Mumbai: Listing Life Insurance Corporation (LIC) and non-life companies belonging to other government would bring reforms in terms of a better focus on underwriting and product, transparency, governance and risk management, according to Moody’s.
In an interview with TOI, vice president and senior analyst at Moody Mohammed Ali Londe said that any changes that will be brought by the Public Offering (IPO) will produce LIC will have an impact on the broader market as well as 70% of the corporate market.
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“What we have seen elsewhere in terms of what happens after the IPO great is that the standard of governance walk through and through – credit profile, business that they choose and how they manage the assets and risks.
It’s become much more advanced or sophisticated, “Londe said.
He added that the benefits of the list will exceed the pressure to focus on short-term quarterly results.
“I think what the government and focus on risk management is that in terms of risk management heat map that carries all the risk on the table, whether it is short term or long term,” said Londe.
According to him, the three non-life insurers are not registered, which has been under pressure, have shown improved performance after infusion of capital by the government several years ago.
In March 2018, non-life insurance companies have a 46% state-owned, but 84% of the premium underwriting losses.
“Our figure shows that in March 2021, it dropped to 67% from underwriting losses, and for FY22 till June 2021 they were only 57% of the underwriting loss,” he added.
Moody’s see the inadequacy of the price as the main driver for the weakness in the non-life insurance company public sector.
However, there has been a renewed focus on underwriting after this capital injection and overall impact on the market in terms of competitive prices.
Moody’s sees the opportunity for a state-owned insurance companies to hold on to market share given that there is much room for growth and the company has an advantage in terms of geographical penetration and brand.
“They can make a tech-savvy retail segment through digitizing and reduce the cost of the acquisition to make it more profitable,” said Londe.
While reforming the listing, consolidation, or consolidation of entities with better governance will be beneficial, the consolidation would be beneficial only work if there are synergies to be had in terms of geography, line of business or operations.
“If the synergies it should have, the consolidation would make sense to go ahead and push power to overcome operational obstacles.
If the synergy was not available, we have seen a lot of M & A transactions fell,” said Londe.
Moody’s viewed the pandemic as a major driver for the health insurance business and the time period, but expect the property business and the victim to be taken as economic activity gathers steam and more investment made in the metro, roads and other projects.