Alleged accounting manipulation, concealed costs and high-risk investments put policyholders at Risk

If substantiated, these practices could have significant implications for the company's financial health and, more importantly, for the security of policyholders' savings and future bonuses

Allegations surrounding Rupali Life Insurance extend far beyond questions over inflated assets or missing funds. A review of the company's financial statements and related documents indicates a broader pattern of alleged accounting irregularities, including the recognition of unpaid renewal premiums as income, concealment of management expenses in apparent violation of insurance regulations, and investments in distressed financial institutions without making the provisions required under international accounting standards.

If substantiated, these practices could have significant implications for the company's financial health and, more importantly, for the security of policyholders' savings and future bonuses.

Recognition of Uncollected Premiums as Income

Under Bangladesh's life insurance regulations, insurers prepare their annual accounts for the period from January 1 to December 31. To facilitate year-end accounting, premiums collected during the grace period up to January 31 may temporarily be reported as "outstanding premiums" before being reconciled with the final accounts.

According to Rupali Life's 2024 financial statements, the company reported renewal premium income of Tk 143.89 crore, of which Tk 74.19 crore—approximately 52 percent—was classified as outstanding premiums.

Industry specialists consider such a high proportion unusual, as it assumes that more than half of the annual renewal premium would be collected only during the one-month grace period.

Subsequent collection records raise further questions. Of the reported outstanding premiums, only Tk 46.28 crore (approximately 62 percent) was ultimately collected. The remaining Tk 27.91 crore was reportedly never realized.

Despite this, the company allegedly treated the uncollected amount as recognized income while calculating its Life Fund and actuarial surplus.

Financial analysts reviewing the figures estimate that after deducting average renewal commissions of around 10 percent, exclusion of the uncollected premiums would transform the reported surplus of Tk 22.13 crore into an estimated deficit of nearly Tk 3 crore. Nevertheless, the company declared a 10 percent cash dividend, raising questions about whether shareholder returns were based on unrealized earnings.

Alleged Concealment of Tk 32 Crore in Management Expenses

Bangladesh's Insurance Act 2010, particularly Section 62(2), requires insurers to include relevant capital expenditures—including depreciation, fair value adjustments and investment-related losses—when calculating management expenses.

An examination of Rupali Life's financial disclosures indicates that these capital-related costs were excluded from management expense calculations.

Between 2016 and 2024, the company reported cumulative management expenses of Tk 777.57 crore. However, incorporating the capital expenditures required under the law would increase total management expenses to approximately Tk 809.57 crore.

This suggests that nearly Tk 32 crore in expenses may have been omitted from the reported management cost over the nine-year period.

In 2024 alone, the company reportedly excluded Tk 3.22 crore in capital-related expenses. As a result, the financial statements showed management expenses to be Tk 48 lakh below the regulatory ceiling, whereas inclusion of the omitted costs would have indicated that the company had exceeded the permitted limit.

If confirmed, such accounting treatment could obscure the company's actual operating costs and regulatory compliance.

Investments in Distressed Financial Institutions Without Adequate Provisions

International Accounting Standard **IAS 9** (as referenced in the report) requires financial institutions to recognize expected losses and maintain adequate provisions when investments become impaired or recovery becomes uncertain.

Documents reviewed indicate that Rupali Life has investments totaling approximately Tk 6.16 crore in four non-bank financial institutions facing severe financial distress, along with Tk 8.51 crore deposited in four financially weak commercial banks.

Among the most significant exposures are investments totaling Tk 2.60 crore in International Leasing and Financial Services Limited and People's Leasing and Financial Services Limited, two institutions for which Bangladesh Bank has initiated liquidation or closure processes.

Based on available recovery estimates, only around Tk 20 lakh may ultimately be recoverable from these investments, potentially leaving losses exceeding Tk 2.40 crore.

The company also reportedly has Tk 27.93 lakh outstanding from employees and field personnel, including advances for salaries, motorcycles and mobile phone purchases that have remained unrecovered for an extended period.

Renewal Expense Ratio and Investment Losses

The investigation also raises questions regarding the company's reported renewal expense ratio.

Between 2019 and 2024  Rupali Life disclosed renewal expenses averaging 7.04 percent of renewal premiums, with annual figures ranging between 6.08 percent and 10.22 percent.

However, calculations based on supporting financial data suggest the actual average renewal expense ratio may have been approximately 14.90 percent, reaching as high as 19 percent in certain years.

If accurate, this would indicate that renewal-related expenses were understated by an average of 7.85 percentage points, potentially presenting a more favorable financial position than actually existed.

The company's investment performance also appears weak. Between 2017 and 2024, share market investments reportedly generated cumulative net losses of Tk 4.36 crore.

According to the analysis, these losses were offset against dividend income from mutual funds and other investments, reducing their visibility in the published financial statements.

Declining Life Fund Raises Concerns

The cumulative effect of these alleged accounting practices and investment decisions is reflected in the company's declining Life Fund.

Rupali Life's Life Fund reportedly decreased from Tk 506.80 crore in 2022 to Tk 494.85 crore in 2024, despite continuing growth in policyholder liabilities.

During the same period, total investments fell to Tk 285.03 crore, representing a decline of Tk 24.09 crore, or approximately .79 percent, over two years.

The deterioration has also affected policyholder returns. The company reduced its declared policy bonus from Tk 55 per thousand to Tk 45 per thousand, lowering returns for long-term policyholders.

Insurance professionals warn that unless regulators undertake comprehensive investigations and enforce appropriate corrective measures where necessary, policyholders' savings and future benefits could face increasing financial risk.

Company Response

Multiple attempts were made to obtain comments from Golam Kibria, Managing Director of Rupali Life Insurance.

Phone calls, text messages and other communication channels were used to seek the company's response to the allegations outlined in this report. However, no response was received before publication.

Accordingly, the company has not yet provided its official explanation or rebuttal regarding the issues raised.