PSU disinvestment: Modi govt shelves plan for OIC, NIC, UIIC

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Updated: September 2, 2019 7:17:51 AM

“A road map has to be prepared to first to bring their solvency ratio to the required level before merging the three. After the merger, if the solvency ratio meets the norm, disinvestment of merged entity will be considered,” an official told FE.

Disinvestment, Oriental Insurance Company, National Insurance Company, solvency ratio, New India Assurance Company , DIPAMAccording to an estimate, the capital infusion requirement in the three insurers could be over Rs 10,000 crore.

The government will prepare a road map to improve the solvency ratios of Oriental Insurance Company (OIC), National Insurance Company (NIC) and United India Insurance Company (UIIC) to at least the regulatory norm of 1.5 times (of assets over liabilities) by infusing capital, before it revives disinvestment plans in these unlisted public sector general insurers, official sources said.

“A road map has to be prepared to first to bring their solvency ratio to the required level before merging the three. After the merger, if the solvency ratio meets the norm, disinvestment of merged entity will be considered,” an official told FE.

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A meeting of an inter-ministerial group was held in July to deliberate on the way forward regarding these insurance companies as the government was keen on consolidation of state-run general insurers. According to an estimate, the capital infusion requirement in the three insurers could be over Rs 10,000 crore. However, the Centre has not earmarked any sum for this purpose in the FY20 Budget.

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NIC has reported a deterioration in its capitalisation levels with a weak solvency ratio at 1.01 times as on December 31, 2018 while OIC’s solvency ratio was at 1.21 times. UIIC’s solevency ratio was also below the norm. These companies reported losses in the first nine months of FY19 – OIC’s underwriting losses were at Rs 3,035 crore while they were Rs 3,171 crore for NIC.

Through listing of state-owned New India Assurance Company (NIA) and re-insurer General Insurance Corporation (GIC) in October-November 2017, the Centre garnered Rs 17,357 crore disinvestment revenue by selling a small portion of its stake in both the companies. The proceeds helped the government net a record Rs 1 lakh crore in disinvestment revenue in FY18. It is targeting Rs 1.05 lakh crore disinvestment revenue in FY20, but has achieved only 12% of the target so far.

After listing of NIA and GIC, the Department of Investment and Public Asset Management (DIPAM) was looking at options including stake sale in the three unlisted insurers — OIC, NIC and UIIC. The options included merging the three unlisted companies and listing it or selling the merged entity to NIA or any other potential buyers.

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