The stock price performance of the non-life insurance sector remained depressed and decreased by an average 4 percent during the first half of 2011 (January-June 2011), despite sector's first quarter CY11 profits showing healthy growth, analysts said. "We believe floods that severely hit the country last year coupled with no major relief announced in the budget FY12, affected the prospects of the insurance sector," Mazhar A Sabir, an analyst at Invest Capital and Securities said.
The market capitalisation of the sector declined to Rs 46 billion ($523 million) as compared to the December 2010 figure of Rs 49 billion, witnessing a decline of 6 percent during the first half of CY11. As far as individual stock price performance is concerned, only four companies namely PIL, CICL, RICL and NJICL have managed to perform well and posted healthy returns of 65 percent, 55 percent, 27 percent and 26 percent respectively during the first half of CY11. On the other hand, UVIC, CENI, PINL, and AICL witnessed subdued performance during this period, as their scrip prices lost by 41 percent, 28 percent, 27 percent and 26 percent, respectively.
"We believe the price performance of the sector has overreacted, declined massively during the first half of CY11," he said. However, the recent decline in prices of the insurance sector has offered an attractive investment opportunity at current levels, he added. As the one-time impact of floods has been history, the first half of CY11 profits of the sector are expected to be better as compared to last year. "We view that a rally towards the end of the year on account of healthy results can be witnessed in the non-life insurance sector," he added.
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