New India Assurance Co Ltd (NIA) is the largest general insurance company in the country in terms of net worth, domestic gross direct premium, profit after tax and number of branches. It was incorporated in Bombay in 1919 and has been in operation for almost a century now. The company has maintained an excellent market share, with its investment income contributing over 100% to the total income over the last five years. It has one of the highest solvency ratios in the industry, which is much above the regulatory requirement, indicating how financially strong the insurer is in making claim payments. NIA has been rated AAA stable by rating agency Crisil for the last five years, indicating that the company has the highest degree of financial strength to honour its policy holders’ obligations. On the other hand, the claim ratio is higher compared to other general insurance companies, mainly because of higher motor third party and health insurance claims. To improve the performance and reduce the claim ratio, the company has restructured and reprised its health portfolio and taken corrective measures in appointing doctors and third party administrators. In case of motor claims, the company feels that the new Motor Vehicles Act will bring a balance in the adjustment of the claim ratio. One of the key highlights of the company is that it has funded its operations during the last four decades without any external capital infusion, but only through internal accruals. NIA has strong underwriting capabilities, excellent relationship with reputed reinsurers, enabling it to provide a comprehensive range of insurance products, addressing the needs of both individual and commercial customers. Despite significant competition from private sector players like IFFCO Tokio, ICICI Lombard, HDFC Ergo, etc., the company has maintained market leadership in the general insurance industry, particularly in fire, marine, motor and health insurance sectors due to its strong brand equity and excellent relationship with major corporate groups. NIA has also supported various Government of India and state social welfare initiatives like the Pradhan Mantri Fasal Bima Yojana, the Unified Farmers Package Insurance and the Pradhan Mantri Suraksha Bima Yojana. Apart from providing insurance support to the above schemes, it has provided insurance cover to more than 400 million individuals having Rupay cards. The company got its share listed on the Indian stock exchanges in November 2017 with a mega stock issue. There is tremendous scope and untapped opportunity in the general insurance space as despite the size and growth profile, India continues to be an under penetrated market compared to global peers. But with rising income levels and increasing consumption demand, NIA is well positioned to capitalise on the growth potential in the Indian general insurance industry. Investors can accumulate the NIA stock for the long term and expect it to double in the next four-five years’ investment horizon.
Rajiv Kapoor is a share broker, certified mutual fund expert and MDRT insurance agent.