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MGT210: Organizational Management
Section: 09
Report on: Karnaphuli Insurance Co. Ltd.
Submitted To:
NOOR-E-HASNIN (NEH)
L...
Karnaphuli Insurance Co. Ltd. Page 1
Acknowledgement
The success of any research study depends upon a number of factors am...
Karnaphuli Insurance Co. Ltd. Page 2
Table of Contents
Contents Page No.
Executive Summary 03
Introduction 04
Mission, Vis...
Karnaphuli Insurance Co. Ltd. Page 3
Executive Summary
Since its inception in 1986 Karnaphuli Insurance Co. Ltd. continue...
Karnaphuli Insurance Co. Ltd. Page 4
 Introduction
Karnaphuli Insurance Company Limited was incorporated on 23rd
November...
Karnaphuli Insurance Co. Ltd. Page 5
 Mission
The mission of the company is to serve the nation with significant contribu...
Karnaphuli Insurance Co. Ltd. Page 6
 Corporate Philosophy
The customers, employees and shareholders are equally importan...
Karnaphuli Insurance Co. Ltd. Page 7
 Products and Services
1. Conventional
Fire & allied perils Insurance
Riot and Strik...
Karnaphuli Insurance Co. Ltd. Page 8
6. Engineering Insurance
Machinery Breakdown Insurance (MBD)
Deterioration of Stocks ...
Karnaphuli Insurance Co. Ltd. Page 9
 Organizational Chart
Karnaphuli Insurance Co. Ltd.
Non-Managerial Employees
First-l...
Karnaphuli Insurance Co. Ltd. Page 10
Situation Analysis
 Financial Highlights
TAKA in Millions
(Except the ones with ^ma...
Karnaphuli Insurance Co. Ltd. Page 11
 Board Of Directors
The Board of Karnaphuli Insurance Co. Ltd. has been constituted...
Karnaphuli Insurance Co. Ltd. Page 12
 Premium Income
The Company earned a premium of Tk. 280,757,465 for the year 2015-1...
Karnaphuli Insurance Co. Ltd. Page 13
Management Issues
 Role of CEO & Managing Director
The duties and responsibilities ...
Karnaphuli Insurance Co. Ltd. Page 14
 Re-Insurance Policy
As per rule, while arranging such agreement the Insurance Comp...
Karnaphuli Insurance Co. Ltd. Page 15
 Solvency Margin
Under the section 43 of Insurance Act 2010, the Company has mainta...
Karnaphuli Insurance Co. Ltd. Page 16
 Management Expense and Provision for Unexpired Risks
Management expenses as charge...
Karnaphuli Insurance Co. Ltd. Page 17
SWOT Analysis
 Strengths
1. Good reputation in the Bangladeshi insurance industry, ...
Karnaphuli Insurance Co. Ltd. Page 18
 Opportunities
1. Expected future economic growth of Bangladesh and forecasted GDP ...
Karnaphuli Insurance Co. Ltd. Page 19
PORTER’s Five Forces Industry Analysis
1. Threat of New Entrants: The average entrep...
Karnaphuli Insurance Co. Ltd. Page 20
barriers preventing other firms from entering. Moreover, the low switching costs and...
Karnaphuli Insurance Co. Ltd. Page 21
 Conclusion
Karnaphuli Insurance Co. Ltd have been functioning its insurance activi...
Karnaphuli Insurance Co. Ltd. Page 22
 Bibliography
Source:
Mr. A.N.M. Fazlul Karim Munshi
CEO & Managing Director
Karnap...
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Organizational Management Report on Karnaphuli Insurance Co. Ltd.

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An organizational management report on Karnaphuli Insurance Co. Ltd. The report covers the Executive Summary, Mission, Vision, Company Background, Organization chart(Hierarchy), Situation Analysis, Management Issues and SWOT analysis of Karnaphuli Insurance Co. Ltd. Moreover, the report also consists of the PORTER's Five Forces Analysis of the Insurance Industry in Bangladesh and across the world.

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Organizational Management Report on Karnaphuli Insurance Co. Ltd.

  1. 1. MGT210: Organizational Management Section: 09 Report on: Karnaphuli Insurance Co. Ltd. Submitted To: NOOR-E-HASNIN (NEH) Lecturer, Department of Management, SBE-NSU Submitted By:  Mahade Hasan Nobel [1510608630]  Akram Hossain [1511948030]  Md. Iftakharul Haque Fahim [1511495030]  Mohammad Abdullah Sujon [1521036631]  Syed Nasif Fuad [1610643630]  Md. Tanzirul Amin [1611676030] MGT 210 Date of Submission: Sunday, 4th December 2016
  2. 2. Karnaphuli Insurance Co. Ltd. Page 1 Acknowledgement The success of any research study depends upon a number of factors among which the proper guidance from the faculty plays an important role. The report is based on the organizational management and business stratagem of Karnaphuli Insurance Co. Ltd. At first, we would like to give thanks to Almighty Allah, due to His mercy and blessings we were able to complete this report. We take here a great opportunity to express our sincere and deep sense of gratitude to Lecturer Noor-E-Hasnin ma’am, Department of Management- SBE, North South University for giving us an opportunity to work on this report. The support and guidance from ma’am was a great help and it was extremely valuable for completing this report and gain practical knowledge. We are also grateful to Mr A.N.M. Fazlul Karim Munshi, Managing Director and CEO (former Additional Managing Director and Head of Marketing) of Karnaphuli Insurance Co. Ltd.; and Mr Md. Azharul Karim, Deputy General Manager (former Sr. Assistant General Manager) of Karnaphuli Insurance Co. Ltd. for their relentless help by providing us with the important information and crucial lessons about the Karnaphuli Insurance Co. Ltd. and the insurance industry at home and abroad. The project is an effort to contribute towards achieving the desired objectives. In doing so, we have optimized all available resources and made use of some external resources, the interplay of which, over a period of time, led to the attainment of the set goals. We are satisfied to complete this complex task with the sincere cooperation of each other in our group. We express our sincere thanks to all the people who, directly or indirectly, contributed in time, energy and knowledge to our attained goal and success.
  3. 3. Karnaphuli Insurance Co. Ltd. Page 2 Table of Contents Contents Page No. Executive Summary 03 Introduction 04 Mission, Vision and Business Strategy 05 Company Background 06 Organization Chart 09 Situation Analysis 10 Management Issues 13 SWOT Analysis 17 PORTER’s Five Forces Industry Analysis 19 Conclusion & Remarks 21 Bibliography 22
  4. 4. Karnaphuli Insurance Co. Ltd. Page 3 Executive Summary Since its inception in 1986 Karnaphuli Insurance Co. Ltd. continued steady development, and have witnessed a successful year in 2015-16 despite a host of challenges faced in overall business investment climate of the country. The interest on FDR decreased drastically, Capital Market was volatile. With these obstacles for economic growth the Karnaphuli Insurance Co. Ltd. kept its steady growth responding to the need and expectations of the customers. They improved their fund management, fixed deposit rose to Tk.64, 02, 74,824/- plus BGTB Tk. 2, 50, 00,000/- and underwriting profit of Tk.4, 42, 53,384/-. They act with integrity and consistency based on a set of values, ethical standards and fairness. They strive to run the company as 100% compliance to the rules, regulations, and circulars of their regulators IDRA, which helped them to improve operational excellence to squeeze cost. They have achieved the targets of 100% collection, zero tolerance to outstanding, profit after tax increased slightly than last year. With the personalized services of their team, their insured-insurer relationship built on the personal and long term relationship. Each and every customer is special to them. They welcome challenges, show strength of character, and remain positive, even when things are tough they see difficulty as an opportunity to demonstrate their ability. Meeting Customer needs, organizing resources in the most efficient and effective way, beating the competitors, they are trying their best to achieve corporate objectives. Their image in the Insurance industry is of great value to them. At the cornerstone of their business, they try to offer highest level of care and customized services to their clients. As per their policy, they are not unnecessarily aggressive. They intend to conduct and grow their business with their guiding principles, which they believe will bring out positive result in the long run for the Company as well as the society at large. With a vision to achieve an increased and diversified customer portfolio, Karnaphuli has rolled out a plan to penetrate the Retail and SME (Small and Medium Enterprises) segment. They are committed to reach every one with their product. With the strong distribution channel they will ensure insurance services to the door steps of the customers in 2015-16 through reinvention over their competitors. We all know the turmoil in our capital market. This challenging condition compelled them to sell out maximum shares squeezing our portfolio resulting to loss of Tk.6, 45, 80,131/- from the share market. They are committed to maintain a strong financial base through the sustainable increase in premium income. They are compliant insurance Company regarding paid up capital, board size, minimum share hold by the members of the Board of Directors, appointment of independent Director and all of the parameters of corporate governance as set by the Bangladesh Securities and Exchange Commission from time to time. Moreover, they have established on line system restructuring IT and Internal Audit department which helped them ensure better compliance at a cost effective manner. Hence, they expect a steady and sustainable development of the company. As an innovative company that plays a leading role in quality the expertise of their employees is of enormous importance as it would not be possible to implement the strategy successfully without them. Utilizing comprehensive promotion and training activities they strive to be seen as an employer of choice at all levels on the job market. Along with the duteous employees, the honourable Chairman, the honourable members of our Board of Directors and Executives are also extending their helping hands and guidance with their prudent knowledge experience and expertise for the welfare of their organization.
  5. 5. Karnaphuli Insurance Co. Ltd. Page 4  Introduction Karnaphuli Insurance Company Limited was incorporated on 23rd November 1986 as public limited company under the companies Act 1913, obtained the certificate of registration, for carrying on General insurance business from the controller of capital issues on 23rd November, 1986. The company started to commercial operation on 25th November, 1986 being sponsored by a group of renowned business personalities, reputed industrialist and journalist of the company. Karnaphuli Insurance Company Limited (KICL) is a first generation and top-tier Non-life insurance company. The company has been maintaining strong capital base, ethical business standards, corporative culture and corporate governance, superior underwriting skills and dynamic investment management since its inception. Karnaphuli Insurance Company Limited was started its journey with paid up capital of 3.00crore in 1986. At present the company’s paid up capital is Tk. 407,039,590 and authorized capital Tk. 60.00crore. With a network of 27 branches covering strategic financial centers of Dhaka, Chittagong, Rajshahi, Khulna, Barisal, Shylet, Rangpur, Bogra and some important district town has been providing whole hearted services to the doorsteps of the client. Consisting of a workforce around 800 people KICL has an active presence in the capital market and general insurance industry. The Company is always eagerly ready to fulfill the needs of all the clients with high profitability & balanced growth. KICL has earned excellent market reputation and absolute confidence of its valued clients The Board of Karnaphuli Insurance Co. Ltd. Has been constituted with 14 Directors including 3 independent directors as on 31 December , 2015 as per section 76(1) of insurance act 2010 and notification of Bangladesh Securities and Exchange Commission.
  6. 6. Karnaphuli Insurance Co. Ltd. Page 5  Mission The mission of the company is to serve the nation with significant contribution to the national economy through specialized, personalized and relentless services to the customers with excellent team spirit to steady growth of the company and maximum return to shareholders and other stakeholders of the company.  Vision The vision of Karnaphuli Insurance Co. Ltd. is to make the company Bigger, Better and Bolder.  Business Strategy The company is focused on few strategic issues encompassing change Management in the short to long period through the implementation of various policies, processes and activates to ensure continuous, sustainable and qualitative growth, with the sole objectives of institution building. An effective cluster management program has been implemented. Branch management is now being continually exposed to mature thoughts and ideas trough mentors resulting is qualitative improvement of their own business and operational activates.
  7. 7. Karnaphuli Insurance Co. Ltd. Page 6  Corporate Philosophy The customers, employees and shareholders are equally important to Karnaphuli Insurance Co. Ltd. They want to achieve strong corporate growth to risk management inclusion. They provide solutions at a minimum cost based on a level of satisfaction of all segment of their customers, thus also contributing to the prosperity of their employees and shareholders. With a firm commitment to provide solutions, they are constantly developing innovative and technologically advanced product and services to satisfy the customer needs. They offer cutting edge compensation package and good work environment to their employees. By embracing a creative corporate culture, they increase the share values according to the expectation of shareholders, which has given them a path to growth and progress.  Core Values of Karnaphuli Insurance Co. Ltd 1. Priority to customers/clients: Being service oriented organization, they give first priority to their customer in extending their services, engage themselves to build up durable relationship with the customers, and differences if any arises is solved through mutual discussion. 2. Organization above self: They believe that organizational interest is above all individual interest. So, all efforts are concentrated at the interest of organization. 3. Trust: They believe that there cannot be teamwork without mutual trust. Trust is fundamental to their business and guides all internal and external interactions. 4. High Standards: They believe that excellence can achieved only by setting benchmarks that challenge their full potential as an organization and as individuals. 5. Shared Ownership: They believe in everybody sharing in achieving best result both organization and team efforts. 6. Spirit and adventure: They believe in continuous innovation and creativity to meet challenges head-on since they deal with unforeseen risks. 7. Respect for Diversity: They believe that diversity is their strength. They recognize team members having varying backgrounds, competencies, ideas and constructive action helps better understanding.
  8. 8. Karnaphuli Insurance Co. Ltd. Page 7  Products and Services 1. Conventional Fire & allied perils Insurance Riot and Strike damage (R&SD) Malicious damage (MD) Flood & Cyclone Earthquake (Fire & Shock) Aircraft damage 2. Marine Cargo Insurance & Marine Hull Insurance 3. Motor Insurance a) Motor Insurance b) Motor Insurance 4. Miscellaneous Insurance Burglary Workman’s compensation Employer’s liability Hotel Owners All Risk (HOAR) Personal Accident (Air Travel) Product liability Insurance Public Liability Insurance Professional Indemnity Insurance 5. Corporate Risk Management Industrial All Risk Insurance including Machinery Insurance And business interruption Property All Risk Insurance including business interruption
  9. 9. Karnaphuli Insurance Co. Ltd. Page 8 6. Engineering Insurance Machinery Breakdown Insurance (MBD) Deterioration of Stocks (DOS) Boiler and Pressure Vessel (BPV) Erection all Risk (EAR) Contractor All Risk (CAR) Electrical Equipment Insurance (EEI) Contractor Plant and Machinery (CPM) Loss of Profit following Machinery Breakdown 7. Financial Cash in safe Cash in Transit Cash in Counter Fidelity Guarantee Bank lockers Insurance A.T.M. Booth Insurance 8. Investment and Portfolio Management Underwriting Pre-IPO placement syndication Trusteeship  Organizational Departments And Committee  Departments: a. Finance and Accounts b. Management and HR c. Marketing and Public Relations d. IT Division  Committees: a. Business Development Committee b. Claim Settlement Committee c. Ethics Committee d. Money Laundering Committee e. Audit Committee
  10. 10. Karnaphuli Insurance Co. Ltd. Page 9  Organizational Chart Karnaphuli Insurance Co. Ltd. Non-Managerial Employees First-line Management Top Management Middle Management
  11. 11. Karnaphuli Insurance Co. Ltd. Page 10 Situation Analysis  Financial Highlights TAKA in Millions (Except the ones with ^mark) Particulars 2011 2012 2013 2014 2015  Authorized Capital  600 600 600 600 600  Paid up Capital  369.2 369.2 369.2 387.66 407.04  Gross Premium Income 232.57 276.38 265.14 274.83 280.76  Net Premium income Less Re-Insurance 137.11 156.69 165.99 139.66 148.08  Underwriting Profit  28.95 49.96 40.18 36.84 35.98  Total Investment  727.79 747.98 790.89 817.28 747.27  Investment Income  91.17 59.67 74.76 72.6 24.9  Net Profit before Tax 101.48 86.95 92.26 90.5 44.25  Net Profit after Tax  78.22 57.62 62.66 59.5 19.05  Dividend Amount  55.38 46.15 46.15 46.52 40.7  Dividend Paid (Cash)* 15.00% 12.50% 7.50% 7.00% 10.00%  Dividend Paid (Stock)* - - 5.00% 5.00% -  Fixed Deposit (FDR) 468.82 500.47 525.92 556.47 640.27  Total Assets  1,068.16 1,117.27 1194.63 1,238.72 1216.93  Earnings Per Share*  2.35 1.56 1.7 1.53 0.47  Net Asset Value Per Share (NAVPS)* 19.36 19.42 19.87 20.95 19.11  No. of Share Holder's (Existing)* 18,868 16,812 17,384 16,215 16,183  Required Solvency Margin 55.77 62.99 66.69 57.41 62.84  Available Solvency Margin 451.11 439.8 427.39 585.87 369.95
  12. 12. Karnaphuli Insurance Co. Ltd. Page 11  Board Of Directors The Board of Karnaphuli Insurance Co. Ltd. has been constituted with 14 Directors including 3 independent directors as on 31 December, 2015 as per section 76 (1) of Insurance act 2010 and notification of Bangladesh Securities and Exchange Commission. The Board is chaired by Mr. Nizamuddin Ahmed, an eminent business person and well reputed industrialist. Former Director of FBCCI, Former Vice President of Bangladesh Insurance Association, Director of Dhaka Chamber of Commerce & Industries (DCCI) and Director of Bangladesh Chamber of Industries (BCI) Mr. Nizamuddin Ahmed has diversified business exposures.  Credit Rating The Karnaphuli Insurance Company Limited regularly analyzes the position of its claim paying ability. During the year Company achieved A+ (Pronounce as A Plus) rating for long term and AR-2 for short term which reflects a stable outlook on the basis of its premium collections, core services expeditions, settlement of claim and sound liquidity position by the Alpha Credit Rating Limited.  Reserve To protect the risk factors of the company it is very essential to have a good amount of reserve fund for company. The company created a reserve fund in line with recommendation of the Insurance Act and Income Tax Ordinance. The reserve for exceptional losses increased to Tk. 164,071,713 which is higher by 9.38 % over last year.  Assets Total Asset of the Company at the end of year 2015 stood at Tk. 1, 216, 929,914.  Claim Settlement During 2015-16 Karnaphuli Insurance Company Ltd. settled claim of Tk. 97,302,284 against Tk. 73,300,633 in 2014-15. In 2015-16 Karnaphuli Insurance Company Limited experienced a year of burdens in claims. Gross claim increased by Tk. 24,001,651 compared to that of previous year registering a growth of 33 %.
  13. 13. Karnaphuli Insurance Co. Ltd. Page 12  Premium Income The Company earned a premium of Tk. 280,757,465 for the year 2015-16 against Tk. 274,832,716 in 2014-15. Out of this Tk. 242, 965,640came from private sector and balance of Tk. 37, 791,825 as public sector business received from Sadharan Bima Corporation. After ceding Tk. 132,676,044 as re-insurance premium, the net premium income for the year amounted to Tk. 148,081,421 against Tk. 139,662,323 in 2014-15. Growth of premium collection is 2.15%.  Underwriting Profit/Income The underwriting profit has declined as compared with previous year. Underwriting profit for the year is Tk. 35,981,299 against Tk. 36,837,928 in 2014-15. The fixed deposit has increased by Tk. 83,800,000. The Company earned interest on fixed deposit amounting to Tk. 56,346,983. Current year’s dividend income was Tk. 3,869,631 and share trading loss was Tk. 64,580,131  Gross Income and Profit Gross Income in the year 2015-16 stood at Tk. 61,878,199 against Tk. 109,434,777 in 2014- 15 Net Profit before Tax Tk. 44,253,384 out of which underwriting profit is 35,981,299 against Tk. 36,837,928 in 2014-15.  Variance Within The Financial Year Underwriting profit decreased due to stiff competition and others multifaceted circumstances. Investment income decreased due to low interest rate and unsatisfactory performance of the stock market. Total income decreased due to loss on sale proceeds of shares of Tk. 6, 45, 80,131.  Interest on Statutory and other Investments Interest earned on statutory investments of Tk. 2.50crore lying with Bangladesh Bank in the form of Bangladesh Treasury Bonds has been accounted for at the prescribed rate. Besides, interest received from banks on STD accounts and FDR accounts have been duly credited to the Profit and Loss Account.  Share Value at DSE The aggregate market value of the shares as on 31/12/2015 stood at Tk. 49,624,600 as against cost of Tk. 31,384,370, and Debentures of Tk. 2,679,846.
  14. 14. Karnaphuli Insurance Co. Ltd. Page 13 Management Issues  Role of CEO & Managing Director The duties and responsibilities of CEO/Managing Director are clearly defined in the articles of Association and the guideline of the IDRA. CEO and Managing Director must present the Company's financial and business position in each board meeting for directors understanding and guidance. CEO is overall responsible for running of the business and implementation of the Board strategy, policy and performance of the Company. He looks after the day to day business and accountable to the Board for the financial and operation activities of the Company. Under prudent leadership of CEO a group of talented executives are performing efficiently within the jurisdiction of power delegated by the Board.  Compliance with the Law The Company applied all the applicable legal obligation and regulatory requirement of Bangladesh Securities & Exchange Commission, Dhaka Stock Exchange Ltd. and Insurance Development & regulatory Authority .Respective officers are responsible for ensuring proper compliance with applicable laws and regulation. Corporate Compliance Auditor M/s. Hussain Farhad & Co. Chartered Accountants was appointed by the board of director to conduct corporate compliance certification as per requirement of Bangladesh Securities and Exchange commission.  Application of BAS, IFRS, BFRS and IAS Bangladesh Accounting Standards (BAS), International Financial Reporting Standards (IFRS), International Accounting Standards (IAS) and Bangladesh Financial Reporting Standards (BFRS) as applicable in Bangladesh have been followed in preparation of financial statements and any departure there from has been adequately disclosed by Karnaphuli Insurance Co. Ltd.  System of Internal Control The system of internal control is sound and is implemented and monitored effectively. The Internal Audit Department of the company regularly checks the accuracy and reliability of its accounting data and takes initiative to promote the operational efficiency. The management is accountable for the implementation of the internal control systems and its principles. The financial data have been reviewed, confirmed and reported regularly to the Board of Directors. The management has taken into consideration its liquidity status, projected cash flow based on the market situation and its performance in the past years in support of the assumption.
  15. 15. Karnaphuli Insurance Co. Ltd. Page 14  Re-Insurance Policy As per rule, while arranging such agreement the Insurance Company/Underwriter needs to surrender net Re-insurance balance quarterly to Re-insurer through Statement of Accounts. On getting confirmation, Re-insurance premium is needed to remit to Re-insurer. Re-insurer by virtue of such agreement extends agreed commission and allows, claims recovery to the ceding Company. This agreement is renewable in each year subject to no objection from either side. At the moment, their lead Reinsurer is Sadharan Bima Corporation (SBC) and General Insurance Corporation (GIC) of India.  Investment Policy Karnaphuli Insurance Company Limited keeps an amount in the form of investment to meet up the uncertain loss. The Company has invested its fund very carefully in diversified way. Karnaphuli Insurance Co. Ltd. earns investment profit other than underwriting profit. Company has invested its fund in the capital market since 1996 in the share, debenture and bond. The Company reduced its investment in the capital market and reinvestment that fund in the form of FDR.  Dividend Policy The net profit of the Company is Tk. 44,253,384 for the year 2015-16. Reserve for exceptional loss is maintained for Tk. 14, 071, 080. The Board of Directors' of the Company recommended 10% cash dividend to the shareholders out of the surplus available for distribution at the end of the year 2015-16, subject to the approval of the shareholders in the 29th annual general meeting held on 27th June, 2016. The Company always dispatched/credited dividend to the shareholders within the stipulated time.  Risk and Concern Major risks are: strategic risk, underwriting risk, re-insurance risk, reserving risk, investment risk and liquidity risks. Board of Directors is very much careful about the risk factors of the company. It monitors such risk from time to time, keeping abreast of relevant developments and takes corrective and preventive measures as necessary to protect its interest to the fullest extent.  Extra Ordinary Gain and Loss To reduce the investment in capital market the management decided to sale the shares from investment in share market. As such the company incurred loss Tk. 6,45,80,131 which was partly adjusted with previous year's reserve for diminution in value of investment Tk. 2,98,50,727.
  16. 16. Karnaphuli Insurance Co. Ltd. Page 15  Solvency Margin Under the section 43 of Insurance Act 2010, the Company has maintained the required solvency margin. During 2015-16 the company's solvency margin was above the required level. Karnaphuli Insurance Co. Ltd. required solvency margin of Tk.62.84 million whereas the Company's available solvency was Tk. 369.95 million which means the value of assets had been more than the liabilities in that particular period.  Fairness of Financial Statement The financial statements along with the notes are prepared inconformity with the Company Act 1994, Insurance Act 2010, and Securities and Exchange Commission Rules 1987. These statements present fairly the Company's state of affairs, the results of its operation, cash flow and changes in equity. In compliance with BSEC notification dated 7 August 2012 Chief Executive Officer and Chief Financial Officer have given the declaration about the fairness of the financial statements.  Anti-Laundering Activities All the concern branches/department have been instructed to remain alert from motive of money launder's in connection with insurance underwriting and claims settlement. If any suspicious activities of any insured are found in connection of insurance document the concern branches are immediately inform to the chief money laundering compliance officer.  Software development and IT Division The management has established an Information Technology (IT) department headed by experienced and professional IT personnel. Since 1995 the share department of Karnaphuli Insurance Co. Ltd. has been introducing computer system and software of share management system has been developed by IBCS Primax Software (BD) Ltd. The management of Karnaphuli Insurance Co. Ltd. felt the necessity of utilization of Computer Integrated Information System (CIIS) in the Company and as such most of the branches are connected in one networking system.  Employee Benefit Plan The Company maintains a contributory provident fund for its employees. Every eligible employee contributes 10% of their basic salary on a monthly basis and the Company also contributes an equal amount to the fund. The fund is approved by the National Board of Revenue. The number of permanent employees engaged for the whole year who received a total annual remuneration of Taka 36,000 and above was 320.
  17. 17. Karnaphuli Insurance Co. Ltd. Page 16  Management Expense and Provision for Unexpired Risks Management expenses as charged to Revenue Accounts amounting to Taka 107,995,870 is approximately 38.47% of gross premium of Taka 280,757,465 earned during the year. The expenses have been apportioned at 51.90% to Fire, 28.57% to Marine and 19.53 % to miscellaneous business as per management decision. Before arriving at the surplus of each class of business necessary Provision for Unexpired Risks have been created at the rate of 40% on all business except on Marine Hull business for which the provision was made 100% of the total premium for the year 2015-16.  Corporate Social Responsibility (CSR) Activities Karnaphuli Insurance Company Limited is committed its role of Corporate Social Responsibilities (CSR). The Company during the year 2015-16 has contributed to Honorable Prime Minister's relief fund and Bangladesh Muktijudha Sangsad.  Corporate Website and Communication with Shareholders The company encourages communication with shareholders throughout the year and welcomes their participation at the Annual General Meeting. The annual general meeting decides on the appropriation of net-income, election of board members and appointment of the Auditors. Karnaphuli Insurance Company Limited regularly provide all information like as quarterly, half yearly and annual financial statements, price sensitive information through two daily newspapers and web site www.kiclbd.com of the Company in time.
  18. 18. Karnaphuli Insurance Co. Ltd. Page 17 SWOT Analysis  Strengths 1. Good reputation in the Bangladeshi insurance industry, having many regular and fixed customers especially several big companies or industrial firms. 2. Convenient Re-insurance policy with co-operation with reliable Re-insurers such as: Sadharan Bima Corporation (SBC) of Bangladesh and General Insurance Corporation (GIC) of India. Having foreign re-insurers gives the company a competitive advantage over others. 3. Loyal, dedicated and enthusiastic workforce carrying out their everyday task and working towards achieving organizational goals and company welfare. 4. Good use digital information technology with a Computer Integrated Information System (CIIS) in the company, connecting the branches within one networking system. 5. The company is being operated in an Economies of Scale, having a solvency margin of Tk. 369.95million. Making steady profits and gaining good net premiums. 6. The Company achieved A+ (Pronounce as A Plus) rating for long term and AR-2 for short term which reflects a stable outlook on the basis of its premium collections, core services expeditions, settlement of claim and sound liquidity position by the Alpha Credit Rating Limited. 7. The Company maintains a contributory provident fund for its employees. Every eligible employee contributes 10% of his basic salary on a monthly basis and the Company also contributes an equal amount to the fund.  Weaknesses 1. Lack of advertising and limited marketing only targeting niche corporate and industrial segments. 2. Slow decision making process, since almost every decision is taken by the CEO/Managing Director. This affects the organizational efficiency sometimes. 3. Decreased company stock prices at the Dhaka Stock Exchange, with an approximate Earning per Share Tk. 0.47 and Net Asset Value per Share (NAVPS) Tk. 19.11. 4. Decrease in annual profit percentage, underwriting profit for the year is Tk. 35,981,299 against Tk. 36,837,928 in 2014-15. The fixed deposit has increased by Tk. 83,800,000. Current year’s dividend income was Tk. 3,869,631 and share trading loss was Tk. 64,580,131.
  19. 19. Karnaphuli Insurance Co. Ltd. Page 18  Opportunities 1. Expected future economic growth of Bangladesh and forecasted GDP of around 7% by the World Bank, ADB and IMF. Thus, there is an anticipated boom in the manufacturing and industrial sectors for whom Karnaphuli Insurance Co. Ltd. Can be a reliable choice. 2. The large Retail and SME (Small and Medium Enterprises) segments are yet to be penetrated; these sectors can bring in profitable premiums and great fortunes for any insurance company. 3. Rise in awareness among the public and entrepreneurs about the insurance system. Moreover, people have a growing interest to prefer companies like Karnaphuli, with high claim settlement rates. 4. Lack of experienced workforce, modern technology, reliable claim settlement service and corporate/business ethics within the other insurance companies. 5. Overall steady growth of the insurance industry in Bangladesh with increasing number of customers and net premium incomes.  Threats 1. Unhealthy competitions among the existing companies and entry of new companies. Presence of unethical practice of providing commissions over premiums and claim issuance is a very critical factor. 2. Current political instability and decreasing financial turn-overs in the business sector means fall in the amount of new customers for insurance. 3. Unstable stock-market with depreciative price of shares of the company, the company lost around Tk. 6, 45, 80,131/- in the recent year due to this reason. 4. Increase in Tax issuance on the insurance companies by the government and providing negligible incentives to them. 5. Lack of information and knowledge among the general public about the insurance sector, often leads them to choose cheap but unreliable alternatives. 6. Expected entry of multinational insurance company in Bangladesh. Moreover, there is a tendency of the native customers to go for foreign brands/companies.
  20. 20. Karnaphuli Insurance Co. Ltd. Page 19 PORTER’s Five Forces Industry Analysis 1. Threat of New Entrants: The average entrepreneur can't come along and start a large insurance company. The threat of new entrants lies within the insurance industry itself. Some companies have carved out niche areas in which they underwrite insurance. These insurance companies are fearful of being squeezed out by the big players. Another threat for many insurance companies is other financial services companies entering the market. What would it take for a bank or investment bank to start offering insurance products? In some countries, only regulations prevent banks and other financial firms from entering the industry because starting money may not be a critical issue on today’s context for any insurance company. If those barriers of regulations were ever broken down, like in the U.S. with the Gramm-Leach-Bliley Act of 1999 or the Bangladesh Insurance Act 2010 we can be sure that the opportunities for new entrants are massive. Though many companies are operating in economies of scale but lack of brand loyalty still persists among the potential customers. 2. Power of Suppliers: The suppliers of capital might not pose a big threat, but the threat of suppliers luring away human capital does. If a talented insurance underwriter is working for a smaller insurance company (or one in a niche industry), there is the chance that person will be enticed away by larger companies looking to move into a particular market. 3. Power of Buyers: The individual doesn't pose much of a threat to the insurance industry. Large corporate clients have a lot more bargaining power with insurance companies. Large corporate clients like airlines, pharmaceutical, textile, marine cargo etc. companies pay millions of monetary units a year in premiums. Insurance companies try extremely hard to get high-margin corporate clients. 4. Availability of Substitutes: This one is pretty straight forward, for there are plenty of substitutes in the insurance industry. Most large insurance companies offer similar suites of services. Whether it is auto, home, commercial, health or life insurance, chances are there are competitors that can offer similar services. In some areas of insurance, however, the availability of substitutes is few and far between. Companies focusing on niche areas like: Marine cargo, usually have a competitive advantage, but this advantage depends entirely on the size of the niche and on whether there are any
  21. 21. Karnaphuli Insurance Co. Ltd. Page 20 barriers preventing other firms from entering. Moreover, the low switching costs and buyer loyalty also plays vital roles. 5. Competitive Rivalry: The insurance industry is becoming highly competitive. The difference between one insurance company and another is usually not that great. As a result, insurance has become more like a commodity - an area in which the insurance company with the low cost structure, greater efficiency and better customer service will beat out competitors. Insurance companies also use higher investment returns and a variety of insurance investment products to try to lure in customers. In the long run, we're likely to see more consolidation in the insurance industry. Larger companies prefer to take over or merge with other companies rather than spend the money to market and advertise to people. Like, in our country of the 47 general insurance companies Green Delta Insurance Company does around 50% of the annual insurance business of Tk. 2000crore. The completion is on the rise due to slow growth rate, diminishing prices and limited demands.  Remarks on Industrial Status Of General Insurance Sector The global economic environment needs to improve continuously in 2015 and 2016. In many emerging economies growth expectations are turning out to be lower than in previous years. In the advanced economies, the positive effect of the improved economic outlook on premium growth in property-casualty insurance is likely to be curbed by the significantly keener competitive situation not least because of the very solid capital resources of many insurers. In the emerging economies, we expect the demand for insurance to continue to be high overall, even though total premium growth of about 7.5% on average in 2016 is expected to be slightly lower than that in previous years. However, the premium growth is likely to continuously exceed the economic growth. The number one growth region will continue to be the emerging markets of Asia. Since, insurance industry is a highly competitive sector of the economy so careful decisions, innovative business strategy, thoughtful targeting of customers and building of brand image are the areas that any insurance company should give importance to.
  22. 22. Karnaphuli Insurance Co. Ltd. Page 21  Conclusion Karnaphuli Insurance Co. Ltd have been functioning its insurance activities since 1986 with all the name and fame. The company has so far gained financial solvency with satisfaction and earned reputation in settling claim within due time. In view of the above, the entire day to day affairs of the Company are maintained by skilled officials having technical know-how. The growth of the Company is satisfactory. As such, this Company shall function much better in future because of adoption of valued policies covering the entire operational activities of the company, including managerial, investment, training and staff welfare. In fine, they are confident to enjoy one of the best Credit Rating duly reflecting their best of financial and managerial capabilities. At the moment, this Company enjoys "A+" Credit Rating. The major challenges that manifested Insurance Sector due to poor investment in new Industries and barrier in Garment sector by the buyers imposing new conditions for compliance, which disrupted the economic activities and negative affect on premium income and interest on FDR. Against this tough scenario, the company put in its best efforts at harnessing best possible return from its core business through prudent cost control and premium income drive. Compiling all the instructions of their regulator IDRA, the overall performance of the Company is satisfactory.
  23. 23. Karnaphuli Insurance Co. Ltd. Page 22  Bibliography Source: Mr. A.N.M. Fazlul Karim Munshi CEO & Managing Director Karnaphuli Insurance Co. Ltd. Biman Bhaban (3rd Floor), 100, Motijheel C/A, Dhaka-1000. Contact: Phone- 9564810-11; FAX- 88-02-9555802; E-mail- kicl@kiclbd.com Mr. Md. Azharul Karim Deputy General Manager & Branch In-charge Baliadi Mansion Branch, Karnaphuli Insurance Co. Ltd. 92/1, Motijheel C/A, Dhaka-1000. Contact: Phone- 9564516; Fax- 88-02-9564516; E-mail- kic.baliadi@gmail.com Links: 1. http://www.kiclbd.com 2. http://www.kiclbd.com/reports/annual_report_2015.pdf 3. https://www.google.com/search?rct=j&q=karnaphuli%20insurance%20co.%20ltd 4. http://www.investopedia.com/features/industryhandbook/insurance.asp#ixzz4Rfyzp19 Z 5. http://www.academia.edu/1767455/Poblems_and_prospects_of_insurance_business_i n_bangldesh 6. http://www.slideshare.net/ 7. http://www.ivoryresearch.com/samples/economics-essay-example-strategic- management-of-tesco-supermarket-pestle-analysis-porter-5-forces-analysis-critical- success-factors-swot-analysis-value-chain-analysis-tesco-strategic-options-core- comp/ 8. http://www.investopedia.com/features/industryhandbook/insurance.asp ~~~Thank You~~~

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