American Life Insurance Company Limited - Annual Reports

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American Life Insurance Company (Pakistan) Limited

Annual Report 2000

CONTENTS

Board of Directors

Corporate Information

Notice of Meeting

Financial Highlights

Director's Report

Pattern of Share Holding

Auditor's Report

Balance Sheet

Revenue Account

Profit & Loss Account

Statement of Changes in Equity

Statement of Changes in Financial Position

Notes to the Account

Classified Summary of the Assets

BOARD OF DIRECTORS

CHAIRMAN

ARIF SULTAN MUFTI

Chairman &

Chartered Accountant

Bungalow No. 85 / C, 16th Street,

Chief Executive

Phase-VI, Defence Housing Authority,

Karachi.

DIRECTORS

ABBAS KHALAF

Director

Business Executive

Verdun Street,

Verdun 2000 Building, 9th Floor,

Beirut - Lebanon,

BILAL AHMED QURESHI

Director

Business Executive

67, Khayaban-e-Mujahid,

Defence Housing Authority,

Phase V, Karachi.

BRUCE EMMITT DOZIER

Director

Attorney

18 Quail Hollow Drive,

Hockessin DE 19707- 1404, USA.

EHSAN AHMAD NOMANI

Director

Advocate

6, Embassy Villas, Clifton,

Karachi.

KHALID ANIS-UR-REHMAN

Director

Business Executive

19 / 2 / A, 32nd Street, Phase V,

Defence Housing Society, Karachi.

KHURSHID MALIK

Director

Business Executive

6th Floor, Sidco Avenue Centre,

Maulana Deen Mohammad Wafai Road,

Karachi.

MOHAMMADMIAN SOOMRO

Director

Business Executive

D-7 Akbar Apartment,

Opp. British Council Library,

Black House Road, Karachi.

MUHAMMAD KALIM

Director

Business Executive

115-C, Shahrah-e-Iran,

Clifton-5, Karachi.

NISAR A. MEMON

Director

Business Executive

78/2, Khayaban-e-Sehar,

Defence Housing Authority,

Phase VI, Karachi.

ROBINSON K. NOTTINGHAM

Director

Business Executive

2401 Pennsylvania Avenue,

Unit 1603 Wilmington DE 19806, USA.

SAIYID SAEED AKHTAR

Director

Consulting Actuary

6A-1, Third North Street,

Phase 1, DHA, Karachi-75500.

SIMON RATTRAY

Director

Insurance Executive

22 Maule Street, Monifieth, Angus,

Scotland DD'54 NR.

CORPORATE INFORMATION

COMPANY SECRETARY

S.G. Shahabuddin,

A-15, Block "C" North Nazimabad, Karachi.

Office Tel No. 5683564

AUDITORS

A.F. FERGUSON & CO.

CHARTERED ACCOUNTANTS

State Life Building 1-C,

Off. I.I. Chundrigar Road, Karachi.

Tel No. 2426682-6, 2426711-5

Fax No. 2415007, 2427938

LEGAL ADVISERS

Surridge and Beecheno

Finlay House, I.I. Chundrigar Road, Karachi - 74000

Tel No. 2427292 - 94 & 97

Fax No. 92 (21) 2418298

BANKERS

Muslim Commercial Bank Ltd.

Habib Bank Ltd.

Standard Chartered Grindlays Bank.

Hongkong Shanghai Banking Corporation.

REGISTERED OFFICE

Lakson Square, Bldg. No. 1, 11th Floor,

Sarwar Shaheed Road, Karachi-74200 Pakistan

Tel No. 5685241, 5687339, 5682876, 5661146-48

Fax No. 92(21) 5688042

SHARE DEPARTMENT

Ground Floor Sheikh Sultan Trust Building No. 2,

Beaumont Road, Karachi.

Tel No. 5686658, 5689021

Fax No. 92(21) 5685095

HEAD OFFICE

Lakson Square, Bldg. No. 1, 11th Floor,

Sarwar Shaheed Road, Karachi-74200 Pakistan.

Tel No. 111-111-711

Fax No. 92(21) 5688042

KARACHI AGENCY OFFICES

76-Atoll Colony No. 2,

Jamshed Quarter Nariman Road, Karachi.

Tel No. 4914142, 4913268, 4913417, 4913832

Fax No. 4922712

Room No. 501, 5th Floor,

Suite No. 701-702, Park Avenue,

Madina City Mall,

Shahrah-e-Faisal Block-6,

Abdullah Haroon Road, Karachi.

LAHORE OFFICE

P.E.C.H.S. Karachi.

Tel No. 5651530-37

Al Malik Bldg, 3rd Floor,

Tel No. 4312068-79

Fax No. 5681539

19 Davis Road, Lahore - Pakistan

Fax No. 4312076

Tel No. 111-111-711

Fax No. 92 (42) 6375589

NOTICE OF ANNUAL GENERAL MEETING

Notice is hereby given that the Sixth Annual General Meeting of American Life Insurance Company

(Pakistan) Limited will be held at Crystal Ball Room, Pearl Continental Hotel, Karachi on Friday, March 16, 2001

at 10:30 a.m. to transact the following business:-

Ordinary Business

1. To receive, consider and adopt the Annual Audited Accounts of the Company together with the Directors'

and Auditors' reports thereon for the year ended December 31,2000.

2. To appoint auditors for the year ended December 31,2001 and to fix their remuneration. The retiring auditors

M/s A.F. Ferguson & Co. Chartered Accountants, being eligible have offered themselves for re-appointment.

Special Business

3. To consider and if thought fit, to pass the following as a special resolution with or without modification(s);

"RESOLVED that the Articles of Association of the company be and hereby amended as follows:

a) In Article 2(c) and Article 24 the words "Insurance Act 1938" shall be substituted by the words "Insurance

Ordinance 2000".

b) In Article 3(b) the words "Section 7 of the Insurance Act 1938" shall be substituted by the word "Section

29 of the Insurance Ordinance 2000".

c) The second sentence in Article 59 shall be deleted.

d) In Article 71 the words "Section 32(B) of the Insurance Act 1938" shall be substituted by the words

"Insurance Ordinance 2000, if applicable".

e) In Article 89 the words "Insurance Act, 1938" shall be substituted by the words "Insurance Ordinance

2000".

f) In Article 97(b) the words "Section 13 of Insurance Act, 1938" shall be substituted by the words "Section

50 of Insurance Ordinance 2000".

g) Further the words "Insurance Act, 1938" wherever appearing in Articles of Association shall be substituted

by the words "Insurance Ordinance 2000"."

Statement under Section 160 of the Company's Ordinance appears below:

The amendments in the Articles of Association are necessary in view of the repeal of the insurance Act 1938 and

enforcement of the Insurance Ordinance 2000. No director is either directly or indirectly interested in this business.

By order of the Board

February 21,2001

S.G. Shahabuddin

Karachi

Company Secretary

NOTES:

1. The Share Transfer Books of the Company will remain closed from March 07, 2001 to March 16, 2001

(both days inclusive).

2. A member entitled to attend and vote at this meeting may appoint another member as his/her proxy to attend,

speak and vote instead of him. A company or corporation may, by means of a resolution of its directors,

appoint a person who is not a member, as proxy or as its representative under section 162 of the

Companies Ordinance 1984. Form of proxy is enclosed with the Annual Report.

3. The instrument appointing a proxy, in order to be effective, must be received at the registered office of the

Company, duly signed, stamped and witnessed, not later than forty-eight hours before the time appointed

for the meeting. A member shall not be entitled to appoint more than one proxy. If more than one instrument

of proxy are deposited by a member with the Company, all such instruments of proxy shall be rendered

invalid.

4. Members are requested to communicate promptly to the Company of any change in their address.

FINANCIAL HIGHLIGHTS

(Rupees in 000)

Dec 31

2000

1999

1998

Balance Sheet

- Total Equity

325,000

- Total Liabilities (other than shareholders' equity)

52,007

48,622

36,145

- Total Assets

401,437

357,489

322,599

- Total Capital Funds (Shareholders' equity)

349,430

308,867

286,454

- Ordinary Share value (Face value per Share Rs. 10-)

- Market Price Per Share (February 15,2000)

14.50

15.00

17.50

- Right Share issue

150%

Revenue Account

Net Premium Income

101,576

89,400

64,235

Investment and other Income

42,310

36,499

12,716

Operating Expenses

- Net Claims

18,899

12,922

7,623

- Direct Expense Commission

10,825

14,240

11,604

- Management Expenses

70,482

74,591

66,843

REPORT OF THE DIRECTORS

The Directors of the company are pleased to place once again before you the audited financial statements for

the year ended 31st December 2000 along with an overview of your Company's progress and salient features

of the financial results for the year.

ECONOMY

The economy of the country is stagnant with poor economic growth rate struggling to come back on track.

Pakistan is caught in deadly debt trap with three major economic issues, i.e. debt burden, fiscal deficit and trade

deficit. Current government has recently tried to address these issues to some extent for revival of the economy

and it is claimed that economic slide has been checked. However it is believed that economic progress will

remain slow and substantial growth is not expected in operations unless above major crisis are resolved.

OPERATIONS

Your Company is in sixth year of operation with an overall adequate growth. Net premium income grew to Rs.

101.6 million, an increase of 14% over Rs. 89.4 million registered in the previous year. As a result of the

Company's new Agents Training Program the development of many qualified agents has been attained according

to the company's established worldwide standard.

Significant amounts of premiums came from individual policyholders, which sounds well for future growth with

high persistency and stability of the portfolio. The market sentiments remain positive and continues to welcome

our various unique policies reflecting the increasing popularity of the company's products amongst wide range

of income groups.

ORDINARY LIFE

Ordinary Life premium income during 2000 amounted to Rs. 73 million recording a growth of 11% over 1999.

Ordinary Life premiums include those of ordinary life riders and Income Shield Care riders.

Muhafiz Technical and Muhafiz Executive plans launched in 1999 are doing well and are being welcomed in

the market. Basic Training School (BTS) and Sales Trainees under Senior Management Trainee (SMT) program

continued to provide good quality agents.

Despite the slow growth of country's economy your company continued to progress moderately with expansion

of branches in up-country under new marketing strategy thus inviting higher production and stronger growth.

The year 2000 was marked by strengthening agency leadership and enhancing the Field Force compensation

structure.

ALICO worldwide conference at San Francisco took place in August 2000. This was a global challenge motivating

all field force to explore their potential and achieve award on account of hard work and sales excellence.

There were 4 qualifiers from ALICO Pakistan selected out of 200 qualifiers from Middle East and Africa and

600 for worldwide. Their spouses also enjoyed a most memorable trip to San Francisco, USA.

GROUP

Group premiums amounted to Rs. 29.0 million an increase of 23.4% for the year under report compared to Rs.

23.5 million in the previous year. Additional sales in the first quarter of year 2001 are encouraging and indicate

that another substantial increase in income from group business, can be expected in 2001. We are confident

of exciting progress in the future, for this product line, and expect continued improvement. A recently developed

VGA product for Group line of business is very promising.

Group Life had a remarkable year as there was a significant increase in proposal activity, and activity per Group

Sales Representative rose by 60%. As a result of closer control and effective management of the PPO network,

loss ratios on medical benefits remained under control. Moreover, Credit Life was successfully introduced at

leading banks. "Most of our new business in 2000 came from strong industries like the financial sector,

telecommunication and information technology".

The Global PA day was a special day at ALICO Pakistan. It started with enthusiasm, with more than a hundred

agents and their Managers on board, full of energy, resulting in a flow of applications that kept pouring in

throughout the day, and turning in 400 PA applications. "It was a day of great team work. Strong cooperation

among field force and staff helped us achieve our target"

CLAIMS

We repeat again that risk selection, discipline and quality underwriting, better service to policyholders, prompt

payment of claims has been laudable and excellent.

Total claims amounted to Rs. 18.9 million compared to Rs. 12.9 million in previous year an increase of 46.5%.

However, the claim is 18.6% of total income compared to 14.4% of total income experienced in previous year.

INVESTMENTS

Total Investment Income amounted to Rs. 41.1 million out of total income of Rs. 143.8 million compared to

investment income of Rs. 35.4 million out of total income of Rs. 125.9 million in the previous year. The increase

in investment income is the result of careful use of additional capital and good selection of investment in high

yield Government Securities and quality Corporate Bonds. The composition of income analysis given below

includes investment at 28.5% compared to 28% from previous year of total income, well maintained over and

above target.

OPERATING RESULTS

Net income over outgo amounted to Rs. 40.6 million compared to Rs. 22.4 million recorded in the previous year,

showing Rs. 18.2 million over 1999 figure, a positive cash flow due to consistent growth in premium and

maximization of investment income.

The loss in the initial years of inception for a Life Insurance Company are expected to vanish in subsequent

years. The negative life fund of the company will quickly move into positive in near future.

AGENCY DEVELOPMENT

The main objective and prime focus have been dedicated to agency buildup at full speed.

The Direct Sales Training School which was introduced in 1998 continued during the year with the help of

ALICO's regional personnel to provide intensive training of agency recruits, to better prepare them to cope with

ongoing marketing challenges and to accelerate their start into life insurance sales. This initiative proved to

be a valuable aid in launching products, development of agents and equipping them with the necessary selling

skills. Graduates of this program are now the mainstay of the agency force. Presently the number of agents

working with us is 200 as on December 31,2000.

During the year 2000 ALICO Pakistan aggressively pursued Direct Marketing initiatives and the marketing of

Bancassurance Products. By the end of the year three credit life deals had been closed and agreements have

been signed with leading banks in Pakistan.

OUTLOOK FOR THE FUTURE

The management will continue its policy of focusing on quality underwriting and direct sales through qualified

trained agents. With the addition of new products during the year in both the individual and group life business,

the company has started providing more attractive selection of benefits for a wider variety of clients. Most

recently introduced were the Muhafiz, Tahafuz and VGA policies. These policies offer Worldwide Protection

in case of accidental loss of life and a major disability coverage, 24 hour protection, on or off the job. Both

products are being welcomed in the market and generated good business in the year under report. We expect

to add further range of products in 2001 allowing us to better serve the needs of the market.

ALICO Pakistan looks ahead to a year of Agency Building and High Productivity in 2001 a year of intriguing

challenge!

HUMAN RESOURCES AND TRAINING

The Company continued to recruit staff on merit and provide training for desired skills.

Our computer systems have been further upgraded and linked with LAN networking attached with main frame

computer of IBM AS400. This has provided time saving and computer based good working environment.

The Management continues to provide training at local and as well as regional level in all spheres of business

activities, including technical and operational support.

The Company provides full financial assistance and encourages employees to appear in insurance diploma

exams of LOMA. So far we have two employees who have attained the FLMI designation and more are to follow

in the year 2001.

PARENT COMPANY

American Life Insurance Company (ALICO) incorporated in the United States of America having its registered

office at ONE ALICO PLAZA, Wilmington, State of Delaware, 19899, U.S.A. is the sponsor and holding company

of American Life Insurance Company (Pakistan) Limited.

PATTERN OF SHAREHOLDING

The pattern of Shareholding in the company as at December 31, 2000 is included with the report. American

Life Insurance Company holds 51% while local shareholders hold 49% of the company's total shareholding.

SUBSEQUENT EVENTS

There have been no material changes since 31st December 2000 and the company has not entered into any

commitment which could effect financial position of the company between the end of the financial year and the

date of this report.

AUDITORS

Our present auditors M/s. A.F. Ferguson and Company, Chartered Accountants have offered themselves

for appointment as auditors for the next year. The Board has considered their offer and recommend to appoint

them auditors for the year 2001.

GRATITUDE

We take this opportunity to express our appreciation to the Government of Pakistan, Ministry of Commerce and

Department of Insurance under Securities and Exchange Commission of Pakistan for their invaluable assistance,

support and guidance.

The Board of Directors would like to express their sincere thanks and wish to record their appreciation for

remarkable contribution offered by the company's officers, field force, sales consultants and staff towards the

company's present achievements during this difficult year.

Lastly, our thanks go to thousands of shareholders and policyholders whose confidence, continued commitment

and support for the Company has been a leading source of encouragement and inspiration.

On behalf of the Board of Directors.

Arif S. Mufti

February 16, 2001

CHAIRMAN & CEO

PATTERN OF SHAREHOLDING

AS OF 31 DECEMBER 2000

No. of

Having Share

Shares Held

Percentage

Share Holders

From

103

100

9100

0.028

405

101

500

185100

0.570

501

1000

36600

0.113

1001

5000

192450

0.592

5001

10000

77450

0.238

10001

15000

37100

0.114

15001

20000

75850

0.233

20001

25000

491400

1.512

25001

30000

88500

0.272

45001

50000

49500

0.152

55001

60000

58000

0.178

60001

65000

62500

0.192

65001

70000

69000

0.212

70001

75000

72000

0.222

85001

90000

88100

0.271

90001

95000

91000

0.280

95001

100000

96750

0.298

445001

450000

449300

1.382

1210001

1215000

3.738

2095001

2100000

6.462

2310001

2315000

2314000

7.120

2450001

2455000

2450050

7.539

2495001

2500000

7.692

3120001

3125000

9.615

16565001

16570000

6566250

50.974

------------------

702

22500000

100.000

==========

CATEGORIES OF SHAREHOLDERS

Particulars

Shareholders

Shareholding

Percentage

INDIVIDUAL

692

12038500

37.0417%

INSURANCE COMPANIES

1000

0.0030%

JOINT STOCK COMPANIES

1369000

4.2123%

FINANCIAL INSTITUTIONS

2525250

7.7000%

FOREIGN COMPANIES

16566250

50.9730%

------------------

COMPANY TOTAL

702

32500000

100.0000%

==========

AUDITORS' REPORT TO THE MEMBERS

We have audited the annexed balance sheet of American Life Insurance Company (Pakistan) Limited as at 31

December 2000 and the related revenue account, profit and loss account, statement of changes in equity and

cash flow statement, together with the notes forming part thereof, for the year then ended and we state that we

have obtained all the information and explanations which, to the best of our knowledge and belief, were necessary

for the purposes of our audit.

It is the responsibility of the Company's management to establish and maintain a system of internal control, and

prepare and present the above said statements in conformity with the approved accounting standards and the

requirements of the Insurance Ordinance, 2000. Our responsibility is to express an opinion on these statements

based on our audit.

We conducted our audit in accordance with the auditing standards as applicable in Pakistan. These standards

require that we plan and perform the audit to obtain reasonable assurance about whether the above said statements

are free of any material misstatement. An audit includes examining, on a test basis, evidence supporting the

amounts and disclosures in the above said statements. An audit also includes assessing the accounting policies

and significant estimates made by management, as well as, evaluating the overall presentation of the above said