Page 26 - LIFE INSURANCE TODAY Novemver 2017

Implications of

the surge in

Insurance IPO

I Insurance companies are tapping This sort of thing hasn’t happened remains to be seen if insurance stocks

the market in droves. To be sure,
before. There are some interesting
themselves become a standalone
the regulatory compulsion was aspects to it. segment with sufficient trading volume
always there to divest promoter and market cap, forcing bourses to
holdings in a time-bound manner. But Tapping markets for what? track their performances through an
look at what is happening now. NSE or BSE insurance index?
Almost a decade and half after the
insurance market opened up to private
The first ever insurance issue, that of As for listing of public sector
players, the realisation has now
ICICI Pru IPO, happened a year back. dawned that many of these hold companies, this could usher in
The debutant listed below par but transparency and efficiency. One
embedded value, which they are
now is riding high in in the stock would hope that the experience of PSB
attempting to release to the original
market. ICICI Lombard hit the market promoters. banks is not repeated here. The
last month, followed by SBI Life. GIC whopping NPAs point to less than
Re’s issue managed to draw However, the capital market rush gives professional boards.
subscriptions around 1.4 times but did rise to questions.
not receive an encouraging response Life insurers have come full circle from
from retail investors. Does it cater to a real need to lift aggressive promotion of linked
capital adequacy levels or fund products to active pursuit of protection
This may be followed by New India expansion costs? Many of the (re) products. But in the case of general
and Reliance General .Not in the insurers are underutilising their insurers, the common anxiety is
distant future will be HDFC Life. And existing net worth with a less than whether can they continue to ride
then there will be several PSU issuers. ideal capital gearing, primarily because piggyback on investment income,
they are operating in a still emerging abandoning the surplus in the core
Apart from four new GI companies market. business. None of the general insurers,
entering the market, there is the news save one, makes money in core
of Shriram group's insurance So, will expanding the capital base lead insurance/reinsurance operations.
companies likely to be subsumed by to sub- optimal capital servicing?
IDFC merger. Star Health is not left Paradoxically, many could face Relying on investment
behind in reportedly seeking a billion solvency margin adequacy issues as
dollar value realisation. Insurers are their topline grows. income
now in the menu card of capital For many of the institutional investors
markets. What is in it for retail investors? It overseas, insurance presents as “an

I’d rather live with a good question than a bad answer.

26 November 2017 Life Insurance Today

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