Chennai: After a fall in its growth rate in FY06 to 31.7 per cent from 74.3 per cent the previous year, private non-life insurer Cholamandalam MS General Insurance Company Limited (Chola MS), recovered a little last fiscal.

It logged 41 per cent growth with a gross premium income of Rs314.6 crore. The profit after tax stood at Rs12.4 crore and the underwriting profit was Rs7.5 crore after factoring net claims outgo of Rs70.8 million.

However, the first quarter performance of Chola MS, located literally on the Coramandel coast in Chennai, is certainly creating ripples in the industry if not waves. The company accelerated its premium earnings to Rs147.93 crore up from Rs79.80 crore made during the previous year''s corresponding period. Chola MS wiped out all its accumulated losses.

The company, a 74:26 joint venture between $2-billion turnover Murugappa Group and Mitsui Sumitomo Insurance group, Japan, literally located along the Coromandel coast is making waves in the industry with its resurgence.

When one looks at the figures in the light the rumours that floated in the market in the recent past-like promoters exiting the business, and also the drastic cut in the fire and engineering insurance rates early this year, Chola MS'' performance is quite impressive.

For the current year Chola MS has fixed a target of Rs600 crore premium income, nearly 91 per cent over last year''s achievement. And by 2010 the goal it hopes to become a Rs1,000-crore premium outfit.

Given this ambitious targets, M Anandan, managing director and his lieutenant S S Gopalarathnam, president, operations, are hard at work to overtake other private sector insurers like another Chennai-based insurer, Royal Sundaram Alliance Company Limited, that belongs to the TVS group.

Last fiscal first quarter Chola MS lagged TVS group''s Royal Sundaram by Rs75.48 crore. At the end of June 2007, Chola MS has reduced the lead to just Rs19.87 crore. While Chola executives expressly don''t say so, it is evident that they are itching to overtake Royal Sundaram.

More interesting, Chola MS'' resurgence is happening under three Murugappa Group veterans who are not from the insurance industry. A chartered accountant by qualification Anandan headed the group''s non-banking finance company Cholamandalam DBS Finance Limited before he came to Chola MS in April 2006.

A cost accountant Gopalarathnam has been in finance function as well as selling steel tubes for Tube Investments of India Limited. Later he became the Group''s vice president (corporate and strategic planning) before he moved to the insurance company in 2002. And Shivkumar Shankar, senior vice president, retail was earlier general manager, marketing at Tube Investments.

"There was nothing to unlearn. All we had to do is to transplant the shop floor work practices to office," says Gopalarathnam. The factory practices-delegation of authority at all levels and working as a team, were adopted by the insurer. For instance, the underwriters have been authorised to accept risks up to certain levels. Similarly the culture of teamwork towards the corporate goal is being practiced amongst the employees.

Regardless of the growth and ambitious targets employees say the work environment in Chola MS is peaceful without much pressure. This coupled with the growth story has enabled the company to lure talents from competition.

On the business front the company decided to change track and become intermediary friendly.

Says Gurpal Dhingra, vice president, south, Prudent Insurance Broker Pvt Ltd, "Earlier Chola MS was focussing on direct sales and didn''t encourage brokers. Now the situation has changed."

Another change expressed by brokers is that the company is actually transacting insurance business, underwriting risks. Earlier the company was conservative in accepting risks. "Today the company not only underwrites risks but also suggests the corporates ways to minimise chances of a loss," remarks Yash Parashari, assistant vice president, Marsh India Private Ltd.

Through its sister company Chola MS Risk Services Limited, risk minimisation consultancy services are offered to the clients. In some cases the insurer gets business from clients of the risk management company. (See: Reducing risks for policyholders)

Details are in retail
However, the company''s growth details largely lie in its retail strategy. The start of last fiscal saw the decision to beef up its sparse branch network numbering 18. Last year 47 new offices were added. In the first three months of this year the company added 10 more branches taking the total to 75. The plan is to have 100 branches by this year end and 300 in the next three years.

The growth in branch network naturally led to increase in the company''s agency force to 2,000. In addition Chola MS developed 600 people strong new cadre-direct sales team.

The second strategy is signing up with vehicle manufacturers or dealers to become their preferred vehicle insurer. With two such agreements in its bag, one with Toyota Kirloskar Motor Private Limited and the other with Hyundai Motor India Limited, Chola MS is confident of working similar pacts with Honda, Mahindra & Mahindra and also with one of the two largest car manufacturers in India.

While companies like National Insurance Company Limited has struck similar deals with two-wheeler players, Gopalarathnam says that segment is underpriced and the company is not interested in tie-ups.

Last fiscal Chola MS earned Rs97 crore selling motor insurance, up from Rs52 crore earned in FY06. With the formation of separate pool for motor third party risks, the company is now going all out to insure commercial vehicles. For the current year the company has targeted Rs240 crore topline contribution from motor business.

From the third quarter onwards the company will be focussing on growing its Rs38 crore health insurance business further. The target from retail business for the year is Rs400 crore a steep increase from previous years earning of Rs146.8 crore.

The third part of the retail game plan is increasing the number of bancassurance partners presently the weak link. The company has just one major bank and couple of cooperative banks and hopes to sign two more bancassurance soon. Group company Chola DBS Finance Limited sells the insurance products through its outlets.

The advantages of the retail business are many. Firstly, while the per ticket risk exposure is low, the premium retention would go up placing more money with the company for investment opportunities. During FY07 the company''s net retention ratio (net premium / gross premium) went up to 0.50 from 0.44 the previous year. Secodly, there will be more stability in business unlike the corporates which switch insurers based on the rates.

On the investment front, the company earned Rs15 crore last year from its investment portfolio of Rs257 crore. During the first quarter of the current year the investment book size went up by another Rs60 crore and the company targets Rs22 crore as investment income for the year.

Targetting the ''J&K'' corporates
When Chola MS officials say that they are looking at J&K corporates it does not mean companies in Jammu and Kashmir but Japanese and Korean (J&K) companies operating in India. Barring Maruti Udyog Limited, the Murugappa company is the lead or the sole insurer in the J&K corporate segment.

A separate strategic business unit (SBU) is busy strengthening the company''s leadership position in this segment. Earning Rs30 crore last year (prior to detariffing of fire and engineering lines) Chola MS is confident of increasing the pie to Rs40 crore this fiscal.

As to the business mix, Chola MS underwrites small and medium sized risks where retention could be high compared to writing large risks. It is the sole insurer in nearly 70 per cent of its corporate accounts; have leadership position in 18 per cent and a junior partner in 12 per cent account.

Chola MS wants to be known as a dependable and consistent insurer in the corporate world. To a large extent it has succeeded in building this brand equity. At a time when many private non-life insurers cancelled their loss making corporate group health insurance policies midway post fire and engineering insurance detariff, Chola MS is perhaps the only private player not to do that even with one policy.

The company is gearing itself to meet the fresh challenge of custom design policies by going in for a new core insurance solution.

According to Gopalarathnam, the new solution is to enable custom design policies and also to mine varied data to arrive at a premium rate. "We plan to launch around 25 new policies in fire, engineering, motor and workmen compensation portfolios," he adds. (See: Chola MS General Insurance looks for a core insurance solution)