EFU General Insurance is a leading insurance company in the US, focusing on home, auto, business and commercial insurance. Its mission is to help customers by providing excellent customer service and competitive rates. Its financial strength and operational expertise allow it to respond to the changing needs of its customers.
Cost of capital
Despite EFU’s nominal increase in debts, its debt ratios have plummeted. However, the company’s assets have increased substantially, which translates to more provision for outstanding claims. This will benefit the company, as the government has also granted an exemption on CGT for two years.
EFU has taken measures to improve the quality of its business. In addition, it has increased its paid-up capital requirement, which is important for maintaining a high level of financial strength.
The company has also increased its investment portfolio, which helps it earn higher returns. This is the main source of EFU’s profitability. In fact, the company’s net income margin has also increased, which indicates that it is a healthy performer.
The company’s shareholders’ equity is also on the rise. Compared to the previous year, EFU’s equity base increased by 8%. This is the result of higher capital investments made by the company in listed companies.
Return on equity
EFUG’s GWP (gross written premiums) has grown by a substantial 14% over a five year period. EFU’s market share has stayed steady at 24%. However, competition in the motor insurance segment is likely to be a headwind.
EFUG’s balance sheet strength is bolstered by a very robust risk-adjusted capitalisation. The company’s long-term financial strength rating has been upgraded by JCR-VIS. The company also has a formal ERM framework. Its investment portfolio is heavily concentrated in Pakistan. Moreover, EFUG’s stock has performed poorly relative to the KSE 100 Index.
The EFUG has a long-standing client-base comprised of leading business houses. Its financial strength rating is now “AA”. However, the company needs to focus on improving its underwriting practices.
The company has a large exposure to Pakistan, and the recent floods have had a negative impact on the country’s financial resources. Nonetheless, the impact should be manageable.
Rating downgrades
EFUG’s Long-Term Issuer Credit Rating was downgraded by the rating agencies to a bb+ from a B+. Despite the downgrade, EFUG has a long standing record of operating with a robust operating margin, a good record of underwriting and claims performance, and a solid investment performance.
The company has a very small footprint in Florida but has a large investment portfolio that is primarily located in Pakistan. This exposure has impacted the company’s risk profile, and the company’s most enviable feat is a formal ERM (enterprise risk management) program.
EFUG’s rating is not the only downgrade in the works as some of its peers have been rated downgraded and a handful have seen their stock prices take a beating. One of the largest insurers in the state is about to undergo a large scale downgrade, and the impact on hundreds of thousands of homes could be a significant one.
Impact of recent floods on EFUG’s operating performance
Several studies have examined the effect of flooding on firm performance. However, little research exists on the effects of flooding on local economic growth. The purpose of this study is to examine the effects of flooding on the operating performance of a sample of Chinese firms and to explore the underlying causality.
Using comprehensive flood data from China, the paper estimates the effect of flooding on firm performance. The results show that the negative impact of flooding is particularly concentrated on firms with a larger percentage of tangible asset investment.
Moreover, the negative impact of flooding is greater for firms with financial constraints and for firms that operate in cities with low government quality. Inefficient or incompetent city management can also exacerbate the negative impact of flooding on firm performance.
Product offerings
Touted as the insurer of the nation’s most well-heeled citizens, EFU’s offerings include a solid assortment of policies, esoteric coverages, and a smattering of snazzy schmoos. In fact, EFU has more than its fair share of philanthropists to boot.
Not a bad thing since EFU has a cult like devotion to customer service. Interestingly, EFU’s business model has a long term commitment to customer service that rivals the likes of any of its peers. Besides, the organization boasts an industrious executive suite whose number one priority is to make a smooth transition into a full-fledged business.
Besides, EFU is one of the few regulated insurance companies that has not only managed to stay out of the revolving door but also has been a shining star in the industry.
