Govt to merge 3 PSU general insurers into one, list on bourses

As part of the Centre's divestment plans, Finance Minister Arun Jaitley today proposed to merge three public sector general insurance firms into one and list that entity on bourses.
Jaitley, while presenting his Budget for 2018-19, said, "Three public sector general insurance companies -- National Insurance Co Ltd, United India Assurance Co Ltd and Oriental India Insurance Company -- will be merged into a single insurance company and be subsequently listed."
The merger and subsequent listing of the entity to be formed is part of the government's disinvestment drive through stake sale.
The government has already lined up strategic disinvestment in 24 public sector units (PSUs), including national carrier Air India.

Industry experts see this proposal as a positive development for the industry, with the proposed merged entity estimated to be a size of about Rs 40,000 crore.
"It will be a profitable move for the government and with an estimated size of around Rs 40,000 crore, capacity of the combined entity will be enhanced and there won't be any need to depend upon reinsurance business to generate revenues as the three entities, based on their locations, are engaged into a host of services," said Joydeep K Roy, Partner & Leader - Insurance, PwC India.

Ratings firm ICRA said the merging of the three non-life PSU insurance companies, as a positive development for the general insurance sector.

These three PSU insurers had a combined gross premium of Rs 32,115 crore by December 2017 with a combined market share of 33.3 per cent.
The economies of scale arising from the merger, higher transparency of operations, and focus of profitability before public listing, will not only improve the performance of the PSU entities but also benefit the private sector insurers as pricing on products will rationalise by the PSU insurers," said Karthik Srinivasan, Senior Vice President and Group Head- Financial ratings, ICRA.
K G Krishnamoorthy Rao, Managing Director & Chief Executive Officer, Future Generali India Insurance Company said the merged entity will have higher scalability and lower operational costs.

"From the industry's perspective, it will lead to healthy competition which will ensure innovation in product offerings and better customer service," Rao said.
The government owns four general insurance firms, of which the New India Assurance Co Ltd is already a listed entity.
While General Insurance Corporation of India (GIC) Re is the only public owned reinsurer firm, also a listed entity.
In a case where premium for health insurance for multiple years has been paid in one year, the deduction shall be allowed proportionately over the years for which the benefit of health insurance is available.
Additionally, the minister has also proposed to extend the benefit of exemption for withdrawal up to 40 per cent from National Pension System Trust (NPS) to all subscribers and not only to employees.