This second largest general insurance company has strong credentials to get the other two public sector GI companies merged with this. The 14-storey new building under construction is ready for this!
Public sector General insurance companies have been bleeding due to continuing adverse claim ratios and intense competition resulting in rate cutting. Chairman cum Managing
Director, M N Sarma pointed to such practices resulting in a humongous underwriting loss of Rs 4444 crore incurred during 2016-17. During that year the combined ratio was at 136.94 per cent. Thus during that year, despite a handsome investment income of Rs 2532 crore, the company suffered a loss of Rs 1914 crore.
Sarma and his team focused on achieving cost efficiencies. The business was recording handsome growth in motor and health insurance sectors. But the group health insurance, though providing large volume, continued to suffer heavy losses. So, a conscious decision was taken to reduce drastically this business volume. This meant growth dropping to 8 per cent against the industry average of 15 per cent. This helped reduce the claims ratio to 111 per cent. The company registered a steep reduction in underwriting losses to Rs 2542 crore (Rs 4444 crore). Sarma pointed to a handsome increase in investment income of Rs 3770 crore (Rs 2532 crore). Thus the company could earn a profit after tax of Rs 1003 crore against the loss of Rs 1914 crore incurred in the previous year.
The traditionally bleeding motor insurance business showed remarkable improvement; the claims ratio dropped to 90 per cent. In health insurance too it dropped to 111 per cent. The focus will continue on these segments and on crop insurance. Sarma pointed to government’s impressive plans to provide larger allocations for the farm sector.
There was more reason for cheer. The company achieved a solvency ratio of 1.54. This was at a low 1.15 in the previous year, less than the norm prescribed by IRDA of 1.50. The company went for an additional Rs 900 crore of two-tier capital and employed the funds to profit.
The current year promises to be eventful and can open up newer opportunities for growth. For one, the government’s conscious efforts to expand healthcare massively; more important is the plan to merge the three public sector general insurance companies – UII, National Insurance and Oriental Insurance – to form a single company. These three are headquartered respectively in Chennai, Kolkata and Delhi.
With the better credentials of UII there is a strong case for merging the other two GI companies with UII and retain the headquarter in Chennai. SV
