THE HEADS OF four public sector insurance companies are expected to meet officials in the finance ministry on Wednesday to discuss the merger proposal of United India Insurance, National Insurance and Oriental Insurance, sources told FE. Senior officials in the insurance industry said that the deliberations would be around challenges of mergers like branch rationalisation, information technology and human resources. In the meeting, a decision on hiring an external consultant to value the three companies and advise on the process of integration is also likely.
“This will be second meeting after the finance minister announced merger of three insurers in Budget 2018-19. We have also set up committee of general managers which will also simultaneously look into the issue of merger. The major challenge is with regard to our workforce, all the three combined have around 44,000 employees and we have to utilise them effectively once the merger is finalised,” said a top official of a leading insurance company. New India Assurance will be also part of the meeting, said the official.
Currently, New India, which is also a public sector insurance company, is the leader in general insurance with a market share of 15.06% in financial year 2017-18, show the data from Insurance Regulatory and Development Authority of India (Irdai). If merged, the market share of the other three players would be around 30%. All the four public sector insurers had a collective 45% of the market share in terms of gross direct premium underwritten in the last fiscal.
“There will also be a discussion on how the companies performed in the last fiscal. Government plans to list the merged entity immediately after the merger. But it looks like the merger would be pushed to the last quarter of this fiscal. Once a consultant is finalised and the valuation process is completed, we will get a clear picture on how much stake the government wants to off-load in the IPO,” said the CMD of a public sector insurance company.