Neco Insurance receives Icra Grade 3 for upcoming 100% right issue

ICRA Nepal has assigned an “[ICRANP] IPO Grade 3”, indicating average fundamentals to the proposed rights issue amounting NPR 324.04 million to Neco Insurance Compny Limited (NIL). The process to issue right share of NIL is on review in Securities Board of Nepal (SEBON). The insurance company is proposing to issue 1:1 (100%) rights share of 3,240,436.32 numbers of equity shares at the face value NPR 100 each to be issued to the existing shareholders at par. As per Icra Nepal, NIL’s market share improved to 6.0% in FY16 from 4.5% in FY15. The segments that grew fastest during FY16 were Engineering (228%), Motor (101%) and Fire (42%). Premium retention ratio of NIL (~46% in past 2 years ending FY16) has slightly increased in recent years. Despite higher growth in motor segment, NIL was able to bring down the claims ratio in the segment from 89% in FY14 to 60% in FY16 causing the overall claims ratio also to fall (from 62% of NPE in FY14 to 36% in FY16). NMB Capital Limited has been assigned as the issue manager for the right issue. Also, Neco Insurance has decided to distribute 20 percent bonus share to its shareholders. The decision is subject to approval from Insurance Board and the company’s upcoming Annual General Meeting (AGM). NIL had earned net profit of Rs. 12.60 crore in the fourth quarter of last fiscal year 2072/73 as per unaudited report. It’s paid up capital remains at Rs. 32.40 crore. After distributing 20 percent bonus and 100 percent share it’s paid up capital will rise to Rs. 71.28 crore. 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.