Six of eight pvt general insurers post profit

Six of the eight private general insurance players have posted net profit in the fourth year of setting up shop. Bajaj Allianz General Insurance Company, ICICI Lombard General, Tata AIG General, Iffco-Tokio General, Royal Sundaram Alliance and Reliance General continued to be the 6 profitable companies as was the case in 2004-05.

Theoretically, a general insurance company usually takes five years to break even, but privatisation of the Indian insurance sector has proved to be the biggest success story in the financial sector.

Bajaj Allianz's net profit rose to Rs 47 crore in 2004-05, from Rs 32 crore last year. On an equity base of Rs 110, the company's return on equity (RoE) stood as high as 42.7 per cent.

Similarly ICICI Lombard has a RoE of 21.9 per cent considering a higher equity capital of Rs 220 crore and a similar net profit figure of Rs 48 crore for 2004-05.

"High RoE reflects disciplined underwriting and lower management expenses," said Kamesh Goyal, CEO Bajaj Allianz.

Tata AIG having posted a net profit of Rs 15 crore, has a RoE of 12 per cent on a capital base of Rs 125 crore. Similarly Iffco Tokio Marine's RoE stands at about 13.36 per cent as the private insurance entity booked a net profit of Rs 14.7 crore on an equity base of Rs 110 crore.

Royal Sundaram reported a lower net profit figure of Rs 5.4 crore on its capital of Rs 130 crore, reflecting a RoE of 5.4 per cent.

The private insurance players have shored up their market share to 19.63 per cent in fiscal 2005 from 14.21 per cent in fiscal 2003-04.

The non-life insurance sector witnessed a growth rate of 12.8 per cent as total premium income rose to Rs 18,094 crore in 2004-05, up from Rs 16,037 crore as per figures released by the Insurance Regulatory and Development Authority.

The key reasons for the success story of private players have been their customer-centric focus and quality service, said Antony Jacobs, managing director Royal Sundaram. Further, private players tend to cherry-pick profitable accounts, thereby ensuring against large claims.

This is the second year in a row that these 6 private players managed to book profits. In fact Reliance and Iffco-Tokio broke even in year one when Reliance declared a net profit of Rs 7.35 crore for the year ended March 31, 2002.

In the second year of privatisation, ICICI Lombard joined the league, breaking even and posting a profit after tax of Rs 0.7 crore in the first half of 2002-03.

"Private insurers have been able to make profits because the volume of policies issued increased, thereby enabling them to leverage management expenses," said senior officials at a leading private insurer.

Market strategies of new players have proved to be far more effective, providing tough competition to the established state-owned insurance players, added officials.

The four public sector insurers have lost market share in the profitable fire policies, and have been forced to write more of the less profitable and often loss-making motor, health, personal accident and liability portfolios, said the Irda in its recent magazine.