Chennai: Royal Sundaram Alliance Insurance, a city-based general insurer, is all set to close this fiscal with a net profit.
For the first half of the current fiscal the company posted Rs 5-crore profit on a premium income of Rs 132 crore. "We plan to close this year with a premium income of Rs 280 crore," says Micky Brigg, managing director.
Royal Sundaram, with a claims ratio of 70 per cent, will also log underwriting profit (premium income minus expenditure and claims payout). Normally it is the income from investments that offsets the underwriting loss incurred by a general insurer.
Says deputy managing director Antony Jacob: "Our investment income this year will be around Rs 11 crore on an investment of Rs 220 crore." In line with the sliding-down interest rate trend, the company's average yield on investments is expected to be around 8 per cent this year as against 10 per cent earned last fiscal.
Royal Sundaram has already factored a fall in interest rates, and to a large extent built such volatility in interest rates into its five-year business projections.
The company follows a three-prong strategy to manage returns on investment in the falling interest rate regime; the first one being 'buy and hold' interspersed with trading. But the bulk of the investments are held to maturity.
The second strategy is to take advantage of the market distortions and focus on investing on those securities that offer better yields rather than going in favour of liquid securities. And the final strategy is to invest in mutual fund schemes to have superior returns.
About the business mix, Brigg says: "It is a healthy mix of personal line [50 per cent] and commercial lines. Similarly, the company also employs a mix of channels - corporate agents, banks, brokers and individual agents - to distribute its policies."
Royal Sundaram has bancassurance agreements with American Express, Citibank, Standard Chartered Bank, Repco Bank and SBI-GE. In addition the promoter company Sundaram Finance and another TVS group finance outfit Lakshmi General Finance also sell insurance policies.
"Thirty per cent of our premium is earned through bancassurance deals," says Brigg. Royal Sundaram has signed a letter of intent with Lakshmi Vilas Bank to sell insurance products through its 221 branches in a phased manner. The letter of intent is likely to be firmed into a business agreement by the end of next month.
Two new dividend options
Sundaram Mutual has introduced two new dividend options, namely the annual and the half-yearly dividend options, on its flagship product, Sundaram Bond Saver retail option.
The initial period of offer will be 31 October 2003. The entry net asset value (NAV) for both the dividend options during the initial offer period will be that of the growth option on 31 October 2003. The new dividend options will be available for purchase on an ongoing basis from 3 November onwards.
The existing dividend option will be renamed quarterly dividend option. With the launch of the two new options, Sundaram Bond Saver retail option offers growth / bonus / dividend payout and dividend reinvestment-plans. The dividend periodicity available is quarterly, half-yearly and annual.