The Hindu Business Line : Bajaj Allianz Life recapitalising to sustain high growth rate

Bajaj Allianz Life is currently capitalised at Rs 367 crore after the last equity infusion of Rs 60 crore in December 2005 by the two joint venture partners — The Bajaj group and the Allianz AG of Germany.

But the company's business has grown. Its gross premium collections till December this financial year were Rs 1,367.04 crore or a growth of 301 per cent on a year-on-year basis. By March end, it hopes to have a gross premium collection of at least Rs 3,000 crore.

It was this high growth rate that was triggering the capital requirements, he said. "We have consistently remained solvent and will bring in capital to sustain the growth," he said.

Additions to new business also increased the insurers liabilities. Till December, the company had sold 3.8 lakh policies, a 127-per cent increase over the previous year. This growth was achieved even after factoring an attrition of about up to 14 per cent. Attrition implied migration of policyholders and defaults in policy premium payments by the existing policyholders.

Mr Ghosh said the actual capital requirement, however, was unlikely to be on the same scale as the increase in business. This was because bulk of the growth was in unit-linked policies, where the investment risks were on policyholders, unlike conventional covers. The company's assets under management were likely to increase to Rs 1,600 crore with the growth in business. About 50 per cent of the assets were in equities. The remaining was split between government securities and corporate debt, as mandated by the regulator.

Mr Ghosh said that despite the rising interest rates in the bond markets, the company was able to generate returns of 4 per cent on its bonds. However, as a matter of prudence not much of churning was done in the securities. This was to minimise investor risk, he added.

Micro insurance product: Bajaj Allianz had filed for a new micro insurance product with the Insurance Regulatory and Development Authority targeted at rural customers and distributed through its bancassurance partners consisting of regional rural banks (RRBs) and cooperative banks. This product in the form of a term plan would be bundled as a health insurance product as well. Tie-ups with third party administrators and hospitals for the product were already underway.