New India Assurance Loss Stands at Rs 421 crore

DEAR VIEWERS,

New India Assurance (NIA) has logged losses for the first time in its 90-year history. The country’s largest general insurance company notched a net loss of Rs 421 crore in 2010-11, even after Rs 2,329 crore investment income Higher claims in both domestic and international markets, one-time additional provision for wage hike, pension and gratuity of Rs 315 crore and the provision of Rs 456 crore to comply with the capital requirements on third-party motor business plunged the company’s balance sheet into the red. Though earlier, it used to make underwriting losses, the large investment income always ensured that the company was in black.

NIA’s claim ratio has remained at 100 per cent, while the combined ratio has remained at 140 per cent. The company has also provided over Rs 1,000 crore for future claims during the year, as the Irda wants general insurers to make larger provision than what they have been doing thus far. General insurance companies suffering net losses due to the sudden requirement of higher capital on account of third party motor pool has been the overall trend in 2010-11.

NIA board, which finalised the results last week, will neither pay any dividend to the government nor any incentives to its officials and the company’s reserve has stood depleted in 2010-11.

“The company’s large asset base has kept solvency ratio at 3 per cent, which is quite within the industry’s standard,” said AR Sekar, financial advisor, New India Assurance.

“The growth was quite comfortable, but the loss is purely due to one-time expenses like salary hikes, pension and gratuity a high amount for the third party motor business. The company also added over Rs 1,200 crore to its investment portfolio during the year. But the fact that this is the first ever loss in the history of the company is quite hurting,” Sekar said. The company will definitely see a turn around in 2011-12. “By end of the first half, the company will see a much better performance,” he said

The company’s investment portfolio has grown to Rs 13,604 crore out of which equity portfolio (book value) is at Rs 2,630 crore. NIA’s net global premium had grown by 20 per cent to Rs 7,192 crore including Rs 1,112 crore from the overseas markets.

While the earned premium of the company for 2010-11 is at Rs 6,473 crore, the net incurred claims are at Rs 6,524 crore, thereby putting the underwriting losses of the company at Rs 41 crore.

...... EDITOR