The Hindu Business Line : This year, investors want equity in insurance

Several large investors see insurers emerging as one of the top value creators in Indian equities in 2005, which appear ready for more, even at record highs. The BSE index closed over 6,600 and the 50-share NSE index at 2080, both all-time highs.

However, a lack of listed companies is a problem for investors who wish to directly own stocks in the emerging industry. Except Max India Ltd, the holding company of the Max group's joint venture insurance company with New York Life, no other insurer is directly represented by listed equity. But that is unlikely to deter investors with a long-term outlook.

"Greed and fear views the insurance sector as the natural extension of the continuing bull market in Indian bank stocks," a top analyst of CLSA, Mr Christopher Wood, said in their Greed and Fear journal last week. "One technical issue is the lack of direct plays but there are indirect plays, and investors are advised to buy into them, even though the share prices have already begun to move," Mr Wood said.

Several large investors appear to share that view. The Max India stock rose 20 per cent on Friday to close over Rs 320. Several dealers attributed the interest in the stock to its investments in the insurance sector. They say that foreign institutional demand is strong.

CLSA, which is one of the largest equity broking firms catering to foreign investors, said it would introduce a four percentage point weightage for insurance and the chosen stock would be AV Birla group's Indian Rayon. The synthetic yarn maker has invested in the group's life insurance venture with Sun Life Insurance of Canada. That venture — Birla Sun Life — is the second largest private insurer in India in terms of market share behind Prudential ICICI Life. The state-owned Life Insurance Corporation dominates the overall market with a share of over 80 per cent.

Kotak Securities, another top institutional broker, said in a mid-December research report that Asia was the biggest emerging life insurance market and India and China were expected to dominate growth over the next decade. The Kotak report, prepared on the basis of an insurers' conference held in December, estimated that while India's insurable population was 65 crore, insurers reached only 2.3 per cent of that.

CLSA plans to introduce insurance to replace textiles. And, as was the case with textiles early this year, there is a lack of research on insurance. "It is only a matter of time before the Indian insurance sector attracts more research coverage, as liquidity moves into the relevant stocks," Mr Wood of CLSA said. Some insurers like Prudential ICICI, HDFC Standard Life and Birla Sun Life have indicated that they would go public sooner than later. Until then, however, stocks such as ICICI Bank, SBI, Dabur, Bajaj and HDFC, which have indirect investments in insurance, are likely to act as proxy for insurers.

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