Why must you invest in insurance companies' stock?

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Dear investors 

They are Gems of Indian stock market. 


 

What should an investor look at while picking the best insurance stocks to buy?

There are not many listed players in the insurance space and in challenging times it is better to stick to the leaders which have the highest solvency ratios, strong Banca partners, a wide distribution network, and a diverse product mix. 

Annual Premium Equivalent or Gross Written Premiums

Profit and Loss statement of an insurance company is extremely different than any other industry. Here the revenue is in the form of APE or GNP. Annual premium equivalent (APE) which forms the topline in life insurance players is a key parameter to observe. In simple terms, APE forms the premiums received by the companies from its various products. It usually measures the volume of new business premiums written in the course of the year. An investor should look for consistent improvement in APE growth. NBP is the term used for new business premium which should continuously grow for a life insurance player. While life insurance companies call it APE, general insurance companies call their topline Gross written premiums (GWP). 

New Business Margin

New Business Margin (NBM) is used to measure the profitability of the insurance business. A higher percentage which is rising YoY or QoQ is preferable. Similarly, PAT or Profit after Tax should also show continuous improvement.

Value of New Business Margins

Value of New Business Margins (VNB) is the present value of future profits that is associated with new businesses. This parameter helps to gauge if the operational efficiency and scale are enabling the value of the business to improve.

Embedded Value

Embedded value (EV) on the other hand is a valuation measure to estimate the consolidated value of shareholders’ interest in the insurance company. P/E v and P/VNB are used as valuation multiples and India’s current average is 3.5 P/EV and 42.9 P/VNB. An investor should check for higher VNB margins as they translate to higher EV in the longer term.

 


 (insurance stocks should be always in your portfolio )
                                                                    

            (Image source google) 



Image source ( MC )








current price these may rise further 
20/07/2020

( Image source Google )


Increase in market cap and returns on big players 


Perfect measure to track Insurance company  


 

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