United Insurance Company’s 240% right share receives Grade 4 rating from Care Ratings; right shares worth Rs.72.57 Crore to be issued soon

CRNL has assigned grading of ‘CARE-NP IPO Grade 4 [IPO Grade Four]’ to the proposed Rights Share Issue of United Insurance Company (Nepal) Limited (UIC). ‘CARE-NP IPO Grade 4’ indicates Below Average Fundamentals. UIC proposes 240% rights share issue of 7.2576 million equity shares of face value of Rs.100 each at par aggregating Rs.725.76 million.

The grading assigned to the rights share issue of UIC is constrained by substantial decline in gross premium written (GPW); net premium written (NPW); net underwriting profit and PAT during FY18 and 9MFY19 impacting Combined Ratio, concentration in motor segment albeit diluting over the period and competition from other insurance companies and relatively small market share in the nonlife insurance industry. The grading also factors in healthy solvency ratio as per old regulations; however, low as per new capital requirements.

The grading, however, derives strength from long track record and strong promoter group, experienced board and management team, good asset quality of investment book, improved reserves and surplus position and improved investment income. The grading also noted Supreme Court's interim verdict to hold the action taken by Insurance Board (IB) of Nepal to halt fire business.

(Source: CARE Ratings)