29 March 2017: National Insurance Company- the state-run insurer has raised Rs 893 crore via subordinated debt that is mobilized from a group of investors including insurance companies and pension funds. This big step will help NIC in meeting its solvency margin that is below the set limit. The documents include a coupon of 8.35% and are rated as AAA and AA+. It is basically a 10-year paper with a call at 5 years. Six mobilizes are included in the issue Edelweiss BSE 2.67 %, ICICI Securities, and AK Trust. The issue has received responses from all investors. Basically, it is the first time when a public sector insurance company has issued bonds.
K Sarath Kumar, CMD, National Insurance Company said, “This is one of the steps we have taken to shore up our solvency. We had taken approval from the regulator for the issue and it reflects well on our books as we close March 31, 2017.” The amendment to the Insurance Act India has permitted companies to raise funds via both equity and debt.
Recently, NIC had registered an improvement in its solvency to 1.31 times during the quarter that ended on December 31, 2016, from 1.26 times earlier. However, it is still lower than the needful 1.5 times, which is mandated by the regulator. Basically, Solvency shows the capital strength of an organization.
Currently, NIC has a share capital of around Rs 200 crores. The company has a time frame of three years to perk up its solvency level. It has initiated the step to improve its capital base before the predetermined time.