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Detariff prices to stabilise in 2 yrs

08 June, 2007

Antony Jacob, managing director, Royal Sundaram Alliance Insurance Company (RSA) has been one of the longest serving managing directors of a private general insurance company in India, since the late 90s. In an interview with Nandini Goswami, Jacob, who moves over as Royal & SunAlliance''s regional finance director for Asia and Middle East in a few months, reminisces on his early years in RSA, the company''s current plans ad his new role.

Looking back:
It''s been a great journey for both the company and myself over the last few years. The preparatory work began in 1996 and RSA was one of the first private companies to be registered in October 2000. People in the initial years were wary of the private sector. It has been a tremendously satisfying journey for me, given the fact that we are at Rs. 600 crore premium and with a relationship with 1.7 million customers.

Current performance of RSA:
We have been on a path of consistent profitable growth with a CAGR of 50% all these years. In 2006-07, the growth was 30% at Rs. 600 crore. These are early days of a detariffed market ad we expect price to find its own levels in 12-24 months. While there is an average 25% decline in insurance premiums, the current growth in infrastructure projects and property on the back of a robust GDP growth will drive insurance volumes. Motor insurance was the largest portfolio contributing 51% lf the total premium, while fire and engineering contributed 22% of the total business. Accident and health insurance increased to 21% from 16% the previous year.

Prospects for RSA:
This is a year of consolidation and we are expecting to clock Rs 775 crore of premium income in the current financial year. There will be growing opportunities from the retail book primarily in health, personal accident and home insurance. Internally, we have just initiated the process of exploring new products, which will come up once the terms and conditions of general insurance undergoes change from 2008.

Equity infusion and expansion:
The current equity capital of the company is at Rs 142 crore. We will review it around October and may infuse capital towards the second half of the year. Currently, we are in talks with a couple of financial services companies to tie-ups in distribution.

The new role:
The new role will be a challenging one with almost 10 countries including Hong Kong, China, Singapore, Japan, Malaysia, India, UAE, Saudi Arabia, Oman, Bahrain and Egypt under the Asian region. Interestingly, this region comprises almost 45% of the world''s population but only 2% of the non-life insurance business globally. The potential for the general insurance industry to grow is enormous.