New Delhi, Dec 30: In the past few years, the profits and losses of India’s second-largest general insurance company, United India Insurance (UII), are undergoing a massive swing without any striking reason.
Girish Radhakrishnan, chairman and managing director of the state-owned company, has told his employees in a year-ender mail the financial situation is precarious and alarming.
For the September quarter, the company posted a loss of Rs 14.29 billion. To put the number in perspective, for the entire year of 2017-18 the company had made a profit of Rs 10.03 billion. But this figure was surprising since UII had reported a huge loss in the year before, of Rs 19.14 billion. In just half year of operations, the company is close to the annual loss of 2016-17. Its profits were thin in the previous years, with Rs 2.5 billion in 2015-16 and Rs 3.19 billion in 2014-15.
The losses are also surprising in the context of the insurance sector, which is expanding at a compounded annual growth rate (CAGR) of about 34 per cent. This is why SBI Life Insurance had found buyers for a 10 per cent stake in the company. According to a report of 27 December, Carlyle and GIC will buy the shares at Rs 510-520 apiece, creating a deal size of over Rs 51 billion, which would make it the second-largest transaction in the sector this year.
Contrast this picture with sustained losses at UII. For the losses in 2016-17, the company said it had to make a major technical provision. And then, it was suddenly profitable for a year. One of the reasons for the unseasonal profit in 2017-18 was a bar on taking on new business in the corporate sector.