State Bank of India is planning to divest up to 4% in the non-life insurer ahead of the Initial Public Offering of SBI General Insurance, a 74:26 joint venture between State Bank of India (SBI) and Insurance Australia Group (IAG). After having sold this 4% stake, SBI, India’s largest lender would have 70% share in the non-life general insurance company. The valuation of general insurers is based in the book value and SBI General Insurance’s book value at the end of last financial year stood at around Rs 1,500 crore.
In the earlier period listing of New India Assurance and ICICI Lombard General Insurance, the market has seen investors giving the two insurers multiple of three to eight times to the book value for their IPOs. With parallel benchmark, if SBI General Insurance is taken at six to eight times of book value, it can be valued at Rs 9,000-12,000 crore.
The data from Insurance Regulatory and Development Authority of India (IRDAI) shows that SBI General Insurance has underwritten gross direct premium up to July this year at Rs 1,317.67 crore against Rs 847.65 crore in the preceding financial year – an increase of over 55%. However, as on July, its market share stands at 2.69%.
With market share of 15.91%, The New India Assurance is the leader in the non-life space while ICICI Lombard is top among the private non-life insurers in India with market share of 10.02% as on July 2018. A number of top categories in which SBI General Insurance, in terms of received premium were motor, fire, health and personal accident (PA) for the last financial year. The net profit of SBI General Insurance stood at Rs 396 crore for the last financial year, while its combined ratio was at 96.4%.