National Insurance seeks Rs 6,000 crore before merger

National Insurance Company, the country’s third-largest general insurer, is yet to publish its financial results for the first half of the current fiscal.

National Insurance Company has urged the government to infuse around Rs. 6,000-crore into it to shore up the capital before its merger with two state-run general insurers.

The proposed merger of National Insurance Company, Oriental Insurance Company and United India Insurance Company would create one of the largest general insurance players in the country. “We have requested the government for capital infusion of almost Rs. 6,000 crore before the proposed merger,” a senior official of National Insurance Company told FE, requesting anonymity.

On how much capital the government is expected to infuse into the insurance company, he said, “Now, nothing is concrete actually.” “The government is working towards the merger. But currently nothing can be said on the effective date of the merger.”

National Insurance Company, the country’s third-largest general insurer, is yet to publish its financial results for the first half of the current fiscal. As on March 31, 2019, the Kolkata-based company’s solvency ratio was 1.04, which was well below the minimum solvency ratio of 1.50 for general insurance companies as per the guidelines of the Insurance Regulatory and Development Authority of India (Irdai).

In the Budget for 2018-19, the government had proposed the merger of the three general insurance companies to create a single entity. The government has plans to list the merged entity on the stock exchanges.

The government’s mega merger announcement had come as a surprise to National Insurance Company, which had at that time been preparing for its initial public offering (IPO) after getting approval from the Irdai. Notably, the merger proposal was part of the government’s divestment drive and followed the listing of two other public sector insurers — New India Assurance (NIA) and General Insurance Corporation (GIC). The Budget did not allocate any capital infusion in these three insurers.

One-hundred-and-thirteen-year-old National Insurance Company currently has 1,700 offices across the country, more than 12,000 employees and over 65,000 agents. Another senior official of the company said, “Logically, there could be branch rationalisation after the merger. But ultimately, it would not affect the workforce. The present number of retiring employees is high at every state-run insurance company. Everywhere, around 10-12% people are leaving due to retirement.”

“Therefore, there will absolutely be no job losses due to merger,” the official said, requesting not to be named. With the general insurance companies having different IT and technology platforms, the merger process is likely to face “some difficulties”.

“The merger process will always have some difficulties due to some technical issues or other issues. Combating these challenges would be the key,” the second official said.