Due To The Merger Process Trading of Securities For Sanima and Reliance Life Insurance Company Is Halted

An agreement to merge the two listed companies on NEPSE – Sanima Life Insurance Limited (SLI) and Reliance Life Insurance (RLI) was signed on Wednesday morning.

The preliminary agreement was signed by Ghanshyam Thapa on behalf of Sanima Life and Bharat Kumar Todi on behalf of Reliance Life.

A preliminary agreement has been reached between the two companies to merge in the ratio of 1:1. However, the final swap ratio will be decided only after the DDA of both companies.

Most of the insurance companies are under pressure to increase their capital as the Insurance Committee (Beema Samiti) has directed the life insurance companies to increase the minimum paid-up capital to Rs 5 Arba and non-life insurance companies to Rs 2.5 Arba within Chaitra end 2079.

The committee had also announced to provide various facilities and exemptions to the insurance companies going for merger by the end of Ashad.  Accordingly, insurance companies are keen on mergers.

Earlier, three life insurance companies, Union Life Insurance Co Ltd (ULI), Gurans Life Insurance Co Ltd (GLICL), and Prime Life Insurance Co Ltd (PLIC), signed a merger agreement aimed at strengthening the company's capital base. That was the first merger in the country's life insurance sector. Also, last week Surya Life Insurance Company Limited (SLICL), and Jyoti Life Insurance Company Limited (JLI) assigned an MoU for the merger.

Five life insurance have already initiated the merger process, with the merger of Sanima and Reliance Life Insurance the number will be increased to seven, making the overall - listed/non-listed Life-insurance companies to come down to twelve.

Additionally, out of the twelve listed life insurance companies, there are high chances for Asian Life Insurance Company Limited(ALICL), Prabhu Life Insurance, and Mahalaxmi Life Insurance of choosing to merge because their current paid-up capital is woefully inadequate to meet the Insurance Board's capital requirements of Rs. 5 Arba.

At present, Sanima Life has a paid-up capital of Rs 2.08 Arba, and Reliance Life has a paid-up capital of Rs 2.10 Arba. Accordingly, the paid-up capital of the two companies will reach Rs 4.18 Arba, which is still not enough to meet the Insurance Committee requirement.

After the merger agreement was reached between the two companies, Nepse also suspended its share trading from Ashad 29. The last transaction price of SLI is Rs. 345.90 and that of RLI is Rs. 335.