Art Of Pricing Insurance IPOs

There is quite a bit of euphoria in the stock market around the initial public offerings (IPOs) of insurance companies these days. Four IPOs of leading companies ICICI Prudential Life, ICICI Lombard, SBI Life and General Insurance Corporation of India have already been concluded. Some more, such as public sector insurer New India Assurance and private sector companies HDFC Standard Life and Reliance Nippon Life, are expected in the near future.

All the stocks of insurance companies that have been launched so far were oversubscribed. However, doubts have been raised about valuation of these stocks, and most analysts have cautioned that they may not give good returns in the short term.

Let's see how valuation is done in the insurance sector.

The valuation exercise in the context