IGI Insurance on the radar

It pays to be a smart investor. Take IGI Insurance, for instance. The firm is continuously struggling with its core business. Recall that the companys 9M CY13 results showed an 86 percent decline in its underwriting profits due to Rs85 million in losses in its health and fire and property damage segment. Yet the firms stock is being sought after by investors as if there would be no tomorrow.
Lets go back to November 2013 first, when IGI Insurance became the talk of the KSE. That month alone, the stock gained 27 percent in value, with its average daily turnover soaring to over 128,000 shares, as opposed to an average volume of about 33,000 shares in the preceding 3 months.
Following that rise, the stock underwent some consolidation in December, when its price stayed rather flat during the month, albeit with a relatively vibrant daily volume of an average 158,000 shares. Come January and the stock shot through the roof again, posting a handsome gain of 36 percent in a short span of just 1 month (compared to KSE-100s return of 6 percent), with average trading volumes shooting up to 337,000 shares.
Clearly, its the healthy portfolio of IGI Insurance that has caught the eyes of many investors. The market value of the quoted equity investment portfolio (investment in associates and AFS securities) of IGI Insurance, as of now, stands at Rs552 per share (December 31, 2012: Rs226 per share). While the firms share price is trading at Rs215.45 per share, reflecting that the scrip is trading at 0.39 times of its investment portfolio at this stage.
With plenty of liquidity available in the market, especially after the delisting of Unilever Pakistan Limited from the KSE, market participants are once again moving towards value stocks. For these stocks, the demand is exorbitantly high with available choices rather limited.
On top of the list for such stocks lies Nestle, the free float of which is mere 5 percent, leaving interested investors with no avenues for direct investments. With Nestle being the major contributor (contributing 84 percent) of the investment portfolio, IGI Insurance offers an indirect route to those looking to diversify their investments in the foods sector.
Besides, its not only about Nestle. Each scrip in the equity portfolio of IGI Insurance has not only generated phenomenal returns but also notably surpassed the benchmark KSE-100 (see table). The only loss-making entity in the investment portfolio was the IGI Investment Bank, which has been offloaded, thus leaving a clean and well-kept portfolio for the company.
All this is hunky-dory for IGI Insurance, because as long as Nestle and other stocks in the portfolio are rising, investors will have a reason to flock to IGIs counters. But, for how long can a company survive on its investments? Unless IGI brings its segmental underwriting results back into green, sooner or later, the chickens will come home to roost!

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Investment Portfolio of IGI Insurance

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Name of Company          Symbol     Holding     Return*

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Packages Limited         PKGS           25%        123%

Nestle Pakistan          NESTLE         10%        150%

Sanofi-Aventis           SAPL           19%        129%

Tri-Pack Films           TRIPF           5%         19%

Treet Corporation        TREET          13%        100%

Mitchells Fruit Farm     MFFL            4%         95%

ZIL Limited              ZIL             3%         33%

Siemens Pakistan         SIEM            1%         72%

Benchmark

KSE 100                                 60%

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