UAIL Fundamental Analysis: Rising Claims, Falling Profits and a Challenging Road Ahead

United Ajod Insurance Limited is one of the non-life insurance companies in Nepal with the paid-up capital of Rs. 2,64,98,99,600, listed on the Nepal Stock Exchange (NEPSE) under the symbol UAIL. The company was formed through the merger of United Insurance Company (Nepal) Limited and Ajod Insurance Limited and began joint operations on 14 Jestha 2080. Let's look at the fundamental indicators of UAIL in the FY 2082/83 and compare it to the previous corresponding years same quarter:

UAIL's net profit declined from approximately Rs. 38.53 crore in FY 2080/81 to Rs. 21.64 crore in FY 2081/82, before falling further to only Rs. 6.31 crore in FY 2082/83. EPS and P/E ratio are also to be affected by the lessening profit as EPS declined to just Rs. 2.73 in the latest quarter and P/E ratio also significantly increased to 132.6 times.

One of the major events that affected Nepal's insurance industry during FY 2082/83 was the Gen Z movement of Bhadra, 2082. The protests resulted in widespread vandalism, arson and destruction of private property, vehicles, businesses and other insured assets. The protests occurred during the 1st quarter of FY 2082/83, precisely when UAIL subsequently reported a significant quarterly loss which they are slowly recovering from.

Although UAIL’s net profit has taken a massive hit, its net worth per share seems to be rising as it increased from Rs. 117.72 to Rs. 188.01. This indicates that despite the recent decline in earnings, the company's shareholders' equity has not weakened. Net claims incurred have increased significantly as it increased from Rs. 54,42,42,515 in FY 2080/81 to Rs. 67,62,84,458 in FY 2081/82 to then Rs. 97,30,47,436 in FY  2082/83. In 2081/82, claims increased by 24.3% and in 2082/83, they increased by another 43.9% which is a huge leap.

The company's FY 2082/83 indicators results were already weak. Then our country experienced severe flooding and related disasters in 2026. The August 26, 2026 Bhote Koshi flood has generated a particularly large insurance exposure for the industry. Higher claim expenses are expected to be the inevitable consequence of the flood which could further harm UAIL’s already declining profit and earnings. Investors often react negatively to uncertainty surrounding large insurance claims. This can put pressure on the stock price even before the final financial impact is known.

This can further be supported by looking at UAIL’s stock prices decline. At the beginning of August this year the company’s stock price was at Rs. 445 then when the flood hit on August 26, the stock prices declined sharply to Rs. 397.2 and recently as of October 2nd, the closing price for UAIL was at Rs. 362 which indicates that the company have not been able recover and market sentiment is not favourable. Although there are risks of declining profits, earnings and dividends, UAIL's rising book value becomes particularly relevant here. An insurance company with stronger capital has a greater ability to absorb unexpected losses.