Assignment

on
Laws and Practices of Insurance
Company: Eastland Insurance Company Limited
Year:2014 & 2015

Submitted To:
Md.Atiqur Rahman
Lecturer
Department of Accounting and Information Systems
Jahangirnagar University.

Submitted By:
Tarikul Islam
Id:2624
Batch:3rd
Department of Accounting and Information Systems

Submission Date: 25/10/2016

Table of Contents
Introduction: ............................................................................................................................... 3
Overview of the Company: ........................................................................................................ 4
Details of the Capital: ................................................................................................................ 5
Company Vision: ....................................................................................................................... 6
Company Mission: ..................................................................................................................... 6
Key information of the company: .............................................................................................. 6
Products: .................................................................................................................................... 7
Financial Information: ............................................................................................................... 8
Financial Statement analysis: ..................................................................................................... 9
EPS: ....................................................................................................................................... 9
Net asset value per share: .................................................................................................... 9
Price Earnings ratio:.......................................................................................................... 10
Return on stockholders equity: ....................................................................................... 11
Current assets: ................................................................................................................... 12
Current Liabilities: ............................................................................................................ 12
Current Ratio: .................................................................................................................... 13
Organizational Chart ................................................................................................................ 14
Operation Summary: ................................................................................................................ 15
2015...................................................................................................................................... 15
2014...................................................................................................................................... 15
Significant Accounting Policies and Relevant Information: ................................................... 16
Conclusion: .............................................................................................................................. 20
References: ............................................................................................................................... 21

Introduction:
Eastland Insurance Company Limited (EICL), a first generation general insurance company
was incorporated on November 5, 1986 as a public limited company under the Companies
Act 1913 (at present 1994) with the vision to be one of the premier non-life insurance
companies in Bangladesh. It obtained the Certificate of Registration for carrying on
insurance business from the Chief Controller of Insurance on November 22, 1986. The
company started its business with a paid up capital of Tk. 30.00 million against authorized
capital of Tk. 100.00 million being sponsored by a group of renowned business personalities
and reputed industrialists of the country having involvement in diversified business.

Overview of the Company:

Details of the Capital:

Company Vision:
To be a premier non-life insurance company in Bangladesh and contribute significantly to
the national economy.

Company Mission:

High quality services with state of the art technology.

Prompt customer service.
Sustainable growth strategy.
Follow ethical standards in business.
Steady return on shareholders equity.
Innovative Insurance service.
Attract and retain Mission-Critical human resource.
Commitment to Corporate Social Responsibility.

Key information of the company:

Products:

Financial Information:

Financial Statement analysis:

EPS:

Description:
Earnings per share, also called net income per share, is a market prospect ratio that
measures the amount of net income earned per share of stock outstanding. In other words,
this is the amount of money each share of stock would receive if all of the profits were
distributed to the outstanding shares at the end of the year.

Net asset value per share:

Details:
The net asset value per share can be defined as an expression for net asset value that
indicates the value per share for a fund (exchange-traded, mutual, and closed-end) or a
company.

Price Earnings ratio:

Details:
The price to earnings ratio (P/E ratio) is the ratio of market price per share to earnings per
share. The P/E ratio is a valuation ratio of a company's current price per share compared to
its earnings per share. It is also sometimes known as earnings multiple or price
multiple. Though Price-earnings ratio has several imperfections but it is still the most
acceptable method to evaluate prospective investments. It is calculated by dividing Market
Value per Share (P) to Earnings per Share (EPS). Market value of share can be taken from
stock market or online and earning per share figure can be calculated by dividing net annual
earnings to total number of shares (Net Annual Earnings/Total number of shares).

Return on stockholders equity:

Details:
Return on equity (ROE) is the amount of net income returned as a percentage of shareholders
equity. It reveals how much profit a company earned in comparison to the total amount of
shareholder equity found on the balance sheet.
ROE is one of the most important financial ratios and profitability metrics. It is often said to
be the ultimate ratio or the mother of all ratios that can be obtained from a companys
financial statement. It measures how profitable a company is for the owner of the investment,
and how profitably a company employs its equity.

Current assets:

Details:
A current asset is cash and any other company asset that will be turning to cash within one
year from the date shown in the heading of the company's Balance Sheet. (If a company has
an operating cycle that is longer than one year, an asset that will turn to cash within the length
of its operating cycle is considered to be a current asset.)

Current Liabilities:

Description:
A current liability is an obligation that is 1) due within one year of the date of a company's
balance sheet and 2) will require the use of a current asset or will create another current
liability. If a company's operating cycle is longer than one year, current liabilities are those
obligations due within the operating cycle.

Current Ratio:

CURRENT RATIO

2013

2.04

2012

1.94

2011

2.31

2.09

4.2

Current Ratio

2014

2015

Description:
The current ratio is balance-sheet financial performance measure of company liquidity. The
current ratio indicates a company's ability to meet short-term debt obligations. The current
ratio measures whether or not a firm has enough resources to pay its debts over the next 12
months. Potential creditors use this ratio in determining whether or not to make short-term
loans. The current ratio can also give a sense of the efficiency of a company's operating cycle
or its ability to turn its product into cash. The current ratio is also known as the working capital
ratio.

Organizational Chart

Operation Summary:
2015

2014

Significant Accounting Policies and Relevant Information:

1. The accounts have been prepared on a going concern basis under Generally Accepted
Accounting Principles (GAAP) and practice in Bangladesh on historical cost convention
and on accrual basis.
2. The Statement of Financial Position has been prepared in accordance with the
regulations as contained in part 1 of the First Schedule and as per Form A as set forth
in part 2 of that schedule and the Revenue account of each class of general insurance
business has been prepared in accordance with the regulation as contained in part 1
of third schedule and as per Form F as set forth in part 2 of that schedule of
Insurance Act and also in compliance with the companies Act 1994. In addition, the
Securities and Exchange Rules 1987, Listing Regulation of DSE & CSE, International
Accounting Standards (IAS) as adopted by the Institute of Chartered Accountants of
Bangladesh (ICAB) as Bangladesh Accounting Standard (BAS) have also been complied
with.
3. Figures have been rounded off to nearest Taka.
4. Last years figures have been re-arranged, wherever necessary, to conform to this
years presentation.
5. The total amount of the Premium earned on various classes of insurance business
underwritten during the year, the gross amount of premium earned against policies
issued, the amount of re-insurance premium due to Sadharan Bima Corporation (SBC)
and General Insurance Corporation of India (GIC) and others, the amount of reinsurance commission earned and the amount of claims less re-insurance settled
during the year have been duly accounted for in the boos of accounts. The effect of
re-insurance accepted and re-insurance ceded as well as the effect of total estimated
liabilities in respect of outstanding claims being the share of the company at the end
of the year whether due or intimated have also been duly reflected in order to arrive
at the net underwriting profit for the year.
6. Revenue / Premium recognition (BAS #18)
Premium recognized when insurance policies are issued. The sum of premium income
as appeared in classified Revenue Accounts is net of the refund made, Re-insurance
ceded and Re-insurance premium on Public Sector Insurance (PSB).

The premium in respect of Companys share of PSB is accounted for in the relevant
statement of accounts received from Shadharon Bima Corporation. The statements of
account for the period from 1st January, 2014 to December 31, 2014 have been
received from SBC and the Companys share of PSB for the aforesaid period has been
accounted for in the financial statements accordingly. Amount received against issue
of marine cover notes are not recognized as income during the year unless issuance
of policy. The said amount recognized as income as and when policy is issued or after
one year from the date of expiry of the cover note. Necessary adjustment in respect
of re-insurance ceded and accepted in Bangladesh and abroad has duly been made in
the respective Revenue Accounts as per Treaty Argument made between the
Company and Shadharan Bima Corporation (SBC) and General Insurance Corporation
of India (GIC).
7. Employee Benefits (BAS #19)
a. Contributory provident fund
Company operates a provident fund, recognized by the Income Tax Authorities.
Confirm employees of the Company are eligible for the said provident fund.
Employees of the Company contribute ten percent of their basic salary and the
employers make a matching contribution. The provident fund is administered by
a Board of Trustee and no part of the fund is included in the assets of the Company.
b. Gratuity
The Company operates a gratuity scheme under which a regular confirm
employees is entitled to benefit at a graduated scale based on the length of
service. The Length of service for the purpose of gratuity shall be reckoned from
the date of joining in the regular service of the Company. As per norms calculation
of gratuity is made on the basis of last drawn basic salary. An employee will receive
one months basic salary for each completed year of services as per rules if he/she
completed ten years service & above. Gratuity is payable only on
resignation/retirement from the company at cash basis.
c. Other Benefits
In addition to above, the company provides other benefits to its employees like
Performance Linked Variable Bonus (PLV), Group life Scheme (GLS), Staff

Benevolent fund and Car/Motor Cycle Loan Scheme subject to fulfillment of

certain terms and conditions.
8. Tax Assessment Position
Income Tax Assessment of the company has been completed up-to assessment year
2011-2012 excepting 2006-2007 for which reference of application has been filled
before the Honorable High Court Division. Assessment year 2012-2013 & 2013-2014
are under appeal and assessment years 2014-2015 and 2015-2016 are under process
of assessment.
9. Leased Assets (BAS #17)
The company acquired 8 (eight) vehicles under lease finance from Bay Leasing &
Investment Ltd. Up to December 31, 2014 and also acquired 7 (seven) vehicles from
International Leasing & Financial Services Ltd. During the year 2015. These vehicles
were not recorded as fixed assets in the books of the Company as these were taken
on lease and present ownership of these vehicles lied with Bay Leasing & Investment
Ltd. And International Leasing & Financial Services Ltd. Respectively. Lease rentals paid
for these assets have been charged to revenue account as operating expenses.
The total of future lease payments from January 01,2016 against lease assets meeting
requirements of BAS-17 are furnished below:

10. The Management expenses charged to Revenue Accounts amounting to Tk.

160099248 represented approximately 19.51% of gross premium of Tk. 820460396
(Including public sector business) and 40.11% of net premium of Tk. 384097972
earned during the year. The said management expenses have been apportioned to
various classes of business of the company taking into account the gross premium
income.
11. Depreciation on Fixed Assets
Depreciation on Fixed Assets is charged on reducing balance method at rates varying
from 10% to 20% depending on the estimated useful life of the assets. Provision for
depreciation on fixed assets of significant value have been charged from the date of

acquisition. Provision for depreciation on other assets purchased during the year has
been made for six months on average and full year depreciation has been charged on
disposal of assets during the year. The rate of depreciation is furnished below:

12. The provision for income tax has been made based on the prevailing tax rate that have
been shown in the Statement of Financial Position.
13. During the year under report, Gross premium underwritten by the company
amounting to Tk. 820460396 and the net premium earned by the company amounting
to Tk. 384097972. Net underwriting profit was Tk. 20662212 and net profit before tax
was Tk. 133265925.
14. Impairment of Assets (BAS #36)
The carrying amounts of the companys non-financial assets are reviewed at each
reporting date to determine whether there is any indication of impairment. If any such
indication exists, then the assets recoverable amount is estimated. An impairment
loss is recognized in the profit and loss account. Considering the present conditions of
the assets, management concludes that there are no such indications exist.
15. Segment Reporting (BFRS #8)
A business segment is a distinguishable component of the company pertaining to
providing of services that are subject to risks and returns that are different from those
of other business segments. The Company accounts for segment reporting operating
results using the classes of business. The Performance of segments is evaluated on the
basis of underwriting results of each segment. The Company has four primary business
segments for reporting purposes namely fire, marine, motor and miscellaneous.

16. Statement of Cash Flows (BAS # 07)

Statement of Cash Flows has been prepared in accordance with BAS-7 and the cash
flow from operating activities has been presented under direct method.
17. Functional and presentational currency (BAS # 21)
Financial statements of the company are presented in Bangladesh Taka, which is the
companys functional and presentable currency.
18. Foreign currency transactions (BAS # 21)
Foreign currency transactions are converted into equivalent Taka currency at the
ruling exchange rates on the respective date of such transactions as per BAS 21: The
Effects of Changes in Foreign Exchange Rates.
19. Borrowing costs (BAS # 23)
Interest on borrowings of fund from bank against secured overdrafts is recognized as
financial expenses according to BAS 23: Borrowing Costs. Interest represented
amount paid and accrued up to the end of the reporting year.
20. Workers Profit Participation Fund
The matter of provision for Workers Profit Participation Fund (WPPF) was referred to
companys lawyer and as per his opinion, WPPF is not applicable in case of financial
institutions like insurance companies.

Conclusion:
Eastland Insurance company has been awarded for best presented annual report
by ICMAB. The operation of the company shows steady growth, except 2014. In
2014 the company issued new share capital but the income wasnt as expected.
In 2015, the company performed as expected.

References:
I.
II.
III.
IV.

http://www.eastlandinsurance.com/
http://www.investopedia.com/
http://www.iasplus.com/en
https://en.oxforddictionaries.com/