Moneycontrol Bureau
The Cabinet on Wednesday approved plans to divest a 25 percent stake in each of the five fully-owned public sector general insurance companies by listing these on stock exchanges.
The move will unlock a huge amount of value for the government and could increase investor appetite for private sector insurer IPOs that may follow. It may also foreshadow a listing for the Life Insurance Corporation of India, potentially the country’s most valuable company.
Finance minister Arun Jaitley told a news conference that all the five state-owned general insurance companies -- New India Assurance, Oriental Insurance, National Insurance, United India Insurance and national reinsurer General Insurance Company will be listed on stock exchanges by way of issue of fresh shares or offer for sale (OFS).
The listing of public sector general insurance companies will likely open up a flood of issue fresh public stocks or Initial Public Offerings (IPOs) by private insurers as well.
The move comes months after the sector regulator, the Insurance Regulatory and Development Authority of India (IRDA), issued listing norms proposing that all general insurance companies, including standalone health insurers, that have been in existence for eight years and life insurance companies in operation for 10 years should initiate steps to get their shares listed.
The listing of these companies will also provide an idea about the market value of insurance companies that are currently reflected only in the “embedded value”— valuation based on a formula that the regulator has approved.
A majority of existing insurance companies, both the life and general insurance space, including the Life Insurance Corporation of India (LIC) have been in existence for the period stipulated in a Discussion Paper on Listing of Indian Insurance Companies issued by IRDA in August.
The insurance regulator has said that all companies meeting the stipulation on minimum years of existence for listing should initiate steps to get listed within a period of three years from the date of issue of directions under these guidelines.
Listing of public sector general insurance companies will likely open up a flood of issue fresh public stocks or Initial Public Offerings (IPOs) by private insurers as well.
According to IRDA rules, the insures will have to make disclosures about embedded value, segment wise lapsation of policies and contribution to profitability, among others.
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