Birla Sun Life to wipe out Rs 1,575 cr loss in 4 yrs

Private insurer Birla Sun Life Insurance (BSLI) that for the first time reported profit in 2010-11 is expecting to wipe off its accumulated losses in the next three to four years. BSLI has accumulated losses of Rs 1,575 crore.

Speaking to Financial Chronicle, Mayank Bathwal, chief financial officer at BSLI, said, “We have been reporting profits since the last five quarters including the first quarter of this fiscal. We expect it will take another 3-4 years to wipe out the accumulated losses depending on the rate of growth.”

The insurer reported a gross profit of Rs 144 crore for April-June 2011 as against Rs 9 crore in the corresponding quarter a year ago. “This was primarily driven by the growing size of in-force book, balanced product mix, lower new business strain and better expense management,” the company said in a release.

The Embedded Value of BSLI, which reflects the value of future profits embedded in the in-force policies written by a life insurance company, increased from Rs 3,816 crore as at March 31, 2010 to Rs 4,108 crore on March 31, 2011. Net profit for last financial year was Rs 305 crore against a loss of Rs 435 crore in FY10.

The company is targeting to grow over 18 per cent in this fiscal. “Industry should in a steady state on an average grow at approximately 15-18 per cent. Our goal is to grow faster that the market. In the last three months, our market share among private players has improved from 7 per cent to 8.4 per cent,” said Bathwal.

Since September 2010, when new Ulip guidelines capping the overall charges that could be levied on policyholders were made effective, insurers saw their growth and profitability being impacted.

“Insurers went through a significant transition to create a balanced product portfolio and revamped the business strategy in order to implement new guidelines. Given the fact that in essence the opportunity for life insurance remains very large, and we believe we will see positive momentum in new business sales from Q3 onwards largely aided by base effect,” said Bathwal.

Among private players, BSLI is fifth in terms of new business premium with an improved market share of 8.8 per cent in April-June 2011 up from 8.1 per cent in the first quarter of the previous year.

Assets under management of the insurer scaled up year on year by 19 per cent to 19,984 crore in the first quarter of this year.