Mumbai:
Chennai based state owned United India Insurance(UII) is set to raise Rs 900 crores soon through subordinated debt to improve its solvency ratio that has fallen below the required regulatory level of 1.5 per cent.
This is the largest amount any domestic insurer will be raising through any debt instruments. Earlier another state owned National Insurance Company had raised Rs 700 crore through non convertible debentures(NCD) to improve its financial parameters.
“We are raising Rs 900 crore this very month. The resources will help us improve our solvency margin, We are hopeful of making it to 1.8 by the fiscal-end with the help of certain measures which have been taken by us’’confirmed MN Sarma, CMD, UII.
The company had to provide Rs 5,550 crore for its loss making third party motor portfolio alone during the last fiscal that pulled down the solvency margin of the company below 1.5 per cent.
UII is looking at achieving total premium of Rs 17,000 crore, a net profit of Rs 1000 crore by the fiscal-end. The insurer’s investment income is likely to be over Rs 3,000 crore, Sarma said.
UII has also gone for quota sharing, partly with the state owned GIC Re and partly with Hannover Re.
Through quota share, GIC Re and Hannover Re will provide special support to UII to underwrite larger business which it wouldn’t be to do as it doesn’t have required solvency ratio of 1.5 per cent.
“We are expecting Rs 1,000 crore of net profit by the fiscal-end.We are planning to go for IPO somewhere during September – December period , We also want to bring down its underwriting loss to Rs 1000-1500 crore by fiscal-end,’’’ said Sarma.
UII had Rs 800 crore of underwriting losses in H1 FY 2017-18 and has a solvency margin of 1.10 during the period.
“We have taken corrective measures since August and the results of which are likely to be seen since December onwards and the things are likely to be much better by the fiscal-end. Our focus is more on sustainability. We are looking at breaking even on underwriting profitability front by next fiscal-end. We have cut down certain loss-making segments like group health insurance slow,’’ explained Sarma.
UII has recorded a premium of almost R 12,000 crore during the first nine months of the current fiscal and has 11 per cent market share in the domestic general insurance industry.
“This year, we targeting a 20 per cent higher premium . A huge number of people normally go for insurance during January-March. Most of the renewals will happen in January and March which is likely to take the insurance industry to that level by the fiscal end. Similarly, we are looking at achieving AUM of Rs 25,000 crore by the end current fiscal.