Chola MS General Insurance Company (Chola MS), a JV between the $4.4-billion Murugappa Group and Mitsui Sumitomo Insurance, is in its 10th year of operation in India. The company has set a target of Rs 2,500 crore gross written premium (GWP) in two years and a Rs 150-crore operating profit.
In an interview to T E Narasimhan, company’s managing director S S Gopalarathnam says to support the target, the company is  planning to raise around Rs 75 crore from the promoters through a rights issue and it’s also possible the Japanese partner may  increase the stake. Edited excerpts
How has the journey been so far?
It was an interesting one and also difficult time for the industry as a whole. The industry went into detariffication in motor and  property lines as on January 1, 2007, and this resulted in a price war, which saw discounts touching 90 per cent in property lines  and motor going to 50 per cent. This resulted in higher loss ratio and lower profit margins for all the players.
Moreover, under the Motor Third Party Pool (TPP), started on April 1, 2007, losses had to be distributed to all the general insurers  based on the market share. As a result, general insurers had to absorb losses of nearly Rs 14,000 crore in five years.
Despite such difficult times, we managed to grow at an average of CAGR of over 65 per cent. The numbers is rare in the industry  in the 10-years’ time frame.
What were and will be the growth drivers?
The company over the years had given thrust on the retail segment with major volumes coming from motor, health and rural  segments, which constitute 84 per cent of our volumes. Going forward, the major thrust would be on health and commercial, retail health. The new motor TP pricing is in place and this would mean they getting revised annually across all class of vehicles. It would help non life insurers lower motor TP losses
The Ministry of Finance has directed all PSUs to curtail the discounts. This would slow down the price war and lead to risk-based pricing in the market.
The dismantling of motor pool from April 1, 2012, means each company will have to manage this claims ratio more efficiently and will not be affected by the market in efficiencies in claim settlements.
What is your GWP target by 2014-15, and how much additional capital infusion would be required to achieve this?
Last year CholaMs clocked Rs 1,350 crore GWP and by 2014-15 our target is Rs 2,500 crore. To achieve this, we need an additional capital of Rs 75 crore to meet the regulatory norms. In terms of market share, the company shall strive to achieve around 3.5 per cent and 5 per cent in the next five years as compared with 2.5 per cent now and be amongst the top five insurers in size and top three in terms of profitability by 2014-15.
How will you raise the money?
This will be contributed by the existing promoters in equity capital through a rights issue The insurance Bill is on the cards. Will your foreign partner increase stake? This is a likely scenario.
Will you look at life or health insurance?
As this is a shareholder subject, I will not be able to comment.
What is Cholas invested asset base at present and to what level it will be increased? Sectors you are bullish on and feel the risk?
We are planning to increase the invested assets base by 33 per cent to Rs 1800 crore in 2012-13 from Rs 1350 crore in 2011-12. These investments have yielded around 8 per cent return on a average. As per the norm, of the total investment, 45 per cent is government regulated, while 30 per cent will be in government securities, 10 per cent in the infrastructure space and 5 per cent in the housing sector. Our equity exposure is less than one per cent of our total portfolio.
