Date:21/06/2006 URL: http://www.thehindubusinessline.com/2006/06/21/stories/2006062103400600.htm

Back Mumbai floods weigh on Oriental Insurance net

Our Bureau

Underwriting losses offset by higher investment gains

Lower net profits: Mr M.Ramadoss (left), Chairman & Managing Director, Oriental Insurance, and Mr Sanjeev Chanana, General Manager, at a press conference in the Capital on Tuesday. - S. Subramanium

New Delhi , June 20

The Oriental Insurance Company Ltd has reported a 14.10 per cent decline in net profit at Rs 283.91 crore in 2005-06, from Rs 330.52 crore during the previous fiscal. According to the company, the decline has been largely on account of the additional burden arising out of the Maharashtra floods last July-August and consequent underwriting losses.

The fall in net profit was due to underwriting loss of Rs 750 crore as the company witnessed higher claims in health and motor business, besides settlements of claims due to Mumbai floods last year. But the losses were offset by a profit of Rs 1,100 crore from investments in equity, mutual funds and bonds, Mr M. Ramadoss, Chairman-cum-Managing Director of Oriental Insurance, told the media here on Monday. The company has announced a 50 per cent dividend and would be paying Rs 50 crore to the Government.

To beat target

Oriental Insurance's premium income for 2005-06 saw a gross growth of 16.80 per cent at Rs 3,609.77 crore from Rs 3,090.55 crore in 2004-05. The growth rate on net basis was 12.73 per cent against 9.10 per cent in 2004-05, he said. "We have set a target of about Rs 3,900 crore gross premium for 2006-07, but we are hopeful of crossing Rs 4,000 crore, up from 2005-06," Mr Ramadoss said.

He said the company's net retention decreased by 2.50 per cent from 71.77 per cent to 69.27 per cent. This was mainly due to lower retention in fire, engineering, and marine hull portfolios as a result of underwriting lower risks. Besides, the payment of reinstatement premium for the XL cover, which was exhausted as a result of Mumbai floods, also affected the net retention ratio.

Overseas expansion

The company plans to expand its overseas operation by adding two more branches in the West Asian region. The three overseas branches of the insurer in Kuwait, Dubai and Nepal have made a profit of Rs 18 crore. Oriental Insurance expects domestic premium collection to go up to Rs 3,884.87 crore in 2006-07 and overseas operations to contribute around Rs 92.07 crore.

According to Mr Ramadoss, the reserves improved during 2005-06 by Rs 226.91 crore in 2005-06 from the previous fiscal to touch an all-time high of Rs 1,545.52 crore. Further, the company's solvency ratio has increased from 1.46 in 2004-05 to 2.14 in 2005-06. This is higher than the required ratio of 1 as laid down in the IRDA Regulation and the preferred ratio of 1.5.

Despite the losses suffered by the company on account of the Mumbai floods, there has been a reduction of 3.47 per cent in the overall net incurred claim ratio (ICR) during 2005-06 as compared to 2004-05. "The main cut back has come from the motor portfolio in which the net ICR has decreased from 112.52 per cent in 2004-05 to 92.64 per cent in 2005-06 a decrease of 19.58 per cent," he said.

Unveiling plans for the future, he said, "We hope to make motor and health portfolio profitable in the coming years. Besides, aviation and energy will also be thrust areas of growth."