Shares of Prime Islami Life Insurance have fluctuated abnormally over the past two months, although the company’s auditor said its earnings and assets for 2020 were overvalued by Tk 218 crore.
The insurer’s share price rose 83% to 93 Tk on June 10 within a month, then finally fell 26% to 68 Tk yesterday.
Prime Islami’s assets for 2020 were worth Tk 967 crore compared to Tk 1,060 crore a year earlier, according to the company’s audited financial report.
He has short term investments with PFI Securities Limited and with various debtors of PFI Securities amounting to Tk 167.80 crore and Tk 15.37 crore respectively, said the auditor, Syful Shamsul Alam & Co Chartered Accountants , in his report.
Since these investments have been in progress for a long time and the financial condition of PFI Securities is poor, there is significant doubt as to the collectability of the full amount of these investments.
But the company did not make any provision against the said amount and, as a result, its total assets and profits were overstated by Tk 183.17 crore, he added.
The Dhaka Stock Exchange (DSE) has disclosed the auditor’s qualified opinion on its website.
Prime Islami Life Insurance also has investments with four Sterling Group companies amounting to Tk 15 crore and Banglalion Zero Coupon Bond amounting to Tk 4.99 crore.
But the recovery of these investments is also called into question since they have been overdue for a long time while there are no provisions on the amounts either.
The company has filed complaints with the High Court against PFI Securities Limited and other non-paying entities. All cases are currently pending.
The company has a recognized provision of approximately Tk 3.37 crore on the bonus fund for the year ended December 31, 2020. However, the required provision against the gratuity is Tk 19.02 crore.
Thus, the required provision is not adequate and remains below Tk 15.65 for the audited year, the auditor said in his report.
“Therefore, the liability against tips is underestimated and the profit has been overestimated to this point,” he added.
Nurul Alam, secretary general of the sharia-based life insurer, said his previous management invested the funds that were not producing any return. But now that the management has changed, they are trying to get the money back.
“We are calling on regulators to take action to return the fund and have filed complaints against non-paying entities in this regard,” he told the Daily Star yesterday.
“It’s people’s money, so how can we just set it aside,” Alam added.