National Insurance to revalue its assets to shore up capital base

MUMBAI: National Insurance Co will revalue its assets for the first time in more than five decades to shore up its capital base to make itself attractive to investors. The insurance regulator has given it three years to improve solvency .
“Irda (Insurance Regulatory and Development Authority) has given a window of three years to come back to the solvency of 1.5 times,“ said chairman K Sanath Kumar.

“We have assured the government that we will go to the market only when we reach solvency of 1.5.“

The solvency margin is currently at 1.26 but with fair value and real estate factored in, it may exceed the norm.Kumar is looking to finalise a listing in the next calendar year and hit the market by FY18. The government plans to list five state-owned general insurers.

The regulator has prescribed that all insurance companies should maintain a surplus that's 1.5 times liabilities at all times. Securities and Exchange Board of India norms require stateowned companies to divest a minimum of 10% to the public, going up to 25% in the next three years.

“It will not be a complete disinvestment by the government, there will be some fresh share issue as well,“ said Kumar.“This will help the capital base to grow .“

The cabinet approved the listing of public sector general insurance companies through a combination of fresh issuance of shares or offers for sale. After such an issue, the government holding in these companies will gradually come down to 75% from 100%. This is aimed at improving corporate governance and placing a greater emphasis on growth and earnings. National Insurance has a net worth of ` 9,000 crore, assets of `20,000 crore and a fair value of `6,000 crore.

“We have unvalued real estate,“ Kumar said. Insurance companies are feeling capital pressure due to higher crop insurance cover stemming from the government's Pradhan Mantri Fasal Bima Yojana.

Oriental Insurance has a solvency margin that's close to the norm. New India Assurance and United India are above the regulatory requirement.