Question

Choose any three companies working in the same industry/sector and listed in the UAE stock market. Download the financial statements of the three selected companies for the years 2014 -2015 and complete the following tasks for both the companies over the period specified: 
1. Prepare a common-size and common-base year income statement and balance sheet and comment on them. The common –size should be for the year 2015. 
2. Using ratio analysis, compare and evaluate the financial performance of both the companies. 
3. Analyze and compare the capital structure of both the companies and give your observations on the impact of the capital structure on the profitability and liquidity (return and risk) of the three companies. 
Notes: 
a. This is a group project work (each group should be of 3 students). You need to seek my approval before you start. 
b. Submit the list on names of your group with all group members’ signatures a long with the names of companies you want to study before you start. 
c. The companies chosen by any group should not be used by any other group. 
d. For ease of comparison, present all your analysis in tables. 
e. Write notes on how you made your calculations. 
f. Your report should have an introduction, tables of analysis, comments, and a conclusion. 
g. Attach the financial statements of the chosen companies. 
h. Prepar e a power point presentation of your work (6-12 slides). 
i. Assessment scope LO 3 and LO 4. 

please help me to find first of all three companies working in the same sector like any three producing companies like cement companies in the UAE find 
statements for three ompaniesn and download the balance sheet and income statement for two years 2014 and 2015 and please help me to find answer for my group project thank u
the professor wants three companies for cement companies in the UAE plz 
plz help me to make the calculations thanks a lot

Answer 1

Hi

You can take three companies working in the insurance sector for your project. I will take Oman Insurance company (OIC),Orient Insurance PJSC (ORIENT) and Islamic Arab Insurance Company (SALAMA).

Next for downloading the financial statements you can go to their respective company sites and look under investor relations sections. A simple google search with company name with financial statements would also work. Only problem is that the information is present in image form and hence you cant directly copy paste the information. You will have to type it in.

For preparing common size for year 2015, you need to divide each line item in the p&l with the net sales number in 2015. Similarly, for balance sheet you need to divide by total assets in 2015.

As an example I am pasting below the common sized balance sheet for OIC. The interesting point to be noted here is that the company had no borrowings in 2014, but had to borrow in 2015, though the PPE went down in 2015. One can further investigate where the new borrowings were used up. Further, Intangibles went up substantially.

	Actuals			Common Sized			Growth
	2014	2015		2014	2015
PPE	38.823	32.72		0.63%	0.53%		-15.72%
Intangibles	39.913	73.023		0.65%	1.18%		82.96%
Investment prop	474.315	513.725		7.72%	8.34%		8.31%
Goodwill	26.588	18.15		0.43%	0.29%		-31.74%
DTA	16.364	16.769		0.27%	0.27%		2.47%
FI	1795.689	1738.188		29.23%	28.20%		-3.20%
Statutary Deposit	23.538	23.538		0.38%	0.38%		0.00%
Reinsurance contract assets	1781.498	1791.699		29.00%	29.07%		0.57%
Deferred acquisition costs	125.196	117.887		2.04%	1.91%		-5.84%
Insurance receivables	1194.962	1328.605		19.45%	21.56%		11.18%
Prepayments and other receivables	109.284	116.972		1.78%	1.90%		7.03%
Bank balances and cash	517.243	392.038		8.42%	6.36%		-24.21%
Total Assets	6143.413	6163.314		100.00%	100.00%		0.32%
Equity and Liab.
Equity
Share capital	461.872	461.872		7.52%	7.49%		0.00%
Reserves	1433.692	1456.956		23.34%	23.64%		1.62%
Cumulative changes in fair value of securities	-299.922	-387.941		-4.88%	-6.29%		29.35%
Foreign currency translation reserve	-3.904	-24.158		-0.06%	-0.39%		518.80%
Retained earnings	376.127	376.362		6.12%	6.11%		0.06%
Equity attributable to owners	1967.865	1883.091		32.03%	30.55%		-4.31%
NCI	35.752	31.777		0.58%	0.52%		-11.12%
Total Equity	2003.617	1914.868		32.61%	31.07%		-4.43%
Liabilities
Insurance contract and lia	3449.288	3385.753		56.15%	54.93%		-1.84%
End of service benefits	31.545	30.192		0.51%	0.49%		-4.29%
Bank borrowings	0	33.489		0.00%	0.54%		NA
Deferred Commission income	96.407	93.532		1.57%	1.52%		-2.98%
Re-insurance deposits retained	79.052	74.885		1.29%	1.22%		-5.27%
Insurance payables	396.544	549.083		6.45%	8.91%		38.47%
Other payables	86.96	81.512		1.42%	1.32%		-6.26%
Total Liab	4139.796	4248.446		67.39%	68.93%		2.62%
Total Liab and equity	6143.413	6163.314		100.00%	100.00%		0.32%

Common size of P&L for OIC:

	Actuals			Common Sized			Growth
	2014	2015		2014	2015
Gross Insurance Premium	3,249	3,190		223.50%	227.99%		-1.81%
Less: Insurance ceded to reinsurers	-1670.26	-1846.27		-114.90%	-131.95%		10.54%
Net retained premium	1578.683	1343.706		108.60%	96.03%		-14.88%
Net change in unearned premium	-124.985	55.478		-8.60%	3.97%		-144.39%
Net earned insurance premium	1,454	1,399		100.00%	100.00%		-3.75%
gross claims settled	-1923.81	-2034.42		-132.34%	-145.40%		5.75%
Insurance claims recovered from reinsurers	890.945	970.816		61.29%	69.38%		8.96%
Net claims settled	-1032.87	-1063.6		-71.05%	-76.02%		2.98%
Net change in outstanding claims	-29.857	-51.965		-2.05%	-3.71%		74.05%
Net claims incured	-1062.73	-1115.57		-73.10%	-79.73%		4.97%
Reinsurance..	299.257	309.004		20.59%	22.08%		3.26%
Commisiion expenses..	-362.898	-330.887		-24.96%	-23.65%		-8.82%
Other income relating..	47.944	51.298		3.30%	3.67%		7.00%
Net commission and other income	-15.697	29.415		-1.08%	2.10%		-287.39%
G&A	-274.37	-282.744		-18.87%	-20.21%		3.05%
Net underwriting profit	101	30		6.94%	2.16%		-69.98%

Ratio analysis for for OIC: One can carry out similar ratio analysis for other two companies and compare amongst them to figure out which has improving or best ratios. Thanks!

		2014	2015	Remarks
Premium Growth	Increase in Gross Premium/ Base gross premium		-1.81%	Business has gone down in 2015
Risk retention	Net Premium written/gross premium written	44.74%	43.86%	This gives the level of risk retained by the insurer, which has gone down for 2015.
Loss ratio	Net claims incurred/ net premium earned	73.10%	79.73%	This measures company's loss as a % of income, and has gone up.
Operating leverage	Net premium written/net worth	72.55%	73.07%	Operating leverage has gone up, hence the potential to further underwrite premiums has gone down
Current Liquidity	Liquid assets/current liabilities	2.70	2.29	Liquidity position has deterioated though it is still above 1
Return on net worth	After tax profit/net worth	5.04%	1.58%	This has gone down in 2015 primarily due to lower profit after tax