securities is a subsidiary company of Prime Finance and Investment Limited – a non-bank financial institution. Prime Islami Securities is a subsidiary of Prime Islami Life Insurance Company.

Prime Life's investment in four Sterling Group concerns is also outstanding for a long time. Also, no agreement was formed between Prime Life and the four entities regarding the Tk15 crore loan.

The insurer has started to take legal action in order to recover the investment from Sterling Group, the same officer of Prime Islami Life said.

Siddiqur Rahman, former president of the Bangladesh Garment Manufacturers and Exporters Association (BGMEA), is the chairman of Sterling Group.

Lastly, Prime Life's Tk5 crore investment in a Banglalion zero-coupon bond also seems to go in vain.

The company has started an arbitration process with Banglalion to recover the investment, the insurance company official said.

During the first nine months of 2022, Prime Life's life revenue account decreased by Tk95 crore to stand at Tk713 crore as its expenses exceeded its income.

But the price of its shares jumped by over 8% to Tk56.6 each last week at the Dhaka Stock Exchange.