Insurance Bill could spur sector re-rating: Espírito Santo Securities Research

The passage of the Insurance Laws (Amendment) Bill could spur sector re-rating, according to Espírito Santo Securities (ESS) Research. 

 

“Bancassurance players are best placed to gain market share and register RoEVs (Return on Embedded Value) of 20% from FY16 onwards,” it said Stock Market Tips

 

The much delayed Insurance Laws (Amendment) Bill is expected to be passed in the winter session of the Parliament (23 Nov – 24 Dec). A key clause in the bill is raising the cap of foreign ownership to 49% from 26%. 

 

ESS said that this could pave the way for listing of insurance entities, foreign partners increasing their stakes and playing a much active role in management. It added that they expect these transactions to happen at more than 3.0x forward embedded value Intraday Trading Tips

 

ESS research showed that qualitatively the sector is stronger than four years ago. The quality of the business underwritten by insurance companies has improved significantly given the higher tenure of products, balanced product mix, better persistency, lower operating expenses and higher protection component versus five years ago, it said.

 

Moreover, it said that the regulators’ stance towards the sector has changed significantly from ad-hoc regulations on Unit-Linked Products in 2010 to phased implementation of product design guidelines in 2013 Commodity Trading Tips

 

ESS expects that HDFC Life, ICICI PruLife and SBI Life would be the first ones to list. It said that other players may see their foreign partner buying out stake from Indian promoter. 

 

In their opinion, listing of insurance businesses would raise the profile and improve understanding of the insurance industry. ESS said that this would also improve transparency and disclosure standards, apart from diversifying the sources of funding Personal Numerology Tips 

 

“A public listing will provide alternate sources of funding for the insurance sector, though ironically the players who would first come to bourse may not require capital. The top-7 players currently declare a significant part of their earnings as dividends,” said ESS Research Nifty Trading Tips