But for a Rs 900-crore charge on profits on account of higher provisioning for wages, pension, gratuity and ‘motor pool losses', public sector non-life insurer, United India Insurance, would not have reported a lower profit for 2010-11 than the previous year.

The company reported lesser net profit at Rs 130 crore in 2010-11 compared with Rs 707 crore the previous year. United India reported a 22 per cent growth in premium income to Rs 6,377 crore in 2010-11.

If it were not for provisioning, the company would have reported net profits of over Rs 1,000 crore. The company had to take hit of Rs 500 crore on provisioning for pension, gratuity and wage revision. Another blow came from third party motor pool losses of Rs 400 crore.

Motor pool

The motor pool is an arrangement under which all non-life insurance companies contribute to a common fund, out of which claims are paid. Since the claims are higher than the funds available, the deficit is apportioned to the companies in proportion to their market share. Public sector companies, with higher market share, bear the brunt of the motor pool losses.

Recently, the Insurance Regulator and Development Authority (IRDA) mandated all general insurers to make provisioning on account of motor pool losses for the last four years, including 2010-11.

Due to this, United India's solvency ratio has fallen to 2.75 from 3.5 per cent. But the ratio is still at a higher level than the required 1.3 per cent by the regulator.