Prime Islami Life to sell properties to settle claims

Prime Islami Life Insurance has decided to sell properties, including land and a building to settle policyholders' claims as it has been hit hard by a lack of liquidity.

In a stock exchange filing on Thursday, it said the board had decided to sell a land of 36.12 decimals along with a building of the company at Banglamotor in the capital.

The decision was taken on instructions of the Insurance Development and Regulatory Authority (IDRA), said company secretary Abul Hasnat Mohammed Shamim.

He admitted that the company had failed to settle some claims after maturity due to fund shortage. "The board is trying to fast track settlement of the claims by selling properties."

Prime Islami Life Insurance has unsettled insurance claims worth Tk 3.17 billion as of December 2022. In the next five years, the company will have to settle claims amounting to Tk 21 billion, according to the IDRA.

Mohammad Jainul Bari, chairman of the IDRA, said earlier at a programme that the regulatory authority sat with the companies separately that had failed to settle claims after maturity to know about their plans to clear the dues.

"If needed, we asked companies to sell assets because timely claim settlement is our priority."

Some life insurance companies have been struggling to settle claims as they made a number of bad investments, where the return was insignificant, while some are facing a liquidity crunch as their life fund has been embezzled.

Against this backdrop, the IDRA appointed observers to four life insurance companies in June this year. The companies are Progressive Life Insurance Company, Sunlife Insurance Company, Padma Islami Life Insurance, and Golden Life Insurance.

Reasons behind selling properties

Several directors of Prime Islami Life Insurance siphoned off more than Tk 3 billion.

They had kept fixed deposits accumulated by the insurance company as collateral to secure bank loans for another company, according to an audit report.

The fraudsters were also on the board of the other company involved -- PFI Securities.

The directors during their tenure forced Prime Islami Life Insurance to keep the fixed deposits as collateral with the banks -- in breach of the rules.

In the middle of 2021, the securities regulator moved to conduct a special audit when allegations of irregularities surfaced against the company.

As PFI Securities did not repay the loans, the banks adjusted the fixed deposits against the loans and interests in 2017 and 2018.

But the insurance company showed the fixed deposits and the interest totaling Tk 1.67 billion as a short-term investment in PFI Securities.

The board of Prime Islami Life Insurance took the investment decision without analysing the associated risks in PFI Securities, and no formal documents or contracts were kept, which indicated the management's negligence at the execution level, said the audit report.

The life insurance company also failed to comply with a number of rules mentioned in the IDRA notifications relating to investment limit in immovable assets, subsidiary and other investment, according to its auditor on the financial year 2021.

As per the rules, maximum 20 per cent of the company's assets can be put into immovable assets. The company has made an investment of Tk 2.78 billion, almost double the permissible limit.

On the other hand, the company invested Tk 176.8 million in the government securities, far below the allowable limit of 30 per cent of its assets.

Prime Life Insurance also has investments in four concerns of Sterling Group amounting to Tk 150 million. Besides, it invested Tk 49.99 million in Banglalion Zero Coupon Bonds. The company - Banglalion -- that issued the bonds is not in operation.

There are doubts over the recovery of these investments since they have long been outstanding, while there are no provisions against the investments, according to the auditor, Mahfel Huq & Co Chartered Accountants.

The Prime Islami Life's assets for 2021 were estimated at Tk 9.57 billion while it was Tk 9.67 billion a year earlier, according to its audit report.

The company secretary admitted that there were gross irregularities and some companies were not repaying.

"We have filed cases against some companies, including Sterling Group and PFI Securities, and some people, including the former chairman of Prime Islami Life Insurance MA Khaleque."

All the cases are currently in the hearing process, he said.

Prime Islami Life Insurance's life fund decreased nearly 2 per cent year-on-year to Tk 7.13 billion in the nine months through September 2022.

The life insurer's stock dropped 1.66 per cent to close at Tk 59.20 on Thursday.

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