How new insurance company entrants are likely to perform in the stock market

The four public sector general insurance companies — New India Assurance, National India, United and Oriental India — and National Reinsurer General Insurance Corp are preparing to be a part of the stock market.

Insurers are bracing for a nudge from the government to consider a public flotation and list their shares in the next financial year.

ET finds out how the companies are faring on parameters like underwriting, profitability, investment and net worth.




WHAT DRAGS THEM DOWN

Most general insurance companies make a profit on investment income. In some years, they may incur significant losses on investments, which may cause investment income to decrease, and have an adverse effect on their financial condition and results.

Another big risk for general insurance companies comes from catastrophic losses, which could affect their balance sheet adversely. A large claim could emerge from a single event like the Hudhud cyclone, floods in Jammu & Kashmir and the Gujarat earthquake.

Profitability may take a hit if companies are unable to obtain reinsurance on time, leading them to pay a much higher claim. Also, if the financials of reinsurance companies are not strong, a default could adversely affect general insurance companies’ business operations.

Like all other businesses, insurance companies too would take a hit on account of the economic slowdown. Demand for their products may come down, resulting in subdued operations.