With the three state-owned non-life insurance companies (National Insurance, United India Insurance and Oriental Insurance) in dire need of capital and their solvency position remaining weak, the government has proposed to merge them into one single entity and subsequently list it on the stock exchanges by FY19. This would be part of the government’s disinvestment programme.

“Since the financials of the three insurance companies are not so attractive to individually list them, the government is looking at merging them so as to reduce the overheads, improve their financials and solvency positions and then list them,” said an analyst.

While the merged entity would have a higher market share than the existing market leader New India Assurance, it would still have a lower networth than New India Assurance that stands at Rs 37,000 crore (including fair value). New India Assurance has an asset base of Rs 73,000 crore.

While presenting the Union budget 2018-19, finance minister Arun Jaitley, said, “The government has approved listing of 14 CPSEs, including two insurance companies, on the stock exchanges. Three public sector general insurance companies National Insurance Company, United India Insurance Company and Oriental India Insurance Company will be merged into a single insurance entity and will be subsequently listed.” 

The minister said the government has begun strategic disinvestment in 24 public sector units (PSUs), including national carrier Air India. As part of divestment of stake in its general insurance firms, the government diluted stakes in New India Assurance and General Insurance Corporation of India last year which saw tepid response from retail investors.

Pushan Mahapatra, MD & CEO, SBI General Insurance said, “The merged entity and its subsequent listing could lead to improved operational efficiencies, adoption of suitable risk based pricing model while looking at a sustained growth rate, positively impacting both the insurance sector and the customer in the long term.

“Further, this would encourage domestic and foreign investors to positively review their investment decision in the sector. The impact of the merger and listing, on the end consumers, would be visible only 5 – 6 quarters post the merger as the process is long,” added Mahapatra. Officials of the respective insurance companies refused to comment.