Understanding the business (profitability) of insurance companies, especially life insurance companies in the general eye, is a complex task of fundamentals analysis. Fierce competition and commissions trade put our country’s insurance sector at increased risk. This is why investing in insurance sector shares is relatively high risk for the general public. Because in return for some premiums, the risk of others is their main business.Contrary to this risk, insurance policyholders may have to pay a large number of insurance claims as the company may suffer losses. Again, paying less claims can lead to bigger profits. However, when mathematical calculation limits the risk level of the insurance risk, the shareholders (owners of the insurance company) also receive some dividends.Insurance companies’ financial statements are not as simple as other services or manufacturing companies, especially in life insurance. Actuarial valuation complicates the calculation of life insurance companies. This is why many people do not invest in insurance companies. However, investing in the fundamentals and understanding of the nature of the market, they can provide good profit. However, the key concepts related to insurance company wealth growth and profitability should be clear to the investor.
There are a total of 3 insurance companies in the country including 3 non-life and 5 life insurance companies. Of these, there are 12 companies listed in the capital market of Bangladesh, together with 12 life, 5 non-life. IDRA is the main regulatory body of insurance companies.First you need to know and understand the similarities and differences between life and non-life insurance. If they have basic ideas about their business, revenue sector, profit source and reporting type, they should not be confused about the actual value (valuation) of the share price of the companies in the secondary market.In both cases, insurance companies take the risk of others on their shoulders in exchange for some premium from the customer. Where life insurance companies provide insurance for people’s lives, non-life companies offer insurance benefits against different types of assets. In both cases, the risk of premium increases or decreases in parallel in a competitive environment. In the case of non-life, the premium is payable, where life insurance companies pay back the policy with interest on the interest.
The company’s business (AI) is involved in determining the premium for potential risk, ensuring insurance efficiency to the customer, and utilizing the premiums received.Successful companies can pay good dividends to shareholders over time, increasing the base and value of their assets and gaining the ability to take more risk. In the case of non-life company, only the shareholder in the case of the shareholder or life insurance company, the policyholder (who purchased the insurance policy in exchange for the premium but did not belong to the ownership of the company), both shareholders are affected. Analyzing financial reports for non-life insurance companies is relatively easy. Like other manufacturing and conventional services companies, they also receive income, expense, balance sheet and cash flow. Earnings per share, value of assets also make it easier for non-life company valuations. However, the financial reporting analysis of life insurance companies is relatively difficult. Reporting for their business is not as straightforward as non-life. Life insurance companies charge refundable premiums for a relatively long time.
It’s a lot like collecting FDR. However, their activities and risks are far more complex than those of FDR collecting banks or financial institutions.Not all shareholders of Life Fund: Many ordinary investors forget that the company’s policyholders own 5 percent of Life Insurance Company’s life fund. Only 3 percent is owned by companies or shareholders. If the life fund for a listed life insurance company’s share is 5 rupees, then the shareholder’s share (owner) is more then 1 rupees. This is called net asset value (NAVPS) for the life insurance company’s share in the big bang.It is now possible to establish a basis for valuation of the shares of companies by reference to this hypothetical NAVPS of a life insurance company. However, it would not be entirely logical to take it literally. Because the fund’s quality and ability to generate revenue are also a factor.