Budget 2018: The government’s plan to merge three general insurance companies — National Insurance Company, United India Assurance Company and Oriental India Insurance Company — will create one of the largest general insurance entities. According to data from insurance regulatory body Irdai, the aggregate gross direct premium of the three insurers for the first nine months of 2017-18 is Rs 32,115 crore. The data also showed that the combined market share as on December 2017 was 29.52%, followed by New India Assurance at 15.45%. “Three public sector general insurance companies NIC, United India Assurance and Oriental India Insurance will be merged into a single insurance entity and will be subsequently listed,” finance minister Arun Jaitley said.
The proposal is part of the government’s divestment drive and follows the listing of two other public sector insurers New India Assurance (NIA) and General Insurance Corporation (GIC). The government had offloaded 11.65% stake in NIA and 12.5% in GIC for Rs 7,653 crore and Rs 9,704 crore respectively. While shares of NIA are trading at 16.5% below its offer price, GIC is trading at 17.4% below its offer price. Ashvin Parekh, managing partner at Ashvin Parekh Advisory Services, said it is a bold decision but the issues of the officers’ associations will have to be addressed. “Moreover, if New India Assurance could not deliver a good performance in its IPO despite a slightly better financial standing, it is a little remote to expect that a consolidated entity will do better,” he added.
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Alice G Vaidyan, CMD, General Insurance Corporation of India — Reinsurance (GIC Re) said with regard to the merger of three PSUs, the proposal is sound but it is the implementation which will the key to reaping the benefits of the proposal. The announcement came as a surprise to NIC. “We did not have any indication about it,” a senior NIC official told FE, on condition of anonymity. “We were preparing for an IPO and approval from the Irdai has already been received for the go ahead. But we had no formal intimation from the government on the merger,” the official said.