ICICI Lombard Swings On Stock Market Debut
Shares of ICICI Lombard General Insurance Company fluctuated between gains and losses to their issue price on the first day of trading on the bourses.
The country’s first non-life insurer to list on exchanges touched an intraday low of Rs 638 and a high of Rs 664 on the National Stock Exchange. It had sold shares at Rs 651-661 apiece in its public issue.
The Rs 5,700-crore initial public offering was subscribed nearly three times the shares on offer led by high demand from institutional buyers. Demand from high net-worth individuals remained subdued. The insurer did not raise any capital through the IPO as it was an offer for sale by promoters ICICI Bank and Fairfax Financial Holdings to part-sell their stake.
Insurance firms are seeking to take advantage of the rally in Asia’s best performing equity market, where there is a dearth of insurance stocks for investors looking to diversify holdings in the financial sector. The offerings come after the government in 2015 allowed to increase foreign holding in insurers to 49 percent from 26 percent earlier.
Three Indian insurers, including ICICI Lombard, have been gone public till now with three more in the pipeline. SBI Life Insurance Company’s IPO, which closed recently, was subscribed 3.5 times.
ICICI Lombard is the second ICICI Bank subsidiary to tap into the capital markets. In September last year, the bank listed ICICI Prudential Life Insurance company after a Rs 6,057-crore share sale. HDFC Standard Life Insurance, New India Assurance and General Insurance Corporation of India have filed their draft prospectus with market regulator SEBI.
ICICI Lombard is India’s largest private insurer in terms of direct premium income. Motor, crop and health insurance contribute the most to its business.
The company sells insurance plans directly to individuals, corporates and the government through agents, bank partners, brokers and online services. It’s present in 618 out of 716 districts across India. The insurer had sold about 17.7 million policies in the year that ended March, with less than a tenth of it being online sales.
Betting On Equities
ICICI Lombard has invested 15 percent of its funds in equities, Bhargav Dasgupta, chief executive officer and managing director of the company told BloombergQuint in an interview.
“The equity market in India is still the best asset class to invest in and our performance over the last three years has continuously demonstrated that in terms of the returns,” said Dasgupta. He said the insurance company will continue to have a reasonable allocation of their book towards equity.
The company’s combined ratio -- which reflects its profitability in the underwriting business -- stands at 104.1 percent, improving marginally over the last three years. A number above 100 percent indicates that an insurer does not make any money from premium and relies on investment income.
A large part of the annual claims reserves is for future, said Dasgupta. "We have taken a lot of steps towards risk selection and building distribution channels in a lot of segments that we are currently underpenetrated in."