The government has enhanced authorised share capital of three public sector general insurance companies – National Insurance Company Limited, Oriental Insurance Company Limited and United India Insurance Company. This will facilitate capital infusion of ₹5,000 crore in these companies.
A notification issued by the Finance Ministry said that for the National Insurance, authorised capital will now be ₹15,000 crore (1,500 crore shares with face value of ₹10 each) as against present ₹7,500 crore (1,500 crore shares with face value of ₹10 each). Similarly, for Oriental Insurance, it will be ₹7,500 crore (750 crore shares with face value of ₹10 each) from ₹5,000 crore (500 crore shares with face value of ₹10 each). In case of United India Insurance, authorised capital has been raised to ₹7,500 crore (750 crore shares with face value of ₹10 each) from ₹5,000 crore (500 crore shares with face value of ₹10 each).
IRDAI seeks business plans from three loss-making PSU general insurersFund infusion will depend on their compliance with certain norms
Notification has amended merger schemes of 1973 related with these three insurance companies.
“Authorised share capitals of entities are increased from time to time to enable subscription of capital. In the instant case, government infused ₹5,000 crore, i.e., ₹3,700 crore in National Insurance, ₹1,200 crore in Oriental Insurance and ₹100 crore in United Insurance, which will be used to subscribe to the share capital of the respective public sector general insurance companies and issuance of shares to government against the subscription,” a senior Finance Ministry responded to a query raised by BusinessLine.
Last month, Parliament approved third Supplementary Demands for Grants (SDG) related with FY 2020-21 which has the provision related with recapitalisation of insurance companies amounting ₹5,000 crore. Now, this process will be completed. All the three general insurance companies, mentioned above are in loss.
According to annual report, National Insurance incurred a net loss after tax of ₹561.85 crore in 2020-21 as against a net loss of ₹4,108.34 crore in the previous year. The government infused capital of ₹3,175 crore in FY 21 to help the company in meeting the statutory solvency margin requirement and for supporting the business growth.
Oriental Insurance ended up with a loss after tax of ₹1,525.44 crore in the FY 2020-21 as compared to a loss of ₹1,524.10 crore in 2019-20. It received capital of ₹3,170 crore during FY 22. For United Insurance, loss dropped to ₹985 crore in FY21 from ₹1,485 crore in FY20. It received capital infusion of ₹3,605 crore during FY 21.
Merger of companies
In her Budget speech of FY 2018-19, Finance Minister Nirmala Sitharaman had announced that three public sector general insurance companies National Insurance Company Ltd., United India Assurance Company Limited and Oriental India Insurance Company Limited will be merged into a single insurance entity and will be subsequently listed.
However, earlier this year, the Finance Ministry told Parliament in a written reply that from time to time, associations of employees of public sector general insurance companies submit their demands of their employees and suggestions for strengthening them. The suggestions received have included suggestions in respect of merger of these companies. “Against the above background and upon further consideration of the matter, government subsequently decided to infuse capital, focus on their growth and not to proceed with merger,” it said.