How closely are Insurance Index & premium of non-life insurance companies related?
- ShareSansar, April 5, 2017 on Exclusive , Featured , Latest , Stock Market
Lately, the capital expansion plan of insurance companies has attracted a lot of investors, resulting in a price surge. The Insurance index rose by almost a thousand points just within few days of this news. However, Insurance index is affected by a lot of other parameters. One among those parameters is the performance of the insurance companies.
Premium collection indicates how well the company performs. The increase in premium collection signifies a business growth of a company. Higher the premium collection, higher the company’s profit. This ultimately affects the company’s price in the secondary market, which then influences the Insurance sub-index and NEPSE Index.
If we go back to the past and analyze the history, the increase in premium collection of non-life insurance companies has directly influenced the Insurance sub-index. As per the recent data of 2nd quarter 2073/74, the gross premium collection of non-life insurance Industry surged by 46% whereas the Insurance sub-index grew by 28%. Similarly, as per the 4th quarter data 2072/73, when the premium rose by 27%, the Insurance Index increased by 110%. There is a positive correlation of 90% which indicates direct relation between the Premium collection and Insurance Sub-Index.
|4th quarter 2072/73||4th quarter 2071/72||4th quarter 2070/71|
|Premium Collection (in lakhs)||9,073||7,137||6,159|
|2nd quarter 2073/74||2nd quarter 2072/73||2nd quarter 2071/72||2nd quarter 2070/71|
|Premium Collection (in lakhs)||5,538||3,786||3,629||3,129|
Especially after the earthquake of 2072, people have understood the importance of insurance, which has brought a significant growth in the premium collection. The Insurance stocks have since become hot stocks for the investors. As the industry is growing and has a wider scope–both in terms of consumers and returns for investors, the industry and Insurance Index has more room to grow.