——life insurance stocks——–

Life Insurance is completely different industry. It is very difficult in Nepal to analyze life insurance stock as they are usually 1 or more years behind and a lot of key metrics are absent in the report of our life insurance companies.

Solvency Ratio

You should look at Solvency margin of company which is placed by beema Samiti, in our case. If solvency ratio is below 1.5 the board shall furnish the recovery plan within 3 months to beema samiti and recover within six months that might impact to your short term plan.

Managment Expense

Another metric to look at is the expense of management. It is better if the insurer spends upto thirty percent of total income generated from premium.

Reserve

Reserve is a good indicator of the financial condition of insurance companies but, to express the judgment on this matter is extremely high.

Premium

Premium is the amount of money paid to life insurance company in exchange for life insurance coverage – it is main source of income. If premium is increasing at a good rate then it can be considered as growing life insurance company.

Embedded value

It is a conservative measure of the insurer’s value in the sense that it only consider future profits from existing policies -ignores the sell of future policies. This also excludes goodwill.

It is sum of following componenets:

– value of new business: present value of future cash flow to contract sold during year
– net asset value

Insurance float

It is a difference between premiums collected and claims paid out. It is considered as free money and it is also the reason behind buffet success. You can read about float in dept from warren buffet.

In the end, I came back to my starting premise that analyzing insurance company is very difficult in Nepal as you do not have access to necessary information.
If you don’t want to go dept then you can use indicator like market capitalization, reserve and surplus, premium & premium growth, insurance float etc.