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Private insurance companies offer better gains than state-led ones

Advait Rao Palepu/Mumbai 15 Apr 18 | 12:35 AM

Four of the six listed core insurance companies have performed in line with market expectations, with each of their scrips making significant gains, while the state-led ones continue to trade in and around their listing price. ICICI Prudential Life Insurance Company was one of the first core insurance companies to be listed, back in September 2016, and has risen 17 per cent to 394.5 on the BSE from its listing price of Rs 324.

Share price of HDFC Standard Life Insurance Company closed at Rs 498.95 on the BSE on Friday, gaining over 41 per cent against its listing price of Rs 290 in November of 2017. SBI Life’s share price has gained a little over 1 per cent to Rs 712.35 from its listing price of Rs 700. “The ‘new business’ margins of HDFC Life are good and are the highest in the industry. Their product mix is well diversified, and the distribution channel is good. From our talks with the management of other firms, we have realised that HDFC Life tends to lead the rest of the companies in these aspects as well as in technology,"· an analyst at a major brokerage told Business Standard.

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ICICI Lombard has gained 14 per cent to Rs 776.4 from its listing price of Rs 661 in September 2017. 

New India Assurance listed its shares at Rs 800. As of date its price has fallen 21.5 per cent to Rs 658.6.

An analyst with an international investment bank said one reason why these stocks weren’t trading at higher prices or at larger volumes was because, “compared to global peers, some of them happen to be the most expensive stocks in all of Asia. This limits the level of attraction".

Share price of General Insurance Corporation of India has declined to Rs 724, a 26 per cent fall from its listing price of Rs 912 (October 2017). 

“Profitability for these companies is not announced so soon, it takes five-10 years for the figures to be reported in the profit and loss accounts," said the analyst quoted above.

Insurance stocks worldwide do not attract the same level of excitement and participation from retail investors as listed companies in other sectors, primarily because their business is long-term in nature and is mainly preferred by institutional investors. 

Although some stocks underperform and others outperform, it depends on business-to-business as some companies like public insurers in the past have had to incur large expenses or claims on account of unforeseen events, like natural disasters.

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