New India Assurance: Information Analysis

Note: This article has no recommendation to either buy or avoid this IPO. Instead, we have presented all the relevant information based on which you can make your own decision. One more note: As regular readers of our IPO analyses would have noticed, we do not approach insurance IPOs in the same format that we use for non-financial companies. The reason is that a large proportion of the questions are irrelevant to these companies. This is partly because of the tight nature of the regulatory environment they operate in, and partly due to the complex, long-term risks that they face. Investing in Indian insurance companies is still a novel activity, and there will likely be surprises ahead that neither analysts nor investors can predict at this point. New India Assurance was founded by Sir Dorabji Tata in 1919. As of FY17, It is the largest general insurance company in India in terms of net worth, domestic gross direct premium, profit after tax and number of branches. It has a market share of 15% of gross direct premiums. In FY17, it issued 27.1 million policies across all segments, which is highest among all general insurers in India. In FY17, its claim settlement ratio was 90.4% (including suit claims), which is the highest among the top 10 multi-product insurers. New India Assurance makes money primarily by selling fire, motor, health, marine, crop and other insurance policies which contributed 15%, 39%, 26%, 3%, 5% and 11% respectively to its gross written premiums in FY17. Their key expenses are insurance claims and the cost of running their operations. Industry overview At 0.8% (gross insurance premiums as a percentage of GDP), general insurance is highly underpenetrated in India. In comparison, the global average is 2.8% and 1.8% for China in 2016. With a share of 2