Profitability of Pakistan Non-Life insurance sector rose by 41 percent to Rs10.5 billion in 2015, mainly driven by strong growth in investment income and improved underwriting income.
After adjusting for a one-off provisioning reversal of Rs1.9 billion booked by EFU General Insurance (EFUG) against its associate profitability of the sector grew by 63 percent to Rs12.2 billion in 2015.    
Sample for this analysis include all listed Non-Life insurance companies that have announced their financial results for 2015 except PICIC insurance (PIL) and Silver Star Insurance (SSIC). The sample covers more than 92 percent of Non-Life insurance sector market capitalization.
Major players including IGI Insurance (IGIIL), Adamjee Insurance (AICL) and EFUG posted impressive earnings growth of 57 percent, 36 percent and 28 percent, respectively. These players have a combined share of over 64 percent in total profitability of the sector .   Investment income that contributes significantly to the earnings of Non-Life insurance companies grew by 29 percent to Rs7.7 billion, driving the overall profitability of the sector in 2015. Higher dividend income and capital gains on equity portfolio contributed to an uptick in investment income.
Encouragingly, underwriting business (core business of sector) has shown improvement. Underwriting income of non-life insurance sector was up 39 percent to Rs5.6 billion in 2015. This is in continuation of an impressive growth of 72 percent seen in 2014. Improving underwriting business is indicative of improving macros and overall fundamentals of the industry.
Net premium of the sector grew by 15 percent to Rs29.0 billion in 2015, as compared to 11 percent growth witnessed during the same period last year. Major market players including AICL and Jubilee General Insurance (JGICL) posted premium growth of 23 percent and 14 percent respectively. AICL and JGICL have a market share of 27 percent and 14 percent in total premiums of the industry.  
Improving macros, increasing car sales, lower car theft and subsiding law & order problem have helped overall growth in underwriting income of the industry.
Claims increased at a slower pace, rising by 10 percent to Rs14.2 billion. As a result claims ratio came down to 49 percent in 2015 vs. 51 percent in 2014. We attribute this to improving security situation, lower car thefts and increased usage of tracker technology.
Similarly, expenses and commission also grew at a slower by 9 percent and 10 percent respectively to Rs7.0 billion and 2.1 billion. Resultantly, expense ratio declined to 24 percent in 2015 from 26 percent in 2014 whereas claim ratio dropped to 49 percent in 2015 from 51 percent in the previous year. 
This improvement in underwriting income was also evident from underwriting margin that improved to 19 percent in 2015 as compared to 16 percent during the previous year.