Ernst & Young(E&Y) has beaten two other prominenet consultants, Boston Consulting Group(BCG), and Oliver Wyman, a part of the Marsh & Mclenan Group, to bag the deal for preparing detailed strategies facilitating the proposed merger of three state owned general insurers-National Insurance Company(NIC), Oriental Insurance Company(OIC) and United India Insurance (UII).
The core panel consisting of three general managers from the merging general insurers to oversee the merger have met on Nov 28 to select the final name to help the merger of the three companies.
“Yes, E& Y has quoted the lowest charges for undertaking the whole exercise and we as public sector companies have to go by the lowest bidding. There was an expectation that BCG, which had earlier done a lot of assignments fir PSU general insurers, may get the deal’’ said sources at one of the merging companies.
Asia Insurance Post hasn't got the details of the charges quoted by the each of the competing consultants.
Now, the core committe' decision to choose E & Y name will be approved by the GIPSA , the official association of four PSU general insurers and GIC Re.
GIPSA will be meeting in the middle of the second week of December to conduct promotional exercise for selecting DGMs for the five companies and will likely give its approval for E& Y for the merger assignment.
Once all the approvals are in place, E& Y will have the onerous task of laying out detailed strategies for the merger of the three companies which have many differen systems including IT systems and reinsurance back up.
It is yet to be known what is the dead line for the completion of the assignment but the sources at ministry of finance(MoF) point out a period ranging from eight to 12 months for preparing the basic blue print of the merger
“May be, by the end of the March 2019, merger of these companies possible. But if there is new government at the centre after May, things may change also, said sources at the Ministry of Finance.
“I can’t say anything about the time-frame for the merger process to complete. I can only say that a process has started with appointment of a consultant. Definitely post the merger. the largest general insurer will emerge in terms of market share,’’ Tajinder Mukherjee, CMD, NIC had earlier said.
Once it happens, the merged entity will be the largest entity with 31 per cent market share when compared to the 14 per cent market share as being enjoyed by New India Assurance.
Union Finance Minister Arun Jaitley in his FY 2018-19 Budget speech had announced that the three companies would be merged into a single insurance entity .The process of merger is likely to be completed during the current fiscal, he had said.
The governmemnt had argued that merger will create a stronger company out of the three weak general insurers, who are currently struggling with low solvency ratios and capital base, high underwriting losses, low profitability and would have a much higher valuation that will be encashed by listing the company.
The fact that three companies are also losing market share steadily, is clearly reflected in the lastest premium figures- Sept, 2018- of the industry where ICICI Lombard General Insurnace, with almost nine per cent market share, has emerged as the second largest general insurer in the country, next to New India Assurance.
E&Y is expected to advise on organisational restructuring, rationalisation of human resources, management of operational issues, regulatory and compliance issues, it said.
It is expected to handhold the management of all the three companies, throughout merger process till the new organisation is formed and set in place, it said.
The consultant has to suggest an action plan with broad time lines to bring all the three into a single merged entity, with a new name, logo and a new Head Office.
It will also work out a scheme for rationalization of offices, merger and unification of offices, creation of new organizational structure. The new entity should assimilate all the individual geographical dominance.