annual report 2009-10 - IRDA

ANNUAL REPORT 2009-10department, underwriting department etc. Although some increase in capital expenses was seen, increasein expenses of management, especially procurement cost of business had increased significantly. Thisresulted in an increase in operating costs. Also, the companies exceeded their expected levels of managementexpenses per unit premium. Expense growth rate far outweighed the premium growth rate. In addition tothis, the increased lapse rates significantly affected the premium sustainability (hence the profitability) andrendered the loadings (in the premiums) towards the fixed per policy costs insufficient. Mortality experiencehas not affected the profitability of life companies significantly as the experience has not been adverse.The status of profits/losses after tax of the private sector life companies over the past five years is indicatedin the table below:Number of private sector life companies according to profit range*Profit/(Loss) range (` Crore) 2005-06 2006-07 2007-08 2008-09 2009-10> (1000) Nil Nil 1 1 Nil(500) - (1000) Nil 1 1 4 Nil(400) - (500) Nil Nil 1 2 3Loss (300) - (400) Nil 1 1 1 2(200) - (300) Nil Nil 4 2 3(100) - (200) 4 5 2 2 20 - (100) 8 6 3 5 50 - 100 2 2 4 4 4100 - 200 Nil Nil Nil Nil NilProfit 200 - 300 Nil Nil Nil Nil 2300 - 500 Nil Nil Nil Nil Nil> 500 Nil Nil Nil Nil 1Total 14 15 17 21 22* Without considering the deficit in the policyholders’ account.Trends in the policyholders’ account which resulted in surplus/deficit to the insurers have been on similarlines to those in the shareholders’ account.Non-Life Insurance SectorDuring 2009-10, out of the 13 private non-life companies, seven reported profit after tax as compared to sixin 2008-09. Out of the seven companies which were able to generate profits in 2009-10, six companieshave reported profits continuously for the last four years. The trends are similar even in case of the fourPublic Sector Undertakings (PSUs). While three of the PSUs made sizeable profit after tax over the previousyear, the fourth PSU recovered considerably from the downfall experienced (losses reported) in the year2008-09. Overall, non-life insurers have been able to recover considerably from the immediate turbulencefaced in the first full year of complete detariff regime. This is also reflected in the performance of the sectoras a whole which recorded a growth of 13.96 per cent in the premium income as against the growth of 9.11per cent in the previous year. In case of non-life sector also, there is deferment of expected break-evenpoint as compared with the projections made in the R1 applications filed with the Authority at the time ofregistration. However, the deferment was less pronounced compared to the life insurance sector. Themajor factors for deferment of break-even point were increased levels of expenses and huge underwritinglosses.22