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HDFC Standard Life Insurance, which expects to turn profitable this fiscal, has said that its promoters will add a further Rs 150 crore in 2011-12 to its paid-up capital of Rs 2,170 crore to support its 10-year-old business.
The company was one of the earliest private sector life insurers to enter the domestic market after deregulation in 1999.
“We will hopefully break even this fiscal. It is high time that the stakeholders got returns for their investments. In a new business you usually make a loss in the first year, but as the backbook (existing customer base) increases or if people surrender, you generate cash,” said Mr Amitabh Chaudhry, MD and CEO, HDFC Standard Life.
He added, “We took a longer time because as compared to the competition our first year premiums were high, but the backbook was less profitable and our fund management charges were lower.”
Private insurers which have already reported profits include SBI Life, ICICI Prudential Life, Bajaj Allianz Life Insurance, Birla Sun Life and Kotak Mahindra.
Growth target
HDFC Standard Life said that it has also missed its growth target for new business in the previous fiscal by 10 per cent (Rs 200-300 crore) largely due to a dip in sales after the regulator announced stricter guidelines for the more popular Unit-Linked Insurance Plans (ULIPs) in September. In 2010-11, new business for the company grew 15-17 per cent, while renewals were up 37 per cent.
“The new guidelines have been good in stopping some of the ills of the industry, the growth numbers prior to that did not seem realistic. This fiscal we do not expect very high growth, because of the high base of the first half of 2010-11. In 2011-12, we expect 15 per cent growth in new business and up to 30 per cent growth in renewals, both of which will be better than the industry,” he said.
While most of the insurance industry are shifting focus towards traditional products because of higher restrictions and lower charges in the sale of ULIPs, HDFC Standard Life believes otherwise. The share of ULIP sales for the company is high at 79 per cent.
“ULIPs are more transparent and the charges are now much lower, which makes it attractive. Also, the market gives better returns … traditional policies give returns in the 7-8 per cent range, while ULIPs also cover for inflation with returns in the 12-15 per cent range. Many have shifted their strategy, but in the long-term when volumes will be higher ULIPs will be more profitable,” said Mr Chaudhry.
roudra.b@thehindu.co.in
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