Reliance General Only Pvt Insurer To Post Profit In 02

Reliance General Insurance Company is the only private insurance company in India to have posted a profit in the fiscal 2002 according to accounts filed with the Insurance Regulatory Authority of India.

Statutory filings show Reliance General Insurance Company posted a net profit of Rs 7.35 crore in the 12-month period ended March 31, 2002, whereas all the other general insurance companies reported losses.

Iffco-Tokio General Insurance Company posted a loss of Rs 3.4 crore, while ICICI Lombard General Insurance Company posted a loss of Rs 9.2 crore, Bajaj Allianz General Insurance Company Rs 18 crore, Royal Sundaram Alliance Insurance Company Rs 24.53 crore and Tata AIG General Insurance Company Rs 27 crore. The losses posted are net of recovery from reinsurance claims.

 

The profits posted by Reliance General are purely on account of profitability from investment income. Like most of the other players, Reliance General made underwriting losses on all three of its operating portfolios -- fire (Rs 95.51 lakh), marine (Rs 48.01 lakh) and miscellaneous (Rs 4.37 crore) -- aggregating Rs 5.8 crore.

Reliance General was able to recoup its operating losses by a hefty investment revenue of Rs 13.54 crore, netting a profit of Rs 7.35 crore.

Officials at Reliance General added that of the 309 claims reported, 250-odd claims have been settled.

Traditionally, it takes a general insurance company three to five years to break even. In the case of life insurance companies the duration is as long as seven to 10 years.

Further, the competition pointed out that Reliance General has been able to post a profit during the year primarily on account of focusing solely on corporate business, and not venturing into the retail segment.

This means that Reliance General does not have high acquisition costs, which it would otherwise had it sold risk products to the retail segment as well.

Most of the other players in the non-life insurance business have gone retail, where there are highly frequent claims especially in the motor and personal accident covers. Further, there is a high acquisition cost attached to the retail business, which also requires extensive systems to be in place. "These tend to load expenses," said a senior official from a private sector insurance company.

Reliance General Insurance has been focusing on the corporate sector for business because of which the average size of the premium is relatively higher. With a gross premium of Rs 79 crore net of surcharge, the number of policies it has insured are around 5,000.

Bajaj Allianz underwrote the maximum business in the fiscal with premium totalling Rs 141 crore largely due to its focus on the motor insurance segment.

Moreover, much of Reliance General's business has been largely captive, pointed out the competition. It has also undertaken co-insurance in state government entities in Gujarat like GNFC and GSFC.

Reliance General's balance sheet identifies that much of the premium income has been receded to reinsurance companies.

For instance, of the Rs 45.84 crore premium written in the fire portfolio, Rs 44.24 crore premium on reinsurance has been ceded. "Reliance General is not the lead insurer and has taken a small percentage of each risk underwritten. Mainly Reliance General has been a coinsurer," said the competition.

According to sources at Reliance General, the company has underwritten part of the risks in various fertiliser plants including Nagarjuna Fertiliser.

Focusing solely on the corporate sector, Reliance General has also participated in underwriting risks in the power sector, having co-insured seven power projects in the country, including the power plants of BSES in Kochi and Mumbai, Karnataka Power Corporation, Calcutta State Electricity Board, Gujarat Industries Power Corporation, as well as other projects in Andhra Pradesh.

Reliance General has also participated in the country's first barged-based power plant -- the Rs 900-crore Tanvir Bawa, as well as GMR's first power plant -- Vasant Bridge. It has also gone in for underwriting aviation risks.

Reliance General Insurance, with a paid up capital of Rs 102 crore now increased to Rs 109 crore, intends to concentrate on the corporate side of business, and proposes to tap the retail segment only after its systems are in place.

According to sources, it will tap the retail segment 2-3 years later, where the focus will be on personal line -- personal accident policies, householders policies, shopkeepers policies and health policies.

It will use an agency force to tap this segment. It has trained 250 agents and will use this distribution channel.