Bajaj Allianz logs Rs 3.67 cr cash profit

Bajaj Allianz Life Insurance Company has made an accounting surplus of Rs 3.67 crore in the first six months of financial year 2004-05. It is probably the first private insurance company to make a cash profit, which it terms as an 'accounting surplus'.

Bajaj Allianz mopped up new premium income of Rs 190 crore in the first six months, against Rs 47 crore in the corresponding period last year.

Sam Ghosh, CEO, Bajaj Allianz Life, said: "We have been able to post an accounting surplus on account of our low management expense ratio (about 30 per cent) and business mix (40 per cent of our new business comes from the sale of traditional plans)."

Most other private life insurance companies have a high management expense ratio and many are more inclined to sell unit-linked plans, where there is a higher allocation of reserves required.

In unit-linked plans, about 75 per cent of the premium income generated, depending upon respective plans, is put aside as reserves. So while unit-linked plans require less solvency margin, a greater amount has to be put aside by insurance companies under reserves, said Ghosh.

"As we sell more unit-linked policies, our cash surplus might go into a deficit as we move towards a 70:30 ratio where 70 per cent of our sales are unit-linked plans," he said.

Off late, many customers are buying unit-linked products where the investment risk is passed on to the customer.