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Tag Archives: IPO

National Insurance Likely To Be Listed By March 2015

Posted on March 15, 2013 by Akanksha

Public sector general insurer, National Insurance Company, might be listed by March 2015, following the finalization of norms for Initial Public Offering (IPO) by the Insurance Regulatory and Development Authority (IRDA).

The company has started evaluating the intricacies of these norms. Informally the centre has already forwarded the message to the company to be listed by March 2015.

Since the company is one of the biggest players in the market, the public-issue is likely to be of a substantial size.

National Insurance is one of the first public sector general insurers to have begun operations in India. As its operations have run for more than ten years, it is eligible to go public. The company was incorporated more than 100 years ago.

The company is aiming to garner premium of around Rs 9,500 crores this fiscal as against Rs 7,785 crores in 2011-12. Company’s focus areas will be motor and health insurance.

Categories: News | Tags: IPO, IRDA, Motor Insurance, National Insurance

Valuation Method Changed For Listing Of General Insurers

Posted on March 14, 2013 by Akanksha

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The Insurance Regulatory and Development Authority (IRDA) has scrapped the embedded value requirement for the listing of general insurance companies on the stock exchanges in the final guidelines issued in the gazette.

Instead of the embedded value method for valuation, general insurance companies will be required to make additional disclosures on risk factors specific to them, adequacy of premiums, reserves, asset-liability management, and current financial condition.

Embedded value, an actuarial practice used to value an insurance company, is the present value of the future profits expected from the business.

In the draft guidelines issued earlier, IRDA after consultation with Securities and Exchange Board of India (SEBI) suggested that the embedded value should be double the share capital for listing of a general insurance company.

However, during discussion on the draft guidelines with IRDA, the general insurer sought removal of this provision as general insurance is a transient business whereas life insurance policies are long term contracts.

IRDA has said that only those companies, which have been in operation for ten years, will be entitled to bring out an Initial Public Offering (IPO).

The approval granted by IRDA will be valid only for a year, within which the company has to file the Draft Red Herring Prospectus with SEBI.

The criteria for approval for insurers will be their overall financial position, its regulatory record, the proposal of issue/offer of capital, the capital structure post issue, history of compliance with regulatory requirements and the maintenance of solvency margin.

Categories: News | Tags: Draft Red Herring Prospectus, General Insurers, IPO, IRDA, SEBI, Solvency Margin

IRDA Gazette New Norms on Various Segments

Posted on March 11, 2013 by Akanksha

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The Insurance Regulatory and Development Authority (IRDA) has finalized and gazetted various new rules for the segment.

These cover Initial Public Offering (IPOs) by general insurers, amalgamations between life insurers, one on Third Party Administrators (TPAs) in the health insurance segment and for health insurance coverage – entry can’t be denied up to the age of 65 years and renewal can’t be denied due to age, except in foreign travel, among other things.

On IPOs by general insurers, IRDA said that only those in operations for at least ten years would be allowed to do so. IRDA also said that this grant of approval would be valid for only a year, within which the company would have to file the draft red herring prospectus with the Securities and Exchange Board of India (SEBI) under the issue of capital and disclosure regulations.

Among the other guidelines gazette, the IRDA (scheme of amalgamation and transfer of life insurance business) regulations say companies in this segment would have to give a two-month notice of an intention to implement the scheme. And, this should be prior to applying.

IRDA said that it might direct such companies to send a copy of this application to every Indian who is a policyholder. After in-principle approval, the life insurer would need to take approval from other relevant authorities such as the Foreign Investment Promotion Board, SEBI, Reserve Bank of India (RBI) and Competition Commission of India. After getting these approvals, a final nod will be needed from IRDA.

As for TPAs, they must take prior IRDA approval to change their shareholding when exceeding 5% of paid-up share capital.

The health insurance guidelines specify that entry age for a policy can be up to 65 years. Guidelines also say that renewal can’t be denied on the ground of age, except in travel insurance.

The guidelines have allowed non-allopathic treatment to be provided coverage, provided treatment has been taken in a government or government-authorized institution. An option to migrate to another suitable health insurance policy has been given to a consumer.

Categories: News | Tags: IPO, IRDA, SEBI, TPA

IRDA may Scrap Embedded Value Norm for Listing of General Insurers

Posted on February 7, 2013 by Akanksha

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The Insurance Regulatory and Development Authority (IRDA) is likely to scrap the embedded value requirement for listing of general insurance companies on stock exchanges.

Instead of embedded value method of valuation, general insurance companies will be required to make additional disclosures on adequacy of premiums, reserves, asset-liability management and current financial condition.

Also, IRDA has said that it will look into financial position, capital structure and regulatory record of insurers before permitting them to come up with share sale offer.

Embedded value is an actuarial practice used to value an insurance company. It is the present value of the future profits expected from the business.

The draft Initial Public Offering (IPO) guidelines for general insurers were released by IRDA in September 2012 after consultation with Securities and Exchange Board of India (SEBI). The draft has suggested that embedded value should be double the share capital for listing of a general insurance company.

However, general insurers asked the IRDA to remove this provision saying that it does not apply to them. It is difficult to value general insurance companies on the embedded value parameter as general insurance is a transient business whereas life insurance policies are long term contracts, where the policyholder pays the premium regularly, which can help determine the embedded value of the company.

Categories: News | Tags: Embedded Value, General Insurance, Initial Public Offering, Insurance Regulatory and Development Authority, IPO, IRDA

General Insurers Demanding to Scrap Embedded Value Norm for IPO

Posted on October 22, 2012 by Akanksha

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General insurance companies have demanded scrapping of the embedded value requirement for Initial Public Offering (IPO). As per general insurers this concept does not apply to them since they depend on year-to-year policy renewals unlike life insurers who write policies for decades. All policies including health and motor are one year contract.

Earlier this, in draft IPO guidelines for general insurers, Insurance Regulatory and Development Authority (IRDA) has proposed that embedded value-future profit of present value- should be double the share capital.

Categories: News | Tags: General Insurers, Insurance Regulatory and Development Authority, IPO, IRDA

SEBI Maintains Profitability Criteria for Listing of Insurers

Posted on July 28, 2012 by Akanksha

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Securities and Exchange Board of India (SEBI) has said that there was no need to relax the three-year profitability criteria for listing of insurance companies.

A sub-group appointed by SEBI has said that insurers could still raise the capital through book-building.

Insurance Regulatory and Development Authority (IRDA) had inquired SEBI if insurers could raise capital through fixed-price issues as insurers will find it difficult to fulfill profitability criteria because insurers require 6-7 years to break even.

SEBI panel has done away with the need for a monitoring agency to oversee how the money raised is deployed.

It recommended that insurers should raise capital only to fulfill capital adequacy requirements according to IRDA norms.

The sub-group said that detailed insurance industry specific risk factors should be the part of offer document.

The risks include claims arising out of catastrophe, faulty pricing leading to differences in future actual claims, deviations in mortality rates and regulatory restrictions on investment by insurers.

The general insurers are also required to emphasise the risks related to their inability to obtain reinsurance, regulated tariffs and increase in claim liability of motor third party due to court judgments.

SEBI panel has recommended that insurers should provide an overview of the insurance industry, disclose financial information according to IRDA format and familiarize investors with a glossary of insurance terms. SEBI has also recommended additional disclosures pertaining to business details such as distribution network, premium, persistency, investment yield, reinsurance and new business achieved profit.

SEBI has requested that either IRDA should amend the insurance laws to fall in line with SEBI ICDR regulations or keep specific additional compliances without there being a need to amend the general provisions of ICDR regulations.

As per experts, the recommendations of SEBI are likely to protect the investor’s interest due to greater disclosures and help in mitigating the conflict between the regulatory provisions of SEBI and IRDA.

Categories: News | Tags: Insurance Regulatory and Development Authority, Investment Yield, IPO, IRDA, Premium Persistency, Profitability Criteria, SEBI

Insurers must Outline Risks in IPO Document

Posted on July 26, 2012 by Akanksha

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Clearing the decks for Insurance Regulatory and Development Authority (IRDA) to come out with Initial Public Offering (IPO) guidelines for general insurance companies, appointed panel of Securities and Exchange Board of India (SEBI) has suggested outlining risk factors in the offer document, including returns from their investments.

The panel had representatives from both SEBI and IRDA. This report will be used by IRDA to finalize IPO guidelines for general insurance companies.

Panel said that Insurance industry is different from other industries and hence, have risks that are unique to it. Therefore, specific risk areas should be disclosed in the offer document.

The committee on disclosures and accounting standards has recommended that general insurance companies that are planning to come out with IPO should disclose in the offer document the claims arising out of catastrophic losses, which could materially and adversely impact the profitability and cash flows of the insurance companies.

The panel’s report recommended that, offer document will outline industry specific risk factors such as interest rate risk, liquidity risk, catastrophic risk, re-insurance risk, regulatory risk and market growth risk.

A meeting of the panel held in January this year has suggested that insurer should come out with the overview of the entire industry and specific format prescribed by IRDA.

Panel has also suggested that insurers have to disclose financial information at regular intervals to IRDA.

Panel has also given its suggestion with regards to advertisements, objects of the issue, definition of promoters and disclosure with regard to uniform financial denomination.

The sub-group has recommended that report of an independent actuary on the economic capital of the insurance should be made a part of the offer document. The content and the format of the reports and criteria for actuaries who are authorized to prepare such report may be prescribed by IRDA.

These suggestions are based on the study of existing practices in other global markets.

Categories: News | Tags: General Insurance, IPO, IRDA, SEBI

Soon Non-life Insurers may also be able to come with IPO

Posted on May 8, 2012 by Akanksha

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Soon non-life insurance companies will also be able to raise fund through capital market as Securities and Exchange Board of India (SEBI) is in advance stage of finalizing norms for non-life insurance companies planning to come out with an Initial Public Offering (IPO).

So far issues and norms for life insurance companies have been clarified between Insurance Regulatory and Development Authority (IRDA) and SEBI. And matter for non-life insurance companies is in advance stage of discussion hence; it will not take too much time.

Categories: News | Tags: IPO, IRDA, Non-Life Insurers, SEBI

HDFC Life to Hit Capital Market in FY’14

Posted on May 3, 2012 by Akanksha

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When most of the private sector life insurers are waiting for Foreign Direct Investment (FDI) limit in insurance sector to be increased to 49% from current 26% to come out with Initial Public Offering (IPO), HDFC Life is getting ready to hit domestic capital market in the next financial year even if the FDI limit is not raised.

HDFC Life is planning to raise funds through an IPO of 10% of its capital base. Company has already started process eternally.

However, it is not clear yet that whether only HDFC will dilute the holding or it will be pared in a parity basis. It is not decided yet whether Standard will dilute its stake or not as there is an agreement that Standard’s holdings will go up to 49% when the FDI limit is relaxed.

As per the company before deciding the timing and the size of the issue, it will need to consider many things such as business model and acceptable margins in the future and valuation of the company.

Company is looking at a margin of 15% before going public. At present company has margin of 10.25%.

Since its inception, for the first time company has reported profit in 2011-12. For FY’12 company has reported net profit of Rs 271 crore. Company’s total premium collection grew 13% to Rs 10,202 crore on year-on-year basis. As of 31 March 2012, company’s embedded value stood at Rs 4,800 crore.

Private sector insurer HDFC Life is a joint venture between Housing Development Finance Corporation (HDFC) holding 74% stake and U.K. based Standard life holding 26% stake.

Categories: News | Tags: FDI, Foreign Direct Investment, HDFC Life, IPO

HDFC Life seeking equity dilution through private equity instead of IPO

Posted on December 23, 2011 by

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HDFC Life is not looking to raise capital from primary market before 2013 instead of it is seeking equity dilution by bringing in another partner. As per company current market conditions does not allow them to get desired valuation through Initial Public Offering (IPO) till next 12 months and their capital requirements has also came down.

As per company, shareholders has invested in it at Rs 75 per share which pegs its valuation at Rs 15,000 crore hence company is expecting to list it above that price.

During the first half April-September 2011 company has seen de-growth of 26%. Company’s renewal premium during same period has increased by 11%. Company managed to post profit of only Rs 21 crore as against the guidance of Rs 60-70 crore.

However, company has seen a decline in number of policy surrenders as during FY’12 till now worth of policy surrenders stood at Rs 1,100 crore as against Rs 1,400 crore in corresponding period last year.

As a cost cutting measure company has reduced its staff. It has also reduced its number of branches to 470 from 500 but the company said that as the market condition will improve it will increase its branch network again; it may increase 100-110 branches in next three years.

Private insurer HDFC Life is a joint venture between HDFC holding 74% stake and UK based Standard Life holding 26% stake.

Compare HDFC Life’s policy with other insurance policies

Categories: News | Tags: HDFC Life, IPO, Premium, Surrender

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