Quake Claims To Rip Apart Former Gic Arms & #39; Books

The four erstwhile subsidiaries of the state-owned General Insurance Corporation are expected to post a 50 per cent fall in their net profit for fiscal 2000-2001 to around Rs 300 crore to 400 crore.

This follows underwriting losses calculated to the tune of around Rs 1,000 crore, net of reinsurance. The losses have, however, been partially offset by the aggregate investment income of around Rs 1,400 to 1,500 crore for the four erstwhile General Insurance Corporation of India subsidiaries. In the preceding fiscal 1999-2000, profits stood at around Rs 700 crore, senior officials at General Insurers' Public Sector Association (Gipsa), said.

The accounts of the four insurance companies are still being collated across the 4,000 odd branches, after which it will go the Comptroller and Auditor General (CAG).

According to sources close to Gipsa, the Gujarat earthquake hit the books of the four state-owned insurers. Underwriting losses following the quake alone stand at around Rs 819 crore, of which, approximately Rs 409 crore is by way of claims from motor, marine and personal accident policies and the balance following industrial losses reported so far.

However, as calamities are reinsured to a large extent, the actual loss that the companies will have to take on their own books would be in the region of Rs 90 to 100 crore, sources said. Third-party motor insurance portfolio which is not reinsured, will directly hit the bottomline of the four insurers, he added.

Meanwhile, "investment income of the four companies has been equally affected due to low interest rates and the depreciating share values. The industry expects a drop of Rs 500 crore in its investment income for the year 2000-01," industry sources said.

The first quarter performance for the current fiscal (2001-02) is equally not expected to be much better in view of the lack of industrial activity taking off, resulting in insignificant rise in new business. Much of the business acquired by the new general insurers has been poached from the state insurers, officials said.