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Expansion cost set to delay Birla Sun Life's break-even
(Ecomonic Times, The (India) (KRT) Via Thomson Dialog NewsEdge) Mar. 17--MUMBAI, India -- Birla Sun Life Insurance has said that its break-even would be delayed by a year because of additional investments in branches and group business. However, it still expects to be among the earliest company to reach the point when its revenues equal costs.
"In a way the delay is on account of competition as we are now looking at lower average premium per policy. In the group, we are going to the small and medium enterprises," said Nani Javeri, MD, Birla Sun Life. He said the company had plans to add 61 more branches to its network and was investing more on its direct sales.
The company has a paid-up capital of Rs 440 crore, which is likely to go up in the next fiscal. He said the company still expects to be among the earliest private life insurance companies to report a break-even. The company would also give an indication of its valuation by publishing its embedded value in its next year's balance sheet.
Embedded value is a measure for calculating the worth of a life insurance company based on the present value of future profits. Commenting on its strategy for group business, Mr Javeri said, "The pricing is getting totally unsustainable in the group business. However, we are not going to be elbowed out.
We have decided to look into the SME area." Birla Sun Life has seen its market share of new business premium dipping to 1.8 percent in January '06 from 2.8 percent a year ago because of a combination of factors -- which include withdrawal of keyman insurance policy, a decline in group business and aggressive sales of investment-oriented products by other companies.
However, the company's marketshare would be slightly higher, if premium figures were annualized. Competition has also resulted in new players targeting senior executives of Birla Sun Life. The company has decided to bring in on deputation an appointed actuary from Sun Life Canada in place of its former appointed actuary KS Gopalakrishnan, who has joined Bharti Axa Life Insurance.
Mr Javeri has also taken on the responsibilities of P Nandagopal, former head of alternate channels and Peter Akers, former COO. Moreover, to expand its branch and agency network, Birla Sun Life is also expanding the number of banking partners for distribution of policies.
The company has tied up with five co-operative banks to increase its reach. The five banks are: Indian Mercantile Coop Bank, Lucknow, Krishna Mercantile Cooperative Bank Bhopal, Thane Bharat Sahakari Bank and Nagaland State Cooperative Bank in Dimapur.
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