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Improved profits bring cheer to United India, Oriental Insurance ahead of merger

Even the solvency ratio in FY18 stood at 1.67% and 1.54% for Oriental Insurance Company and United India Insurance respectively.

Improved profits bring cheer to United India, Oriental Insurance ahead of merger

Improved financials of state-run United India Insurance and Oriental Insurance Company in the last financial year will bring a much-needed relief to the insurers ahead of their merger, according to senior officials in the insurance industry.

Both the non-life insurers have managed to post profits and take their solvency ratio above the mandatory levels of 1.5% in the previous fiscal.
The officials said that United India reported a net profit of Rs 1,003 crore in 2017-18 compared with a loss of over Rs 1,900 crore in the previous financial year. Oriental Insurance registered a net profit of Rs 1,510 crore in 2017-18 against a loss of Rs 1,691 crore in the previous year.

Even the solvency ratio in FY18 stood at 1.67% and 1.54% for Oriental Insurance Company and United India Insurance respectively. Both the insurers’ solvency ratio was below the mandatory level of 1.5% in FY17, the Insurance Regulatory and Development Authority of India (Irdai) said in its annual report. MN Sarma, chairman and managing director of United India Insurance, said: “This was achieved by measures such as underwriting control specially in health and third party motor portfolio, focus on better-priced products and raising of subordinated debt of about Rs 900 crore in the last financial year.” He also added that, the company had to give up about Rs 800 crore worth of group health business due to inadequate pricing.

Industry participants say that the rise in profits and improved solvency margins will further improve the valuations of the company going forward. Finance minister Arun Jaitley, who is currently out of action following a kidney surgery, in his Budget speech had proposed to merge National Insurance Company, United India Assurance Company and Oriental India Insurance Company — which will be subsequently listed. If the merger goes according to the plan, then the merged entity would become a leading non-life insurance company in India.

“The process of merger is on and we had few meetings with the finance ministry in the past few months. We expect the merger to take place by the end of this financial year and listing in the next financial year,” said a senior official from one of the public sector insurance company on condition of anonymity.

Even combined ratio of both the companies have seen improvement and stood at 118.5% and 119.77% for Oriental Insurance Company and United India Insurance Company respectively. In the past one year there has been much action in the non-life insurance industry as New India Assurance and ICICI Lombard Insurance were listed on the exchanges few months ago. As on March 2018, gross direct premium underwritten by the general insurance companies in the current financial year were around Rs 1.5 lakh crore and health, motor and crop insurance are the top segments in the sector.

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First published on: 25-05-2018 at 01:09 IST
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