The New India Assurance Company Ltd (NIA) is the leader in the non-life insurance in India, controlling hefty 15% market share in terms of gross direct premium (`23,230cr). It issued 27.10 million policies across all product segments. NIA is also market leader in Fire, marine, Motor & health insurance with market share of 19.1%, 21.1%, 15.1% and 18.4%, respectively. As of June 30, 2017, NIA distribution network in India included 68,389 individual agents and bancassurance arrangements with 25 banks in India. The company has developed a pan-India branch network. As on 1QFY2018, NIA had an investment book worth `55,028cr on which company has been able to generate yield of 8.1% for FY2017.
Outlook & Valuation: At the upper price band of `800 the issue is offered at 5x FY2017 book value and 76x FY2017 EPS. Its listed peer ICICI Lombard is trading at 8x FY2017 book value and 48 times FY2017 EPS. ICICI Lombard reported decent ROE of 17% and average ROE for last 5 years is 19%, while NIA reported subdued ROE of 7% for FY2017 and average ROE of 9%. NIA’s combined ratio is consistently higher than 115%, which is impacting the profitability of the company. Considering the subdued ROE, inconsistent PAT and higher combined ratio, we recommend NEUTRAL rating on the issue.
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