Care Rating Nepal provides CARE-NP IPO Grade 4 indicating below average fundamentals to the proposed 105% and 300% Rights Share Issue of Everest Insurance Company

Care Rating Nepal Ltd has assigned grading of CARE-NP IPO Grade 4 to the proposed Rights Share Issue of Everest Insurance Company Limited (EIC). CARE-NP IPO Grade 4 indicates Below Average Fundamentals.

CRNL assigns IPO grades on a scale of Grade 1 to Grade 5, with Grade 1 indicating strong fundamentals and Grade 5 indicating poor fundamentals. CRNL‟s IPO grading is an opinion on the fundamentals of the issuer. The grade assigned to any individual issue represents a relative assessment of the „fundamentals‟ of the issuer.

The proposed Rights share issue will be in two Phases; Phase I proposes 105% right shares issue of 14.03 lakh number of equity shares aggregating Rs.14.03 crore and Phase II proposes 300% right shares issue of 82.19 lakh number of equity shares aggregating Rs.82.19 crore.

The grading assigned to the rights share issue of EIC is constrained by volatile net underwriting profit & net profit over the period impacting combined ratio, low retention ratio, investment is not made as directed by Insurance Board (IB) in the past, concentration on motor segment and competition from other insurance companies & relatively small market share in the non-life insurance industry.

Ability to the company to scale up the operations while maintaining the solvency position and limit the loss ratio would be the key grading sensitivities.

The grading, however, derives strength from long track record and strong shareholder group, experienced board and management team, improved overall performance during 9MFY18 (UA)(refers to period ending mid-April 2018), improvement in the investment income over the last 2 years albeit lower base and moderate solvency ratio.