Shikhar Insurance Sees 32% Surge in Net Premium Income
15th August 2025, Kathmandu
Shikhar Insurance Company Limited closed the fiscal year 2024/25 with a strong performance, reporting a 32% surge in net premium income to NPR 1.71 billion.
Shikhar’s Surge in Premium Income
Despite this impressive growth, its net profit saw only a modest increase to NPR 452.7 million, up slightly from the previous year’s NPR 445.3 million. This divergence between strong revenue growth and marginal profit growth can be attributed to increased reinsurance costs and other operational expenses. The company’s focus on building a robust capital and reserve base, however, signals a strategic emphasis on long-term stability over short-term profitability.
The Core Business: Why a 32% Surge in Net Premium Income is a Game-Changer
For a non-life insurance company like Shikhar Insurance, net premium income is the most critical indicator of business health. It represents the portion of the premium that the company retains after paying a share to reinsurers. A 32% increase in this figure is a phenomenal achievement and points to several positive factors. It demonstrates the company’s success in expanding its customer base and increasing gross premiums. More importantly, it reflects a significant improvement in its underwriting performance and risk selection. By writing more profitable policies and retaining a larger share of the premiums, the company is building a stronger, more sustainable business model. This growth is a powerful indicator of market leadership and effective business development, which bodes well for future earnings.
The Profitability Paradox: A Closer Look at Reinsurance Costs
The paradox of high premium growth but modest profit growth is a key area of analysis. It’s driven by the relationship between a company’s gross premium, reinsurance expenses, and its net profit. In FY 2024/25, Shikhar Insurance’s gross premium grew to NPR 5.70 billion, but its reinsurance costs also rose to NPR 3.99 billion. Reinsurance is a crucial tool for insurance companies to transfer a portion of their risk, particularly for large or catastrophic events. While this is a necessary expense for prudent risk management, it can put a cap on profitability. The modest increase in net profit suggests that the gains from higher net premiums were largely offset by operational expenses and the costs associated with strengthening reserves and managing reinsurance. However, the fact that net profit increased at all is a positive sign of the company’s ability to balance these competing factors.
Building a Fortress: Prudent Reserve Management
A key pillar of Shikhar Insurance’s strategy is its focus on long-term stability. The company’s financial report highlights this through its prudent reserve building. It significantly increased its catastrophe reserve to NPR 160.7 million and its special reserve fund to NPR 1.91 billion. Catastrophe reserves are a safety net designed to cover potential losses from large-scale natural disasters or other major claim events. By growing these reserves, the company is fortifying its financial position and enhancing its ability to meet policyholder claims, which is essential for maintaining trust and confidence in the market. This focus on building a strong capital and reserve base, which also includes a paid-up capital of NPR 2.92 billion, provides a robust foundation for future growth and allows the company to absorb unexpected shocks without compromising its stability.
Shareholder Value and Market Outlook
For investors, Shikhar Insurance’s performance offers a blend of steady returns and high growth potential. The company’s earnings per share (EPS) stood at NPR 15.49, a reflection of its stable, albeit modest, profit. The market’s optimism, however, is evident in its high price-to-earnings (P/E) ratio of 49.95 times. This valuation suggests that investors are not just looking at current profitability but are pricing in the potential for significant future growth, likely driven by the massive increase in net premium income. The strong net worth per share of NPR 198.97 also underscores the company’s solid asset backing and financial resilience.
In conclusion, Shikhar Insurance’s FY 2024/25 results tell a compelling story of strategic balance. The company’s focus on expanding its core business, as evidenced by the soaring net premium income, has laid a strong foundation for future growth. While short-term profitability was impacted by rising costs, the prudent move to strengthen reserves and maintain a robust capital base demonstrates a commitment to long-term stability. As the company continues to manage its reinsurance expenses and operational costs, it is well-positioned to leverage its premium growth for enhanced profitability in the years to come, making it a key player in Nepal’s competitive insurance sector.
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