InvestorQ : Why is the government infusing capital into the state-owned insurance companies and can we look to buy any listed insurer?
prachi Patwardhan made post

Why is the government infusing capital into the state-owned insurance companies and can we look to buy any listed insurer?

Answer
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7 months ago


In fact, government has approved capital infusion to the tune of Rs.2500 crore into 3 general insurance companies’ viz. United India Assurance, Oriental Insurance Company and National Insurance Company. All are majorly owned by the government of India. These 3 companies have been under strain and have seen their regulatory solvency requirements being breached, putting their balance sheets at risk. This capital infusion will just help them tide over the solvency gap. It may be recollected that a number of general insurers had been listed in the last 3 years but the pricing had been too aggressive during the IPO. This had led to overall underperformance of the stock post listing. Despite the infusion of capital, the impact will only be marginal on the valuations and stock prices as profitability is still some time away. You can as well stick to life insurers of the private sector for now.