Some Technical Indicators of Non Life Insurance Companies (Investor must know before investing on it)

Global economy is rising day by day. In the same speed, demand of non life insurance is also in upward trend.  Non-life insurance refers to bearing the customer's risk against insurance premiums. People live in society. Society is full of risks and uncertainty. Insurance is a device providing financial compensation to those who suffer from misfortune.

Insurance industry is a fastest growing industry of Nepal. Under the provisions of Insurance Act, 1992 and Insurance Regulation 1993, Insurance Board has adopted the policy of facilitating the insurance companies to invest in the priority sectors. The progressive growth of premium collection also shows the importance of non life insurance in Nepal. Last few years growth trend of total premium collection and total investment shows significant performance of Nepalese Non life insurance companies.

Some Technical Indicators:

Investors must know some technical indicators of company whether they justify the price or not before investing on it. Growth in profit, reserve fund, net worth are some technical indicators, definitely justify the company's performance. Here is a comparative study of some technical indicators of Nepalese Non-life insurance companies listed in NEPSE.

1.      Net Profit:

The difference between revenue and total business expenses is known as net profit. Knowing how net profit measures operational efficiency. Investors commonly look at a company's profitability history before investing on it. Higher percentage change in profit indicates the growth of company and definitely more attractive scripts among them. According to profit made in fiscal year 2072/73 as compared to 2071/72, United Insurance stands in first position, Nepal Insurance stands in second position where as Prabhu Insurance Company Stands in third position.

S.N	Name if Company	Net profit		Increase	EPS		Increase
		In Rs.			In Rs.
		2072/73	2071/72	%	2072/73	2071/72	%
1	United Insurance	82,517,000.00	5368000.00	1437.20	32.74	5.33	514.25
2	Nepal Insurance Company	51,477,120.00	-21316070.00	341.49	17.9	-7	355.71
3	Prabhu Insurance	148,668,000.00	50391000.00	195.02	45	17	164.70
4	Lumbini General Ins.	155,960,000.00	67581000.00	130.77	47.46	23	106.34
5	Prudential Insurance	151,028,000.00	86909000.00	73.77	42.12	32.19	30.84
6	Sagarmatha Insurance	183,856,000.00	110010000.00	67.12	41.67	30.88	34.94
7	Himalayan Gen. Insurance	127,905,000.00	82902000.00	54.28	39.75	30.99	28.26
8	Neco Insurance	126,036,000.00	92813000.00	35.79	38.9	48.46	-19.72
9	Premier Insurance	185,727,000.00	143198000.00	29.69	49.69	48.81	1.80
10	Shikhar Insurance	310,268,780.00	246915630.00	25.65	64.06	69	-7.15
11	Siddhartha Insurance	200,066,410.00	161526810.00	23.85	58.01	58.55	-0.92
12	NLG Insurance	201,135,000.00	162409000.00	23.84	49.07	47.55	3.19
13	NB Insurance	43,607,000.00	38060000.00	14.57	17.8	25	-28.80
14	Everest Insurance	28,121,000.00	39724000.00	-29.20	27.79	39	-28.74
15	Rastriya Beema Com. (RBCL)	163,794,000.00	248800000.00	-34.16	131.63	199.94	-34.16

2.      Earning Per Share (EPS): 

Investors should care about earnings because they ultimately drive stock prices. Strong earnings generally result in the stock price moving up. Earnings per share is also major factor while choosing company to invest. Four out of Fifteen Insurance Company increased their EPS more than 100% as compared to previous year. EPS of RBCL is 131.63 while EPS of Shikhar Insurance is 64.06.

Graphical Representation:

3.      Reserve Fund:

Reserve funds are necessary to handle anything and everything from routine maintenance and upkeep to meet unexpected costs that may arise in future. Higher the reserve fund means stronger its position. Shikhar Insurance changes highest in reserve fund. Lumbini General Insurance and Prudential Insurance Company also change higher percentage than other Insurance Company.

S.N	Symbol	Paid Up		Increase	Reserve		Increase
		In Rs.			In Rs.
		2072/73	2071/72	%	2072/73	2071/72	%
1	SICL	509,897,300.00	357,691,000.00	42.55	459,477,830.00	135,608,700.00	238.82
2	SIC	441,223,000.00	356,544,000.00	23.74	143,227,000.00	229,641,000.00	(37.63)
3	NLG	409,860,000.00	341,550,000.00	20.00	148,155,000.00	130,552,000.00	13.48
4	PIC	373,753,000.00	287,502,000.00	30.00	114,699,000.00	176,764,000.00	(35.11)
5	PICL	356,400,000.00	270,000,000.00	32.00	174,763,000.00	90,018,000.00	94.14
6	SIL	344,850,000.00	275,880,000.00	25.00	162,860,410.00	141,735,640.00	14.90
7	LGIL	330,000,000.00	291,875,000.00	13.06	142,927,000.00	69,600,000.00	105.35
8	PRIN	329,073,000.00	293,812,000.00	12.00	103,192,000.00	62,848,000.00	64.19
9	NIL	324,043,000.00	250,000,000.00	29.61	158,855,000.00	123,417,000.00	28.71
10	HGI	321,000,000.00	267,500,000.00	20.00	127,412,000.00	108,099,000.00	17.86
11	NICL	287,608,200.00	287,608,000.00	-	138,461,430.00	138,443,370.00	0.01
12	UIC	252,000,000.00	100,800,000.00	150.00	152,352,000.00	103,667,000.00	46.96
13	NBIL	244,920,000.00	150,000,000.00	63.28	60,756,000.00	60,756,000.00	-
14	RBCL	124,440,000.00	124,440,000.00	-	1,818,865,000.00	1,736,968,000.00	4.71
15	EIC	101,250,000.00	101,250,000.00	-	170,737,000.00	142,616,000.00	19.71

4.      Paid Up Capital:

Paid-up capital is the amount of money a company has received from shareholders in exchange of shares of stock. A company's paid-up capital figure represents the extent to which it depends on equity financing to fund its operation. 

As compared to previous year's paid up capital, United Insurance Company increased its paid up capital from 100,800,000 to 252,000,000 i.e 150% increased in Paid Up capital. Similarly, NB Insurance Company stands in second position and Shikhar Insurance Company stands in third position according to increase in paid up capital.

Graphical Representation:

 5.      Total Premium:

An insurance premium is the amount of money that an individual or business must pay for an insurance policy. The insurance premium is considered income by the insurance company once it is earned, and also represents a liability in that the insurer must coverage for claims being made against the policy. Premium growth of the company indicates the expansion of business. Total premium is also the remarkable factor of company's success. According to data below, NICL has negative growth as compared to previous year where as Shikhar Insurance surpassed the level of premium collection by more than 2 arab with growth of 48.21%.

S.N	Symbol	Total Premium		Increase	Insurance Fund		Increase
		In Rs.			In Rs.
		2072/73 Q4	2071/72 Q4	%	2072/73	2071/72	%
1	SICL	2,008,579,670.00	1,355,191,970.00	48.21	461,115,080.00	320,490,390.00	43.87
2	NLG	1,215,089,000.00	993,806,000.00	22.26	452,263,000.00	356,409,000.00	26.89
3	SIL	1,165,847,900.00	972,183,910.00	19.92	310,525,700.00	208,597,860.00	48.86
4	SIC	1,115,232,000.00	1,020,744,000.00	9.25	389,992,000.00	260,538,000.00	49.68
5	HGI	1,057,751,000.00	845,346,000.00	25.12	257,394,000.00	159,303,000.00	61.57
6	PIC	1,008,380,000.00	740,744,000.00	36.13	260,308,000.00	152,711,000.00	70.45
7	NIL	907,768,000.00	531,199,000.00	70.89	182,326,000.00	133,798,000.00	36.26
8	PICL	871,727,000.00	781,198,000.00	11.58	234,442,000.00	151,810,000.00	54.43
9	RBCL	868,745,000.00	781,198,000.00	11.20	958,335,000.00	876,438,000.00	9.34
10	LGIL	778,038,000.00	640,727,000.00	21.43	240,457,000.00	134,565,000.00	78.69
11	PRIN	761,793,000.00	731,459,000.00	4.14	247,793,000.00	150,668,000.00	64.46
12	NICL	757,082,420.00	760,756,110.00	(0.48)	78,978,550.00	53,239,640.00	48.34
13	UIC	562,455,000.00	430,463,000.00	30.66	81,222,000.00	65,809,000.00	23.42
14	NBIL	350,005,000.00	4,720,000.00	7,315.36	58,589,000.00	36,785,000.00	59.27
15	EIC	181,187,000.00	110,084,000.00	64.58	48,873,000.00	48,873,000.00	0.00

6.      Insurance Fund:

Insurance fund is also major indicator that shows the company's strength. Lumbini General Insurance, Premier Insurance and Prabhu Insurance increased their Insurance fund by 78.69%, 70.45% and 64.46% respectively than previous year.

7.      Net Worth:

Net worth is the sum of all the financial assets you own minus all the debts you owe. Net worth is the most important financial number because it measures the current financial health and the financial progress. Among 15 Non-life Insurance, networth of Lumbini General Insurance increases 59% i.e Rs. 219.52 while Networth of Shikhar Insurance stands in Second position.

S.N	Name if Company	Symbol	Net Worth		Growth
			In Rs.		%
			2072/73	2071/72
1	Rastriya Beema Com. (RBCL)	RBCL	2331.77	2200.00	5.98
2	Everest Insurance	EIC	317.06	289.00	9.70
3	Shikhar Insurance	SICL	282.61	230.00	22.87
4	NLG Insurance	NLG	251.22	246.00	2.12
5	Siddhartha Insurance	SIL	248.63	235.00	5.80
6	Sagarmatha Insurance	SIC	226.71	241.08	-5.96
7	Himalayan Gen. Insurance	HGI	219.52	199.96	9.78
8	Lumbini General Ins.	LGIL	219.52	137.65	59.47
9	Prudential Insurance	PICL	214.82	189.57	13.31
10	Prabhu Insurance	PRIN	207.00	173.00	19.65
11	Neco Insurance	NIL	205.32	202.89	1.19
12	Premier Insurance	PIC	200.34	214.60	-6.64
13	United Insurance	UIC	195.37	268.13	-27.13
14	Nepal Insurance Company	NICL	163.69	166.00	-1.39
15	NB Insurance	NBIL	148.00	165.00	-10.30

8.      Dividend Rate:

Dividend yield is a useful financial ratio for stock picking. Many investors like to watch the dividend yield, which is calculated as the annual dividend income per share divided by the current share price. The dividend yield can be important consideration if you are looking to invest in stocks for an income stream in addition to investing in stocks for gain by a rising stock price. Following table shows the cash, bonus and total dividend rate of last three years.

S.N	Symbol	Dividend
		072/73			071/72			070/71			069/70
		Bonus	Cash	Total	Bonus	Cash	Total	Bonus	Cash	Total	Bonus	Cash	Total
1	RBCL
2	EIC
3	SICL				15	0.78	15.78	12.71	0.67	13.38
4	NLG				9	0.47	9.47			0
5	SIL				20	1.05	21.05	7	3.25	10.25
6	SIC				10	0	10			0	8	0	8
7	HGI				25	0	25	10	0.52	10.52			0
8	LGIL				20	0	20	15	6.05	21.05	10	11.05	21.05
9	PICL				30	1.02	31.02	14	0	14			0
10	PRIN	17	0.73	17.73	23.75	1.25	25	15	0.79	15.79	20	22.1	42.1
11	NIL				13.06	0	13.06	10.53	0	10.53	10.52	0	10.52
12	PIC				12	0	12			0
13	UIC	60	3.15	63.15	24	1.26	25.26	20	1.05	21.05	20	0	20
14	NICL
15	NBIL				20	0	20

Thus, Investors must know above some technical indicators of insurance company before investing on it.