New India Assurance Company analysis

Industry Profile  The size of the Indian non -life insurance sector was ₹ 1.28 trillion on a GDPI basis as of 31st March 2017 and grew at a CAGR of 17.4% between fiscal 2001 and fiscal 2017. The sector offers different products such as motor, health, crop, fire, marine, liability, travel, aviation and home insurance aimed at meeting different protection needs of retail customers, government as well as corporate customers. The industry operates under a “cash before cover” model under which insurers are not required to assume underwriting risk until premiums are received except in the case of government sponsored schemes such as mass health and crop insurance. According to Swiss Re, India was fifteenth largest market in the world and the fourth largest market in Asia in 2016, behind China, Japan and South Korea. India was also among the fastest growing non – life insurance markets over 2011 – 2016, growing at 14.5% (as per Swiss Re). Despite its size and growth profile, India continues to be an under penetrated market with a non – life insurance penetration of 0.77% in 2016, as compared to 1.81% in China, 1.70% in Thailand, 1.67% in Singapore and 1.62% in Malaysia and a global average of 2.81% in 2016.
As of March 31, 2017, there were a total of 30 companies in the Indian non – life insurance sector, namely

  • Four public sector companies offering multiple products – National Insurance Company, The New India Assurance, Oriental Insurance Company and United India Insurance
  • 18 private sector companies offering multiple products. ICICI Lombard General Insurance, HDFC Ergo ( Recently acquired L&T General Insurance ), Reliance General Insurance, SBI General Insurance, bajaj alinze, etc
  • Two public sector specialized single product line non – life insurance companies – Agriculture Insurance Company (AIC), and Export Credit Guarantee Corporation (ECGC)
  • Six standalone private health insurance companies – Apollo Munich, Cigna TTK, Max Bupa, Religare Health, Star Health, and Aditya Birla

Single product insurance is not holding large market share, only 11%. Out of it Public sector Agriculture Insurance Dominate with 6%, Private health insurance hold 4% remaining 1% held by Export credit insurance. Motor insurance hold large part in Multi product insurance, Private players lead with 11 vs 7% against PSU.

Company profile  The company is the largest general insurance company in India in terms of net worth, domestic gross direct premium, profit after tax and number of branches as of and for the fiscal year ended March 31, 2017. The company is in existence from last 100 years and as on FY 17 had the largest market share of gross direct premium among general insurers in India. as of 31 march 2017, the company holding 2.710 crore policies across all product segments namely Marine, health, travel, Third party Motor, Motor insurance, Crop insurance and other insurance. The company is present in 29 states and 7 union teritory and 28 other countries globally through a number of international branches, agency offices and Subsidiaries including a desk at Lloyd‘s, London.

In Fiscal 2017, our gross direct premium from fire, engineering, aviation, liability, marine, motor and health insurance represented a market share of 19.1%, 21.9%, 29.6%, 18.2%, 21.0%, 15.1% and 18.4%, respectively. In short the brand of the company is well known.

The company built and developed multi-channel distribution network that includes individual and corporate agents, brokers, bancassurance partners and other intermediaries, as well as direct sales and sales through online channels. As of June 30, 2017, its distribution network in India included 68,389 individual agents and 16 corporate agents, bancassurance arrangements with 25 banks in India, and a large number of OEM and automotive dealer arrangements through agent and broker network. The company developed a pan-India branch network. As of June 30, 2017, the company had 2,452 offices in India across 29 States and seven Union Territories. It also partner with the GoI and State governments for implementation of various government schemes including health insurance and policies for underprivileged customer segments.

As of June 30, 2017, The company had international operations across 28 countries, through a number of international branches, agency offices, subsidiaries and associated companies.

Shareholding Pattern  :  Govt of India as promoter holds 85.44%. Mutual Funds Holding 0.32%. Financial Institutions holds 2.23%. Other insurance companies holding 10.90. Remaining is held by Public. LIC, GIC and SBI are largest Public shareholders.

Financials and Ratios  :  

 2012 - 132013 - 142014 - 152015 - 162016 - 17
Net premium9,478.2610,869.0713,234.8015,103.6117,554.22
Investment income1,131.401,284.081,473.551,592.841,686.47
Total income11,357.18412,942.91815,711.08317,672.72720,553.623
Net Benefits incurred8,105.2599,380.90711,188.08313,155.92616,242.190
Commission896.6391,172.6121,283.8651,403.7461,323.138
Operating Expenses2,285.3242,636.5833,057.0243,509.7283,776.914
Loss Ratio85.51%86.30%84.53%87.10%92.52%
Expenses ratio33.57%35.04%32.79%32.5329.05%
Combined ratio119.08%121.34%117.32%119.63%121.57%
Invest income ratio11.93%11.81%11.13%10.54%9.60%
Net profit913.925804.9281,377.323930.354839.860
EPS44.1639.8668.7146.73%40.99
ROE10.11%8.21%12.83%8.20%6.93%
Solvency 252%246%222%
NAV461.08509.67561.48578.23604.32

Future Prospectus  As I am writing it after Budget, Its clear that National Insurance, Oriental Insurance, United India insurance will be merged into one entity. Maybe it will be better company. New India assurance is also good company. LIC, GIC, SBI holding stake. FIIs holding low stake. after the IPO also there is place to sell more stake from promoter. On Operating front the company is looking week. But I am expecting it will be better as the penetration and other factors are showing signs of growth. Big issue is people think Insurance as Investment. General insurance is not investment. and that is why There are some problems.

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About Ashutosh Tilak

Tracking Indian Capital Market since 2010. Finance Student, On this blog I am writing about finance and Investing. You can contact me analystashu@gmail.com or @androidashu & @InsideFinanc on twitter