Private non-life insurers see profits surge in FY 2016-17

FY 2016-17 ended on a good note for most private non-life insurers. The private players recorded a 100% increase in their profit-after-tax, and grew from Rs1,330 crore in FY 2015-16 to Rs2,730 crore last fiscal.

Experts believe growth has been the strongest in the health and motor insurance sector. Few industry officials estimated that the current financial year would witness a stronger growth of around 18%-20% in the non-life space due to increasing awareness and rising medical inflation.

Amongst the top 10 private players, Bajaj Allianz, HDFC ERGO and Tata AIG witnessed significant growth in their net profit. Bajaj Allianz posted a 30% increase in its PAT, up from Rs564 crore in FY 2015-16 to Rs727 crore in FY 2016-17. The company attributed the growth to its successful multi-channel distribution model and constant focus on insurance digitisation.

HDFC ERGO recorded an 83% increase in its PAT, growing from Rs151 crore in FY 2015-16 to Rs277 crore in FY 2016-17. Similarly, Tata AIG posted a healthy increase in its net profit by growing from Rs19 crore in the preceding fiscal to Rs118 crore last fiscal. SBI General reported a net profit of Rs152 crore in FY 2016-17 against a net loss of Rs119 in the previous financial year.

Barring Bharti AXA, L&T General and Liberty Videocon, all the other private non-life insurers posted a profit in FY 2016-17.

While private general insurers witnessed a healthy growth in their PAT, PSU general insurers registered significant losses during the year. Commenting on the underperformance of PSU insurers, R. Chandrasekaran, Secretary General, General Insurance Council (GIC) explained that the objective of private insurers is to make commercial profit whereas that of PSU insurers is to provide insurance to society even if it is economically unviable to do so.

“Very often, private insurers reject insurance of certain risky businesses while PSU insurers don’t have a say there, and have to provide insurance to even dicey businesses, being government owned. There is an additional legacy cost associated with PSU insurers in terms of wages, offices, pension, overheads, and so on, that decreases their profitability,” he added.

 “A number of factors affect the profitability, and therefore even though PSU insurers are not making profits they are holding policyholders’ reserves which is a valuable proposition,” the Secretary General, GIC, further said.

A Delhi-based insurance broker, however, attributed this decline to inefficient underwriting practices of PSU general insurers. “PSU non-life insurers are not good when it comes to assessing risks,” he said.

PAT of non-life insurers 2016-17 (up to March 31, 2017) in Rs crore

Source: Company disclosure