Bharti-AXA General Insurance may revise business plans

With a proposed change in ownership, private non-life insurer Bharti AXA General Insurance Company is set to tweak its business plan for the current financial year.

Earlier, it had planned to infuse Rs 200 crore by December 2010 and grow its top line business by 60 per cent in 2011-12.

“There will be a joint planning session next month with the new promoters on the business targets. So, there might be some changes in the numbers we had planned,” A Ananthanarayanan, managing director & CEO, told Business Standard.

The total capital invested by the promoters is Rs 550 crore. Currently, Bharti owns 74 per cent stake in the joint venture, with the remaining 26 per cent held by AXA of France, the maximum permissible foreign direct investment (FDI) allowed in Indian insurance.

Last Friday, Reliance Industries entered into an agreement with the Bharti Group to buy out the latter's stake in both the life and non-life insurance joint ventures. According to the proposed deal, to be cleared by the Competition Commission of India and the insurance regulator, RIL and its associate, Reliance Industrial Infrastructure (RIIL), will have 57 per cent and 17 per cent, respectively. AXA would continue to have 26 per cent.

The general insurer collected premium of Rs 551 crore during 2010-11 by writing new policies and reported a loss of Rs 170 crore in the last financial year over the Rs 149 crore in the year before. To prune the losses, the company first decided to consolidate its existing business. Second, to improve underwriting practices in both motor and health portfolios, and to price products more prudently.

For instance, in the health side, the company came out of group business, to focus on individual health policies in a big way. Similarly, in motor insurance, Bharti AXA initiated differential premiums for private cars based on models, claim history, etc. “However, with motor and health both being a loss-making business for general insurance players in India, and the ambitious plans which the new promoters have, it remains to be seen what new strategy the new owners adopt to improve profitability,” said an industry analyst. Motor insurance constitutes 70 per cent of the business portfolio with health and commercial lines the remaining 30 per cent.

“Motor and health are both loss-making businesses on Monday, with the average loss ratio at 153 per cent and 120 per cent, respectively....We are tightening our underwriting practices in both these lines of businesses,” Ananthanarayanan added.