Know Which Non-Life Insurance Companies Outperformed The Industry Based on Major Market Indicators
Fri, Dec 9, 2016 3:30 AM on Latest, Exclusive, Financial Analysis, Featured,
After the earthquake of April 2015, there has been increased awareness and importance about insurance. More and more insurance companies have been able to increase their business. With this, the insurance index has surged and more investors are preferring stocks of insurance companies to make profit from the market. However, with any market, it is necessary to make informed decisions and invest in growing companies to maximize profit.
Based on their financial statements for the first quarter of this FY 2073/74, ShareSansar has analyzed the top market indicators of 14 listed non-life insurance companies that are trading in NEPSE. With this, investors will be able to compare these companies and see which ones outperformed the industry growth on these fundamental parameters as compared to that of FY 2072/73:
By comparing the growths in paid up capital, we can see which companies converted their issued capital to paid up capital in the form of number of shares outstanding. On the other hand, those insurance companies who did not announce bonus or right shares in the last fiscal year may announce more dividends this year.
Rastriya Beema Co. Ltd. reported the highest net profit increase of a whopping 945%. It has investments in major commercial banks (Nabil Bank, Nepal Investment Bank, Prabhu Bank) and in Nepal Oil Corporation as well. United Insurance, Sagarmatha Insurance and Neco Insurance also outperformed the industry growth by a wide margin.
Rastriya Beema Co. and United Insurance were ahead of the industry in terms of EPS growth as well. Prudential Insurance and NB Insurance had negative EPS growth in this review period.
United Insurance’s net worth has increased by 32%, leading the industry which grew by 9% on average. Rastriya Beema Co. has the highest net worth at Rs. 2520 per share (14% increase).
P/E Ratio signals how much an investor is willing to pay for one rupees earnings of the company. As such, a stock with a high P/E ratio is better for short term benefit. P/E ratio above 20 might signal that the stock price is inflated in proportion to its earnings and is risky to buy. Short-term investors might benefit from this heightened market price, but it is risky.
Also Read:
See which commercial bank's stocks to buy in this bearish market
See which commercial banks are ahead of the industry as of Q1 2073/74
- Paid Up Capital
- Reserve
- Insurance Fund
- Net Profit
- Earnings Per Share
- Net Worth Per Share
- Price-Earnings Ratio
Paid Up Capital
The industry growth rate of non-life insurance in terms of their paid up capital is 23%. Rastriya Beema Co. and United Insurance had no growth in terms of paid up capital. NB Insurance reported highest growth at 77%.
By comparing the growths in paid up capital, we can see which companies converted their issued capital to paid up capital in the form of number of shares outstanding. On the other hand, those insurance companies who did not announce bonus or right shares in the last fiscal year may announce more dividends this year.
Reserve
High amount of reserve is a major parameter that shows the net worth of the company. Above average increase in reserve might indicate that the company might be able to provide higher dividends than other companies in the industry. In this review period, 6 non-life insurance companies had above average increase in their reserve fund. Shikhar Insurance reported the highest reserve growth of 196%.
Insurance Fund
The insurance fund of the industry grew by 40% in this review period. Eight companies reported above average increase in their insurance fund with NB Insurance reporting the highest at 151%. The insurance fund of United Insurance also increased to more than two folds.
Net Profit
Net Profit is the residual income the company has made after accounting for all its revenues, expenses, management fees, compensations and losses. It is one of the most significant indicators since investors gain dividends only when the company reports positive net profit. During this review period of Q1 for FY 2072/73 and FY 2073/74, the net profit of the non-life insurance companies increased by an average of 153%.
Rastriya Beema Co. Ltd. reported the highest net profit increase of a whopping 945%. It has investments in major commercial banks (Nabil Bank, Nepal Investment Bank, Prabhu Bank) and in Nepal Oil Corporation as well. United Insurance, Sagarmatha Insurance and Neco Insurance also outperformed the industry growth by a wide margin.
Earnings Per Share
Earnings Per Share (EPS) is one of the major indicators that shows a company’s financial health. EPS is the portion of the net profit of a company that has been allocated to each share. A company with high (and positive) EPS shows that the company has the ability to provide the profit to its shareholders as dividends. Higher the EPS, higher the DPS (dividend per share).
Rastriya Beema Co. and United Insurance were ahead of the industry in terms of EPS growth as well. Prudential Insurance and NB Insurance had negative EPS growth in this review period.
Net Worth Per Share
Net Worth Per Share is fundamentally a security signal of a company. It is the portion of the core capital for each issued share of the company, and It shows the amount of cash reserve the company has. Fundamentally, it is the measurement of the net worth of the company for each outstanding share. In the context of Nepal, Rs. 100 is the base net worth for all the commercial banks. If the net worth per share of the insurance company is negative (below Rs. 100 per share), it might be a bad signal that the bank is losing its ability to pay off its liabilities. If the net worth per share is high and positive (greater than Rs. 100), it is a good sign that the bank has reduced its liabilities.
United Insurance’s net worth has increased by 32%, leading the industry which grew by 9% on average. Rastriya Beema Co. has the highest net worth at Rs. 2520 per share (14% increase).
Price To Earnings Ratio (P/E Ratio)
P/E Ratio signals how much an investor is willing to pay for one rupees earnings of the company. As such, a stock with a high P/E ratio is better for short term benefit. P/E ratio above 20 might signal that the stock price is inflated in proportion to its earnings and is risky to buy. Short-term investors might benefit from this heightened market price, but it is risky.
Also Read:
See which commercial bank's stocks to buy in this bearish market
See which commercial banks are ahead of the industry as of Q1 2073/74
