GIC Re, New India Assurance extend rally; surge up to 40% in one month

Shares of state-owned general insurance companies – the New India Assurance Company and General Insurance Corporation of India (GIC Re) rallied up to 10 per cent on the BSE in Wednesday’s intra-day trade, extending their last week upward movement.

Individually, shares of GIC Re hit a fresh 52-week high, surging 10 per cent to Rs 182.65. The company said a meeting of the board of directors of the Corporation is scheduled to be held on Wednesday, December 21, 2022, to consider and approve general matters of the Corporation.

Shares of the New India Assurance Company surged 8 per cent to Rs 132.20. The stock has recovered 69 per cent from its 52-week low of Rs 78.20 touched on July 1, 2022.

With regards to clarification on increase in trading volume at the counter, New India Assurance Company on December 12, said that the company was not aware of any other information or announcement (including impending announcement) which, in the opinion of the company, may have had a bearing on the price or volume behavior of the scrip.

In the past one week, GIE Re has soared 27 per cent, while, New India Assurance up 17 per cent on the BSE. In comparison, the S&P BSE Sensex was down 1 per cent. In the past one month, these stocks gained in the range of 35 per cent to 40 per cent, as against a 0.15 per cent decline in the benchmark index.

According to Business Standard report, the finance ministry has proposed a host of amendments to the insurance laws – from granting insurers a composite licence to allowing them to sell different financial products, and increasing the retirement age of the chairman and whole-time members of the Insurance Regulatory and Development Authority of India (Irdai).

The Department of Financial Services has also suggested allowing insurers to operate in multiple lines of business – general, life, and health – without having to seek separate licences from the regulator for each business, provided they meet the minimum capital requirements. This would require an amendment to the Insurance Act, 1938. CLICK HERE FOR FULL REPORT

With the Central government proposing to allow composite insurers, there will be increased cross selling opportunities, operational expense synergies and diversification if Life Insurance Corporation of India (LIC) and the four public sector general insurers are merged, said Jefferies in a report.

LIC has improved on growth & profitability; PSU general insurers have higher combined ratio & lower solvency margin. Global experience suggests Pros including better cross-sells, opex synergies & diversification. Still, synergies have undershot expectation pushing some back to monoline. Capital release & tax neutrality can help, the brokerage firm said in a report.