Insurer sees breakeven in underwriting business in two years
United India Insurance Company (UII) is confident of achieving breakeven in its underwriting business in two years from now. The company is also ready for an initial public offering (IPO), but it is for the government to decide the IPO timing, said G Srinivasan, chairman and managing director, UII.
Beating the market trend, the public sector general insurer has reported a healthy 28% growth in its total business for the financial year ended March 31, 2012 . Its turnover was R8,179 crore against R6,377crore a year before. The company has been keeping a 20%-plus growth rate for the last few years.
UII also reported an impressive 198% growth in profit after tax (PAT), which rose to R387 crore from R130.54 crore in the previous financial year, thanks to an improvement in overall performance. A sharp reduction in overall management expenses helped the company post high profit growth, despite a high provision, of R1,075 crore, towards motor third party claims pool.
?The company could reduce its claims ratio to 88.50% as compared to 94.36% in the previous financial year, despite making an additional provisions towards motor pool third party claims. Similarly, the management expenses ratio has also dropped to 25.73%, indicating improved staff productivity,? said Srinivasan.
?We have substantially brought down our underwriting losses from R1,650 crore to R1,200 crore. With an overall impressive performance, cost cutting exercises, new products and expanded business, we hope we will achieve the underwriting breakeven in the next two years?, he said.
According to Srinivasan, while the company?s total investment portfolio shot up to R17,100 crore from R15,938 crore in the previous year, the investment income came down from R1,866 crore to R1,692 crore owing to market fluctuations. ?We continue to invest based on the market conditions and we hope to increase our investment income further,? the UII chief said.
The insurer is targetting R10,000 crore in premium for the current year, banking on its ?widespread network, bancassurance tie ups (65) and 50,000-strong agency force and newer products.?
?We see huge opportunities in the semi-urban and rural parts of India and we expect to gain from our bancassurance tie ups, using their business correspondents to the fullest for insurance business too. We continue to focus on retail, SMEs, health, and engineering segments, apart from improving our operational efficiency further through cost cutting exercises, better claims ratio and prudent underwriting methods?, he said.
The insurer is still making losses on its health portfolio, but is focusing on reducing the loss ratio. ?We have brought down our loss ratio from 115% to 98% in financial year 2012,? he said.
The company is also looking at ways to reduce motor pool losses. ?While we continue to monitor TPA (third party administrators) to bring down our motor pool loss ratio, we will also consider floating a dedicated company with the participation of four PSU general companies to service and monitor the TPA. We have even an option to join hands with a partner to take care of TPA, but have not found the right right partner. We need to focus on arresting loss ratio. Plans are being finalised?, said Srinivasan.
