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Last Updated : Nov 27, 2018 12:06 PM IST | Source: Moneycontrol.com

Mega insurance merger to finally get underway; consultant to be picked on November 28

Initial estimates suggest that the combined entity formed by merging the three insurers will be the largest non-life insurance company in India, valued at Rs 1.2-1.5 lakh crore

M Saraswathy @maamitalks
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The proposed merger of the three public sector general insurance companies in India is set to finally get underway as a consultant will likely be appointed for the purpose on November 28, after a delay of six months.

Sources told Moneycontrol that three consultant agencies have been shortlisted and that one will be chosen on Wednesday, in a meeting that will be attended by representatives of the three insurance companies.

"There were more than 10 applicants based on the tender floated. Of these, three were found to be most apt for the process," said a senior official.

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Finance minister Arun Jaitley had made a budget announcement in February 2018 about the merger and subsequent listing of United India Insurance, National Insurance and Oriental Insurance.

Initial estimates suggest that the combined entity formed by merging the three insurers will be the largest non-life insurance company in India, valued at Rs 1.2-1.5 lakh crore.

Among the three consulting firms, there is also a large global firm that has been working in the insurance sector for almost a decade.

Sources said that once the consultant is appointed, it will begin the process of designing the structure of the merger. It is likely that the merger will only be completed by the third quarter of FY20.

The expected duration of the proposed assignment is 19 months, with a provision for extension, if required. The process will have three phases -- design, implementation and post-merger/amalgamation integration.

Here, the precise timelines of the merger will be mutually agreed upon between the consultant, government and the senior management of the insurance companies.

According to the tender documents, the bidder should have five years’ experience of providing merger and acquisition (M&A) advisory services in India, especially in the BFSI and insurance sectors.

Also, they should have an annual turnover of Rs 100 crore and should have reported an annual profit for at least 3 of the last 5 years.

As at the end of FY18, the three general insurers put together had more than 200 insurance products with a total premium of Rs 45,126 crore and a market share of around 35 percent.

The total employee strength of the three companies put together is around 42,000, spread over 5,700 offices.

Two other government-owned insurers -- New India Assurance and General Insurance Corporation of India -- are listed on the stock exchanges. The government has invited bids from companies for divestment of stake through offers-for-sale in these two entities.

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First Published on Nov 27, 2018 12:06 pm
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