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To support its business growth and development, Royal Sundaram Alliance Insurance announced the infusion of Rs 65 crore of additional capital. This infusion will be completed by the end of the current financial year, taking the total paid-up capital to Rs 275 crore.
The capital infusion comes against the backdrop of the aborted move by the promoters to sell the company to another non-life insurer, Reliance General. Employees of Royal Sundaram have spoken in whispers about the difficulties of doing business in a situation where a lucrative line of business — motor insurance — is still under regulator-controlled tariff. Two-thirds of the company's premium income of Rs 915 crore (in 2009-10) came from ‘motor'.
Product pricing
On the other hand, the other lines where pricing of products is left to the insurance companies, the competition has forced the premiums to such low levels that the businesses are inherently unprofitable. Against this backdrop, Royal Sundaram Alliance's foreign partner, Sun Alliance of the UK, initiated talks to sell its stake to Reliance, but the move did not take off (or at least, has not taken off as yet).
In 2009-10, Royal Sundaram reported a five-fold increase in its profit, to Rs 30.9 crore on the back of a 14 per cent growth in premium income (Rs 915.56 crore). But the profits came from investment operations (as in the case of most insurance companies). Underwriting losses were Rs 56 lakh.
In a press release, Managing Director, Mr Ajay Bimbhet, said the company expects to close the current financial year with gross premium income of over Rs 1,000 crore.
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