INSURANCE SECTOR EARNINGS

RPPA · 1 INSURANCE SECTOR EARNINGS Sun Oct 26, 2014 10:41 pm

RPPA

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It is expected that this sector's will have an hit on their earnings in the medium to long term (1 to 5 year) due to the reduction in margins due to the reduction in interest rates.

especially their portfolios are heavily loaded with investments in T/Bills & T/Bonds (mainly Bonds). From that a higher % (more than of 90%) is accounted as long term investments (held to maturity). Therefor no marked to market gain available.

So when selecting stocks in this sector please be mindful in this angle.

soileconomy · 2 Re: INSURANCE SECTOR EARNINGS Mon Oct 27, 2014 7:02 am

soileconomy

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T bonds carries fairly high interest rate and its is over 3 year period .in that case they are benefitted depending on their exposure.

RPPA · 3 Re: INSURANCE SECTOR EARNINGS Mon Oct 27, 2014 7:36 am

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soileconomy wrote:T bonds carries fairly high interest rate and its is over 3 year period .in that case they are benefitted depending on their exposure.

Yes. But Industry heads has their concerns by themselves on future prospects.

ADP · 4 Re: INSURANCE SECTOR EARNINGS Mon Oct 27, 2014 9:37 am

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RPPA wrote:It is expected that this sector's will have an hit on their earnings in the medium to long term (1 to 5 year) due to the reduction in margins due to the reduction in interest rates.

especially their portfolios are heavily loaded with investments in T/Bills & T/Bonds (mainly Bonds). From that a higher % (more than of 90%) is accounted as long term investments (held to maturity). Therefor no marked to market gain available.

So when selecting stocks in this sector please be mindful in this angle.

The concern should be if rates stay low for over 5 years(long term). The insurance sector should have a positive growth in the life sector as insurance becomes more attractive in a with interest rates. Is as you say more than 90% are in long term T/Bills & T/Bonds its massive return they are sitting on. The decision to hold to maturity or trade will be a decision of prudent management and we should see the benefits in the quarters to come.