PSU General Insurers May See up to 10% Stake Sale

The finance ministry is considering up to 10 per cent stake sale in at least one insurance company in 2016-17, beginning with the listing of New India Assurance in the primary market. The department of financial services is in the process of working out valuations for possible stake sale. The listing of other general insurance companies such as United India Insurance, National Insurance and The Oriental Insurance through initial public offerings (IPOs) is also being considered.

"To ensure transparency, we are looking at public listing of up to 10 per cent stake sale in general insurance companies in 2016-17. This is in line with the Budget announcement. The valuations are being worked out. It will also depend on market appetite," said a government official.The New India Assurance and National Insurance reported double-digit net profit growth in 2014-15, at 31.4 per cent and 17.9 per cent, respectively. New India Assurance reported a net profit of Rs 1,431 crore in FY15. The Oriental Insurance and United India Insurance posted a decline of 14.8 per cent and 43 per cent in net profit, respectively, in 2014-15 year-on-year.

No insurance company is currently listed on the stock market. Insurance sector observers, however, said arriving at the right valuations for public-sector general insurance companies might be a tricky affair in view of huge underwriting losses and claims being substantially higher than premia collected in some key segments, like motor insurance.G Srinivasan, chairman & managing director, New India Assurance, had said after the Budget announcement that the company was ready for disinvestment as its financials were healthy with the market share expanding in both domestic and international markets. He had told Business Standard at its Insurance Round Table, "While we have to go through the process, all four public sector insurers are in a position to list, though it could take six to nine months. New India Assurance will be one of the first companies to be listed."