M Saraswathy Moneycontrol News
The initial public offerings (IPOs) of United India Insurance and Oriental Insurance are likely to be deferred to the end of the next calendar year. While the government had given a go-ahead for the listing of state-owned general insurers in 2016, the two insurers are in the process of shoring up their capital to 150 percent.
“We are waiting for the solvency margin to touch 1.5 as per the regulatory requirement. Post that, the decision on how much to divest and the pricing would be taken. It (IPOs) could be around December 2018,” said an official close to the development.
As per the Insurance Regulatory and Development Authority of India (IRDAI) norms, insurers are required to maintain 150 percent solvency at all times.
The public disclosures of Oriental Insurance showed that their solvency is still below 150 percent and stood at 111 percent in FY17. In the first quarter of this fiscal, their solvency was at 118 percent.
United India’s solvency stood at 110 percent for the first quarter of this fiscal. At end of FY17, their solvency stood at 115 percent as per their public disclosures.
Another insurer which is planning an IPO is National Insurance. It is anticipated that the company which has already sent a proposal to IRDAI for an IPO, may bring out its public issue and list on the exchanges by the end of this financial year. National Insurance's solvency margin, which had dropped below 150 percent earlier, rebounded to 190 percent by Q4 of last fiscal.
While the company had time till March 2019 to increase their capital, it managed to bring it up much before the deadline.
“All the private sector insurers have been compulsorily adhering to the solvency norms. These insurers have been given time till next fiscal to pump in more capital to meet the minimum solvency requirements. Post that, the IPOs will come under consideration,” the official added.
The spacing of the two IPOs — United India and Oriental Insurance — their timing and the pricing of the issues is also expected to be closely monitored to ensure that there is adequate retail participation and the debut on stock markets happen on a positive note, another source said.
Among the public sector general insurers, General Insurance Corporation of India (GIC Re) and New India Assurance are already listed on the stock exchanges. Both companies had brought out their IPOs in the last few weeks.
IRDAI officials including chairman T S Vijayan have stated in the past that while they have given time to PSU insurers to take up their solvency margin to 150 percent, the deadline for the same has not been made known.
Only after the solvency goes back will bankers be engaged for the IPOs of these issues. Further, the focus will also be to reduce underwriting losses in these insurers' books.
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