Birla Sun Life Sees Break-Even In 6 Years

Birla Sun Life Insurance Company, a joint venture between Aditya Birla group and Sun Life Insurance of Canada, expects to break even at the end of the sixth year of its operations and absorb all losses by the end of eighth year, according to the company annual report for 2000-01.

In its first annual report, the insurance company, which began operations in August, 2000, said further fresh capital investments were required in the insurance business as it was capital intensive in nature.

"However, the losses resulting from investment in development of the distribution network, new products and back office operations will gradually be overtaken by positive cash flow from the business that has been sold, leading to a positive and healthy position," the company assured its members.

The Aditya Birla group holds 8.28 crore equity shares of the insurance company. These shares, representing 69 per cent of the company's equity of Rs 120 crore, are held by Indian Rayon. The balance is held by the Canadian major.

The company is expanding its distribution reach by linking up with Citibank NA to offer life insurance products, till recently a monopoly of the state-run Life Insurance Corporation.

"This will ensure that the company can distribute its products to the right segment of the market and in those cities where it does not have a physical presence," the company said.

In addition, the company aims at opening branches in more cities in the current financial year to complement an additional 800 agents that it plans to recruit and train in the year.

Birla Sun Life plans to offer retirement products such as gratuity funds and superannuation funds to certain groups of people such as corporate employees, doctors and lawyers.

These products are under development and will be used to tap the vast market for retirement products in the country.

The company would also offer an investment linked product to individual customers, providing customers flexibility in selecting tenure of product, premium payment terms, investment profile and receipt of benefits.

In 2000-01, the company incurred a loss of Rs 8.39 crore against net premium income of Rs 3.19 crore.