Prime Islami Life Insurance Ltd (PILIL) has become engulfed in rampant violations of law and mismanagement in recent times, including using policyholders’ money for illegal and unprofitable investments.
Such malpractices are severely endangering both the policyholders and the investors’ money.
According to the Insurance Development and Regulatory Authority (IDRA), PILIL has made illegal investments in subsidiaries while refraining from making the required investment in government securities, failed to pay insurance claims for a long time, showed lower returns on life funds, and deprived shareholders from dividends.
Under these circumstances, the regulator had ordered the company to submit a time-bound concrete plan to get out of the mess within 20 days, according to the minutes of a meeting between the parties on November 28, of which The Business Post has obtained a copy.
At the same time, IDRA has ordered the company to settle all outstanding insurance claims by December 31 this year. Besides, the regulatory body has asked the insurer for information about where and how its life fund has been invested.
Illegal, excessive, bad investments
A review of Prime Islami Life’s cashflow statement reveals that the flow generated through investment activities has been negative since 2017, indicating an overall financial deterioration of the company.
The meeting minutes reveal that Prime Islami Life has invested a massive Tk 159 crore or 19 per cent of its total investable assets in its subsidiary companies, violating the law. The Insurance Act, 2010, mandates that an insurance company can invest a maximum of 10 per cent of its total investable asset.
Besides, it also showed lower returns on its total life funds.
At the end of 2021, Prime Islami Life reported an investment return of only Tk 7.69 crore or 0.95 per cent of its total life funds of Tk 809 crore. According to the law, the minimum return should be 6 per cent, or in this case Tk 48 crore, excluding taxes.
Meanwhile, of the total Tk 809 crore of investable assets, PILIL has only invested Tk 18 crore in government securities, while it is required to invest at least Tk 2,422 crore.
Prime Islami Life's investments in immovable property stand at Tk 277 crore at present, which is over a hundred crore more than the mandated limit of Tk 162 crore.
According to the balance sheet of the company, it has current assets of Tk 225 crore or 23 per cent of its total assets, which if properly invested would have yielded desired returns. However, that has not happened.
PILIL has invested Tk 15 crore in Starling Group. As per the law, the company is required to monetise this investment, but that has not been the case so far.
In a similar fashion, the insurer invested Tk 5 crore in Banglalion Communications Ltd, which is currently not operating their business, and hence no profit has come from the said investment.
Policyholders, shareholders deprived of profits
At present, PILIL has a total of Tk 31.7 crore of unsettled insurance claims, according to the IDRA.
And in the next five years, the insurer will have to settle a huge number of insurance claims worth Tk 2100 crore. The company, already failing to settle claims, has been asked to submit its plan to tackle the upcoming crisis to IDRA.
Meanwhile, PILIL has also failed to recover Tk 324 crore of unpaid premiums and dues, which was included as company assets. The mismanagement at the company has put policyholders at risk and left many of its shareholders deprived of profits for years.
According to the IDRA meeting minutes, out of all the shares of the Prime Islami Life, its owner and directors own 38 per cent and the rest is owned by others. For the last few years, shareholders owning the majority of 62 per cent shares of this firm have not received any dividends. At the same time, there has been no liability assessment of the company for the last two years. The lack of assessment has kept the shareholders in the dark about the actual condition of the company.
What does the company say?
The Business Post had approached Prime Islami Life Chairman Md Akhtar regarding the reported mismanagement and law violations by the company, but he declined to comment on the matter.
Akhtar however told the correspondent that the company is yet to provide a concrete plan to the IDRA for course correcting the company, despite the deadline ending a few days ago.
However, in the November 28 meeting with IDRA, he admitted the miserable state of the company and its financial irregularities. He also blamed the company’s previous directors for its current state. Regarding the investment situation, he said the former directors of the company invested without properly following the rules. Moreover, the amount of the investments which were kept as deposits in various banks has been systematically misused.
Regarding the investments in immovable assets, he told the meeting that money has been embezzled through purchasing land at a higher value than the actual value of the land. Akhtar said steps are being taken to improve the state of the company.
