S Alam now sets sights on insurers
After taking over a number of banks and financial institutions in the past few years, Chattogram-based S Alam Group has now set its sights on the insurance sector.
As part of the plan to increase its influence on the insurance sector, the group has recently bought nearly 45 percent stakes in Padma Islami Life Insurance Company at an estimated cost of Tk 45 crore.
S Alam Group Chairman Mohammed Saiful Alam will hold 2.52 percent shares in his own name in Padma Islami Life Insurance, his wife Farzana Parveen 2.71 percent and his son Ahsanul Alam 4.75 percent, according to the Insurance Development and Regulatory Authority, which signed off on the transaction.
The remaining 35 percent of the shares will be bought under the name of five companies -- Unitex Petroleum, Unitex LP Gas, Pavilion International, Affinity Assets and Crest Holdings -- with affiliation with S Alam Group.
The business group, which stirred huge controversy recently for grabbing ownership of two Islamic banks, plans to purchase stakes in two more Islamic insurance companies, said market insiders.
Currently, Alam is a director of Northern General Insurance. He is also the chairman of First Security Islami Bank. His group has stakes in seven more banks.
Padma Islami Life Insurance was going through a cash crisis, said ABM Zafar Ullah, its former chairman. “That's why we sold off the ownership,” he said, while blaming the IDRA's ceiling on commission for the insurer's precarious financial state.
Life insurance companies cannot give more than 40 percent commission to agents, as per the new IDRA rules.
“This made the market heavily competitive. Agents are not willing to bring business to us,” said Zafar Ullah, who has 4.75 percent stakes in the company.
Moreover, Padma Islami Life Insurance's business was also affected by the delay in its licence renewal by two years by the authorities, he said.
“We took the licence willingly but later realised that it is not so easy to make insurance business.” The company got the licence for insurance business in 2000 and became listed on the Dhaka Stock Exchange in 2012.
“The financial health of Padma Life is very poor,” said Gokul Chand Das, a member of the IDRA.
If a business group willingly buys such a company and can meet the policyholders' liabilities, then it is good for the company, he added. The insurer's liabilities now stand at about Tk 80 crore, according to Zafar Ullah.
In the last one month, each share of Padma Islami Life traded between Tk 24 and Tk 26. The company was downgraded last year to the 'Z' category after it declared no dividend.
