ICRA Nepal assigns Grade 3 to NICL’s 1:1 right shares

ShareSansar, February 28:

Here’s good news to all of you out there who have been waiting for the early issuance of the 1:1 right shares of Nepal Insurance Company Limited (NICL).  

ICRA Nepal has just assigned IPO Grade 3 to 1,319,016 units proposed equity shares (rights issue) by NICL at the face value of Rs 100 per unit.

IPO Grade 3 indicates average fundamentals to the proposed rights issue .

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 position within the Grading categories concerned. Thus, the Grading of 2+, 3+ and 4+ are one notch higher than 2, 3, and 4, respectively.

According to ICRA Nepal, the grading takes into account NICL’s long track record and strong support from its major promoter - Nepal Bank Limited (an A class commercial bank), good claims paying ability and adequate presence/market share of NICL in the context of Nepalese Non-life insurance industry.

However, these advantages are offset by modest performance indicators of NICL compared to the peers. Apart from modest profitability and underwriting performance, the grading is also constrained by limited product diversification for NICL and low penetration of the overall Non-life insurance industry in Nepal.

NICL has been achieving steady growth rate in recent years, its compounded annual growth rate for Net Premium Written being 31% for last 5 years driven by CAGR of 34% for motor portfolio which is the biggest segment for the company (76% of Net premium written in the last fiscal year 2069/70. However, motor portfolio has remained a loss making portfolio; with underwriting deficit of NPR 3.62 crore reported in the last fiscal year.  

As a result, the NICL continues to report modest performance indicators compared to peers over the last few years. Going forward, the company plans to limit exposure to motor portfolio and adopt stringent underwriting measures with an aim to make the portfolio profitable, at the same time focusing more on existing profitable segments, ICRA Nepal adds.