Mumbai: State-owned general insurers have welcomed the Budget proposal to take them public saying the move will help increase their brand value.
Even the private sector general insurance companies also believe that they can plan for getting listed once their peers in the government sector do so.
The sectoral regulator IRDA has already come out with broad contours of listing of general insurance companies. The industry also feels that automatic clearance of FDI proposals will boost the flow of foreign capital to the sector.
Finance Minister Arun Jaitley on Monday proposed listing of the four wholly-owned state-run general insurance companies.
"We propose to undertake important banking sector reform and public listing of public sector general insurance companies and also undertake significant changes in FDI policy," he said while unveiling the Budget.
There are four public sector general insurers -- New India Assurance Company, National Insurance Company, Oriental Insurance and United India Insurance.
"The government has announced its intention for listing of all the four state-owned general insurers and we are fully geared. As soon as the government takes further steps towards listing, we will certainly fall in line," New India Assurance chairman and managing director G Srinivasan told PTI.
"We can quickly begin the valuation exercise whenever we are asked to do so by the government as part of the listing exercise," said Srinivasan who is also the chairman of General Insurers' (Public Sector) Association of India.
"The objective is to create more transparency which will result in better branding and participation in our shareholding pattern will increase in this way," he noted.
Listing of PSU general insurers has been in the air for quite some time. After the PSU manufacturing sector and the banks, there was speculation that the government would move to other financial institutions for listing as well.
"There is a lot of hidden wealth in these state-owned general insurance companies in terms of market value of assets they hold, brand equity, trust of their customers and other such parameters. There lies a lot of embedded value in these companies and hence we believe that the real valuation will make a very attractive proposition for the investors," National Insurance Company's newly-appointed chairman and managing director Sanath Kumar said.
National Insurance's Sanath Kumar, however, believes it is not the right time for the state-owned general insurance companies to go for listing as the market is not doing well.
"But it has to be noted that our underwriting results have not been very robust till now. Still I believe that it will change within a short horizon of one to two years," he said, adding "once the forces that generate underwriting losses like pricing are addressed, I'm sure there will be a turnaround and the listing exercise will put pressure on us to perform better.
"All the four state-run general insurers are always trying to improve their performance standards in the face of rising competition from their private sector peers. Still, I believe the private sector players may be the first to get listed," he said.
He was also quick to note the poor market conditions saying "the Sensex is not doing well now".
"Ideally, it may not be the correct time for listing. But listing is a long process. By the time the listing takes place I do believe that the market will bounce back," he added.
"Listing of state-owned general insurance companies will give more visibility to the general insurance industry. There will obviously be improvements in the industry on the transparency, corporate governance and performance parameters," ICICI Lombard General Insurance managing director Bhargava Dasgupta said, adding "for the private sector players, it will be company specific. Still I do believe the private sector players will also plan for listing once their peers in the government sector start doing so."
On Budget plans on automatic route of FDI clearance to the sector, he said, "It is also positive as the time taken for the clearance from FIPB route is likely to come down."
Royal Sundaram General Insurance MD & CEO M S Sreedhar said, "The move to initiate listing of public generalinsurance companies is expected to bring in greater responsibility and transparency in their operations."
The life insurance sector also welcomed the increasing
FDI an automatic route.
"Life insurance is an extremely capital intensive business. Increasing FDI to 49 per cent via automatic route will simplify and accelerate the process. This is clearly 'ease of doing business' in action," ICICI Prudential executive director Sandeep Batra said.
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