Page 34 - Insurance Times December 2021

insurance sector, over the two decades since the Investing in Insurance Companies
introduction of competition and regulation, has matured
with 69 insurers today as against only eight in 2000. Fertile Insurers are businesses first, meaning the same indicators
that would apply to any company, apply here - like margins
ground for cultivating innovative approaches to assess and
manage such risks is already available in the form of ever- and revenues. Successful traders often follow an insurer's
results and news releases closely, and tread carefully if
growing volumes and variety of data, coupled with the
enhanced ability to connect secondary and tertiary data concerns arise around regulatory breaches or negative
points across activities almost on real time basis. publicity. Some other factors to note:
Y Assets under management (AUM): more AUM means
Actuaries can help raise a bountiful crop of new solutions a larger client base and an increased potential for good
by actively engaging with businesses and technologies to returns. In some cases, it also means less uncertainty
identify new opportunities, and address emerging for the trader, as insurers with higher AUM tend to be
challenges. Even within traditional areas like insurance and older, well established institutions. These are often
pension, actuaries can enrich risk management if based on preferable for beginner traders as they are likely very
inclination and aptitude, individual trained actuaries stable
consider joining other departments like finance, marketing Y Earnings per share (EPS): increasing EPS means that
and underwriting. Perceptions of risk have heightened on the insurer's profits are higher relative to the price of
account of the once-in-a-century pandemic. Other global its shares. The higher the EPS, the more the insurer
risks are also looming, large climate change concerns and tends to return to shareholders or use for projects - such
rising incidence of catastrophic events have sharply raised as growing their global footprint, which creates a
awareness of environmental risks. positive cycle for EPS

Y Percentage of valid claims paid: choosing to trade the
Further, with the increased pace of technological change
stocks of an insurer with most if not all of its valid claims
and innovation, new ways of carrying on businesses and
paid out can be a prudent move , as these insurers are
engaging in individual pursuits are constantly emerging. stable and far less susceptible to stock price-tumbling
2017 was technically the birth of major life insurance private
bad publicity
players in the eyes of investors with a frenzy of IPOs hitting
D-Street. Since then insurance has mostly been one of the Y Combined ratio: two ratios are important to
niche sectors in the market. Insurance companies have a understanding insurers' operations - loss ratio and
strong balance sheet, are well capitalised, have healthy expense ratio. Despite its name, the loss ratio isn't bad
operating metrics, and are well placed to ride over - it's just the number of payouts (valid claims paid out)
challenges. Now three companies from the insurance sector each year. The expense ratio is how much it takes to
are on their way to boom into the primary market with IPOs run the company, collected from premiums charged.
worth Rs 10,000 crore. Put together, this gives the 'combined ratio', which
shows an insurance company's income versus
The Insurers listed in India as at 30 expenditure
November 2017 are: The insurance industry is at a critical inflection point. Key

Company IPO launch Public listing trends are reshaping the industry, including the rise of
date date competition from an array of insurance and noninsurance
digital players, rapidly changing customer expectations, the
ICICI Lombard Life Sep. 2016 Sep. 2016
increasing importance of growth in valuations, and-in many
ICICI Lombard General Sep. 2017 Sep. 2017 markets-financial and interest-rate pressures.
Insurance
SBI Life Sep. 2017 Oct. 2017 Given the potential for improvement and the prospect of
GIC Re Oct. 2017 Oct. 2017 attractive returns in insurance, private-equity and principal
investors have been targeting attractive talent pools and
New India Asssurance Nov. 2017 Nov. 2017
deploying capital with the goal of rapidly driving and scaling
HDFC Standard Life Nov. 2017 Nov. 2017
the creation of new businesses.

34 The Insurance Times, December 2021