Gamblers at it again, insurance stocks soar on rumours

Insurance stocks came under the spotlight again yesterday despite generating a lower premium income amid the ongoing coronavirus pandemic.

These stocks are being toyed with by gamblers, so they rose during the last couple of months, a stock broker said.

Prices of many stocks from this sector have more than doubled even though the companies had informed that they had no undisclosed, price sensitive information.

The stock market regulator identified rumours to have fuelled the rise of these companies. The upward trend in the sector has been halted in the last couple of weeks.

Now, they are going to become active again, he added.

DSEX, the benchmark index of the Dhaka Stock Exchange (DSE), rose 1 point, or 0.02 per cent to 5,413 yesterday.

Among 49 listed insurers, 43 rose, five remained the same and the remaining one dropped yesterday, DSE data shows.

Of the total 345 stocks, 41 per cent fell while 26 per cent rose.

These stocks have been victimised as there is no significant news for the insurance sector that could have led to the recent rise, said a top official of a merchant bank.

However, the commission income for insurers will rise as they are providing their agents a lower cut on commissions as directed by the Insurance Development and Regulatory Authority (IDRA), he added.

In 2010, the IDRA issued a circular stating that insurance companies could no longer pay more than 15 per cent of the premium as commission to their agents.

But since most insurers disregarded the directive, the IDRA issued another notice in late 2019, urging insurance companies to comply for the sake of the sector's well being.

In the past, many companies offered as much as 60 per cent of the premium as commission in a bid to secure business and this hurt the industry's overall revenue, according to industry insiders.

"But that does not mean that these stocks deserve to rise by around twofold amid the pandemic," the merchant banker said, adding that the pandemic has had a negative impact on their premium.

Premium income of non-life insurers decreased 7.46 per cent year-on-year to Tk 4,366 crore in 2020, according to IDRA data.

Similarly, the premium income of life and non-life insurers as a whole fell 3.46 per cent year-on-year to Tk 13,821 crore.

Turnover, an important indicator of the market, dropped more than 8 per cent to Tk 631 crore yesterday.

At the DSE, 93 stocks rose, 138 declined and 114 remained unchanged.

Continental Insurance topped the gainers' list followed by Nitol Insurance, Prime Insurance Company, Sonar Bangla Insurance and Provati Insurance Company.

Beximco topped the turnover list with trade worth Tk 61 crore followed by Beximco Pharmaceuticals, Robi Axiata, LankaBangla Finance and British American Tobacco Bangladesh.

Aziz Pipes shed the most, falling 6.64 per cent followed by Rahima Food Corporation, NRB Commercial Bank, Anlima Yarn Dyeing and Fine Foods.

The port city bourse fell yesterday.

CASPI, the general index of the Chittagong Stock Exchange, dropped 4 points, or 0.05 per cent, to 9,453.

Among 233 stocks to undergo trade, 77 advanced, 97 dropped and 59 remained unchanged.