- Sijan Bajracharya
All 15 non-life insurance companies listed in Nepal Stock Exchange (NEPSE) have published their financial statements of the second quarter of the FY 2074/75. The performance of all the general insurance companies seems to be quite satisfactory but due to the run for capital increment to Rs 1 arba as directed by the Insurance Board of Nepal for all non-life insurance till the end of Ashad 2075, Earning Per Share (EPS) as posted by the respective insurance companies falls slightly though net profit figure expanded.
The table below breaks down major fundamental parameters every investor should look at a glance before they make decision of investing in insurance companies:
Note:
- Table is arranged as per the highest to lowest EPS of the insurance companies.
- Amount mentioned in the table is in Rs crore, except EPS and Net worth per share which is in Rs only.
- P/E ratio (Price/Earning ratio) is in times which is calculated on the Last Market Price (MP) of the stock as on Falgun 3, 2074.
From the above table, Rastriya Beema Company Limited (RBCL) with massive EPS of Rs 279.44 topped the table, which is followed by leading another re-known non life insurance company, Shikhar Insurance Company Limited (SICL) with EPS of Rs 37.19 but Net worth per share of SICL is just at Rs 186.25 which is lower than that of Everest Insurance Company Limited (EIC) by Rs 114. EIC has EPS of Rs 35.48 but its net worth per share stands at Rs 299.63 which is highest among private insurance companies.
In terms of P/E ratio, Prudential Insurance Company Limited (PICL) has only P/E ratio of 26.90 times which seems to be appropriate and lower than other companies whereas P/E ratio of remaining companies are found to be above 30 times which indicates that PICL is best for those investors who blindly considers P/E ratio as the vital indicator for making their portfolio.
To meet the capital requirement of Rs 1 arba as directed by the Insurance Board, SICL has already hiked its capital to Rs 1.05 arba whereas other insurance companies are on the way to hike their capital by issuing bonus shares and right shares. Also, some insurance companies preferred to issue Further Public Offering (FPO) shares.
Except United Insurance Company Limited (UIC), reserve fund of remaining insurance companies are quite attractive, so is life insurance fund.
The premium collection of SICL amounts to Rs 86.59 crore, is the main reason behind highest net profit of Rs 19.66 crore and highest EPS among private insurance companies. Moreover, with 1.41 lakh unit of policies, SICL makes its source of earning far stronger than other insurance companies. However, RBCL has only 7,788 policies which is comparatively lower than other insurance companies, thus, it is important for the government owned insurance companies to focus in increasing number of policies.
Himalayan General Insurance Limited (HGI) has outstanding (o/s) claim of Rs 4.29 arba but we would like to request investors not to be afraid about the equity hit condition of this company as HGI solely is not liable to pay all o/s claim amount. Higher portion of the o/s claim are borne by re-insurance companies. Thus, though HGI has huge o/s claim, investors can invest in this stock by comparing its market price with other company’s market price and analyzing other factors.
At last, it would be better to segregate your portfolio to non life insurance companies as well because earning posted by the insurance companies are quite satisfactory and the charm of insurance sector is rapidly growing which also helps to caters huge fund of premium leading to huge net profit, EPS and return they provide.
