The merger might not lead to mass layoffs or voluntary retirements as all the three firms had been working on an optimal workforce since the last couple of years. Since the merger was announced in 2018, there has hardly been any new recruitment in the companies.
Apart from drawing up a fresh business model, EY is also expected to undertake a valuation exercise of the assets of the companies, as most of them are recorded at book value rather than market value. EY is expected to submit a project report, defining the tasks and ways for meeting the 18-month time frame, soon.
In the February 2018 Budget, the government had announced its plan to merge the three public sector general insurance firms, and subsequently list the merged entity in the stock exchanges. However, there has not much progress towards the merger since then, even as the financial health of the firms deteriorated in terms of losses, falling market share and poor solvency ratio.
Earlier, there were also talks of merging the three companies, followed by a takeover by New India Assurance. Some other options discussed earlier included creating two public sector general insurance companies.
“All the scenarios were studied by the consultant. The biggest problem in merging the three companies
with New India Assurance was the listed status of the later,” according to a top government official.
Before the appointment of EY, the three companies had formed a core committee to look into various issues involved in the merger, and that committee had also suggested an 18-month time frame for completion of the merger, according to the source.