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The NITI Aayog has recommended privatisation of state-owned insurer United India Insurance Company as the government aims to move ahead with its new public sector enterprise (PSE) policy for Atmanirbhar Bharat.
The policy think tank has suggested that the public sector insurer be considered for privatisation in the banking, insurance and financial services sector, which has been classified as ‘strategic’ in the PSE policy, said an official.
The policy proposes the “bare minimum” presence of government-owned companies in strategic sectors, and privatisation, merger or closure of remaining public sector undertakings (PSUs).
The recommendation is in line with the announcement made by Finance Minister Nirmala Sitharaman in the Union Budget that one insurance company and two public sector banks (PSBs) will be privatised this year.
The government is on course to privatise two PSBs and one insurance company in the current fiscal year as announced in the Budget, said another official.
Although the process may take time to complete, the target as of now is to stick to the Budget announcement of privatising one insurance company and two banks, he added.
The NITI Aayog’s recommendation would soon be considered by the Core Group of Secretaries on Divestment (CGD) chaired by the cabinet secretary, and the privatisation process would be timed post an analysis of sectoral developments and investor appetite in the sector.
The policy think tank’s recommendation has been made only after a holistic sectoral analysis, said the first official. However, the government would approve and time the transaction after considering many factors, including investors’ interest in the sector.
Although the insurer has not performed well, investors would still find the company attractive as there’s interest from foreign investors in the sector, the official said.
United India Insurance reported a net loss of Rs 1,485 crore in 2019-20 against a net loss Rs 1,878 crore in the year-ago period.
Its gross premium income grew nearly 7 per cent year on year in FY20 to Rs 17,515 crore.
The insurer’s gross premium underwitten in 2020-21 fell nearly 5 per cent year-on-year to Rs 16,711 crore, according to the data on Insurance Regulatory and Development Authority of India’s (Irdai) website.
According to the latest data, gross premium underwritten in May 2021 was Rs 1,164 crore against Rs 1,350 crore in May 2020.
The insurer has seen its net worth erode from Rs 5,731 crore in 2015-16 to Rs 1,443 crore in 2019-20.
In the Budget for 2018-19, the government had proposed the merger of three public sector general insurance companies National Insurance Company, United India Insurance Company and Oriental India Insurance into a single insurance entity, and subsequently listing it on exchanges.
However, in July last year, the government “ceased” the process of merger to focus on profitable growth by infusing Rs 12,450 crore in the three entities.
Photograph: Courtesy United India Insurance Company
