Monday, January 7, 2013

Insurance companies sail high on IB directive

Insurance companies are sailing high on pressure to merge among themselves to increase paid up capital and also due to increased investors' confidence in the stock market lately.
The insurance sub-group has recorded almost 175 points gain to 765.40 points in last five months period from 590.50 on September 6, 2012.
The Insurance Board has been pushing for mergers between insurance companies as they have to increase paid up capital to Rs 250 million — for non-life insurance — and Rs 500 million — for life insurance companies — by the end of the current fiscal year.
The small market like Nepal can have few but stronger insurance companies after the merger, according to the Insurance Board.
Currently, there are 25 insurance companies — 16 non-life and nine life —including Rastriya Beema Sansthan (RBS) that has been allowed to provide both life and non-life services. But 21 insurance companies have listed some 42,399,783-unit shares at a face value of Rs 4,239,978,300 at the Nepal Stock Exchange (Nepse).
Today, the insurance sub group has gained 6.02 points to close at 765.4 points, though the Nepse index has lost 2.49 points to close the day's trading at 529.28 points due to key sub groups including banking and development banks' fall.
According to the Insurance Board, some of the companies can increase their paid up capital by issuing bonus shares and rights shares but most of them have to merge to meet the paid up capital by the deadline.
Earlier, Prudential Insurance, United Insurance and Shikhar Insurance had opted for a merger but it was aborted midway a year ago.
Likewise, one-and-a-half years ago, the merger process of Shikhar Insurance, Premier Insurance and Sagarmatha Insurance also could not be finalised.

Insurance sub group index
2012-09-06 — 590.50 points
2012-10-07 — 712.16 points
2012-11-06 — 741.91 points
2012-12-06 — 721.88 points
2013-01-06 — 765.40 points
(Source: Nepse)

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