Insurance sector

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valuepicker
Posts: 144
Joined: Mon Jan 09, 2017 8:44 am

Insurance sector

Post by valuepicker »

With the IPOs in insurance in last one year there are many options available like ICICI Lombard, HDFC standard life, SBI life bnpp, ICICI Prudential insurance, Reliance Nippon life. Unfortunately if you look at PEs of these stocks all seem richly valued..Which stocks are good from 3-5 years perspective in insurance space?
Do insurance stocks attract higher PEs of more than 50 in developed markets?
Pee Vee
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Posts: 453
Joined: Mon Dec 26, 2016 10:45 pm

Re: Insurance sector

Post by Pee Vee »

valuepicker wrote:With the IPOs in insurance in last one year there are many options available like ICICI Lombard, HDFC standard life, SBI life bnpp, ICICI Prudential insurance, Reliance Nippon life. Unfortunately if you look at PEs of these stocks all seem richly valued..Which stocks are good from 3-5 years perspective in insurance space?
Do insurance stocks attract higher PEs of more than 50 in developed markets?
Insurance stocks are a good buy in view of the huge opportunity available.

This is from a IIFL research report:

SECTOR RESEARCH – General Insurance: Well poised to scale new highs

Industry getting future-ready

Given the support from structural growth tailwinds, general insurance biggies expect the ongoing brisk growth in gross direct premium income (GDPI) to sustain in the longer run. The sticky industry challenge of a higher incurred claims ratio (ICR) is on the wane over the past couple of years following the drop in irrational competition and unflinching player focus on economic profits. While the hitherto bleeding Health Insurance segment has undergone marked price correction in recent times, favourable regulatory tweaks should improve profitability of the Motor insurance business. Rising operational scale and growing tech interventions should also translate into higher cost efficiencies.

NIA well placed to sustain growth

The New India Assurance Company Ltd. (NIA) is well placed to make the most of the general insurance growth prospects. The franchise derives its strength from a) market leadership position, b) diversified product spectrum covering various risks across customer segments, c) robust multi-channel distribution, d) credible brand equity built on high customer satisfaction, and e) healthy financials. More importantly, NIA’s underwriting losses are correcting promptly given the declining incurred claims ratio and secular improvement in operating expense ratio. Consequently, the combined ratio for H1 FY18 dropped to 111.8% vis-à-vis 119.8% in H1 FY17. The management aspires to bring it down further to 100% by FY20. NIA has taken credible steps for efficient claims management in health and motor insurance segments, apart from significantly raising prices in health business. It’s confident about improving upon the 20% H1 FY18 RoE. NIA’s loss reserving policy is conservative and prudent. Risks linked to potential catastrophes are mitigated through reinsurance. On valuation front, the company trades at 3.9x P/BV and 1.4x P/BV (incl. FVCA).
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