The New India Assurance Co. (NIACL) stock soared almost 30% in three days to a high of ₹218 on 22 June, before cooling off to about ₹185 now. The rally was triggered after the National Stock Exchange of India filed its draft IPO prospectus on 17 June that showed NIACL as one of the selling shareholders.
NIACL acquired 35 million shares of NSE at a cost of less than a rupee each. Based on NSE’s trading price of about ₹2,000 a share in the unlisted market, NIACL’s stake is valued at almost ₹7,000 crore, which is significant given NIACL’s market capitalization is at ₹30,500 crore. So, NIACL’s residual valuation works out to ₹23,500 crore, but does the core business of general insurance deserve this valuation?
Often, investors are influenced by net profit growth. Here, NIACL has done well, clocking 40% profit growth to ₹1,384 crore in FY26. But the performance of general insurers must be evaluated from a combined ratio, which is an aggregate of loss ratio (claims paid as a percentage of net premium) and expense ratio (expenses as a percentage of net premium). A ratio above 100 indicates an insurer is making an underwriting loss.
Even if the ₹2,314 crore one-off impact in employee costs in FY26 is excluded, NIACL’s combined ratio was 116.7%, steady year-on-year, and its underwriting loss grew by 7% to ₹6,568 crore. While some of the underwriting loss could be attributed to the Air India plane crash in June 2025, the absolute loss figure is still huge.
Capital gains
While investment income is considered key for an insurance company that covers underwriting loss, it should be sustainable. NIACL’s investment income had a 65% component from interest, rent and dividend in FY25, which fell to 50% in FY26 as the share of capital gains went up. So, net profit growth was led by capital gains almost doubling to ₹5,477 crore in FY26.
Investors seem to be already betting that the NSE issue will help NIACL book substantial capital gains of almost ₹2,000 crore in FY27, securing profit growth this year. But profit growth from volatile capital gains leads to a lower valuation multiple as the underwriting loss remains high.
This explains the lower price-to-earnings multiple of 18 for NIACL versus 28 for ICICI Lombard General Insurance Co., based on Bloomberg’s consensus estimates for FY27.