ICRA Nepal assigns Grade 3+ to 6.59 lakh units FPO of Premier Insurance Company Limited

ICRA Nepal has assigned [ICRANP] IPO Grade 3+, indicating average fundamentals to the Further Public Offering (FPO) amounting to Rs 52.7 crore of Premier Insurance Company (Nepal) Limited (PIC). PIC has proposed an FPO of 659,565 equity shares with a face value of Rs 100, each to be issued to the public at a premium of Rs 699 per share (issue price of Rs 799 per share). The proposed FPO will increase the public shareholding in PIC from current 40% to 48% (assuming full subscription). The average fundamental grading of PIC takes into consideration its long track record, sufficiently tested underwriting norms and good ownership & management profile. The grading also considers PIC’s strong branch network, good retail base and healthy growth in premium earnings which has led to improvement in market share over past 2-3 years. The grading also factors adequate reinsurance arrangements, including catastrophic provisions, which helped PIC maintain its claims paying ability, solvency position and profitability profile in the aftermath of the April 2015 earthquake. The grading also takes into consideration improvement in PIC’s underwriting profitability; aided by increased premium retention, decline in claims ratio and moderation in expense ratio, leading to healthy return indicators. However, the grading is constrained by lack of institutional promoters, lack of avenues for diversification of investment, unstable interest rate regime affecting investment yield and stiff competition from other players in the general insurance industry of Nepal. ICRA Nepal assigns IPO grading on a scale of IPO Grade 1 through IPO Grade 5, with Grade 1 indicating strong fundamentals and Grade 5 indicating poor fundamentals. For the grading categories 2, 3 and 4, the sign of + (plus) appended to the grading symbols indicate their relative positioning within the grading categories concerned. Thus, the grading of 2+, 3+ and 4+ are one notch higher than 2, 3, and 4 respectively.