Royal & Sun bullish on India
Business Standard - Mumbai, 08 July, 2007
United Kingdoms second largest insurer, Royal & SunAlliance Group (R&SA) is bullish on India. It expects the share of its Indian presence to rise four-fold to 40 per cent of total income from its operations in emerging markets by 2010.
The foreign insurer is present in India as a promoter of Royal Sundaram General Insurance Company with a 26 per cent stake.
R&SAs operations in emerging market consists of seven countries in Latin America, China, India, Saudi, Oman, UAE, Singapore and Hongkong besides countries in Central, Eastern Europe and three countries in the Baltics.
At present, the Royal Sundaram contributes 5 per cent to R&SAs profits from emerging markets and 10 per cent to income.
India is one of the biggest markets. At present, the Indian contribution is not major but its potential is very big like China, Brazil and Mexico. We expect our India business to be at least four times of the present business by the year 2010. Beyond that the growth potential is still large, said Paul Whittaker, CEO, emerging markets, R&SA.
With the Indian non-life industry on the verge of being fully detariffed, R&SA will be replicating better price sophistication, distribution model and products from other countries in India.
In the emerging markets, we have two measures to calculate the market potential - GDP growth and insurance penetration. In the UK, GDP growth is 2 to 3 per cent while in India it is close to 10 per cent. In the UK, the insurance penetration is saturated with 3.65 per cent of GDP being spent on insurance while the insurance penetration in India is 0.65 per cent. There are different products and different levels of penetration, said Whittaker.
Speaking about the impact of detariffing, Whittaker said, In all countries prices have fallen initially and profitability is lost. But over the time market matures. Risk-based pricing comes into effect. But in one to two years, normality will return.
Royal Sundaram General Insurance started its operations in 2001. Antony Jacob, CEO, Royal Sundaram General Insurance said, The first five years we have focussed on building a large happy customer base. We have 1.7 million customers and our customer rating is 82 per cent as per the AC Nielson survey. We are looking at improving visibility, distribution and brand. The second phase we will focus on accelerating the growth.
Royal Sundaram General Insurance will be increasing the branches to 60 by March 2008 from the present 60. The company reported a Gross Written Premium of Rs 601 crore and a profit after tax of Rs 21 crore , for the year ended 31st March 2007.
Royal & SunAlliance is one of the worlds leading multinational quoted insurance groups, with the capability to write business in over 130 countries and with major operations in the UK, Scandinavia, Canada, Ireland, the Middle East and Latin America.
Focussing on general insurance, it has around 24,000 employees. In 2006, its net written premiums were 5.5 billion pounds. With an almost 300 year heritage, Royal & SunAlliance is the oldest insurance company in the world still trading under its original name.