New Delhi: Insurer and hospital operator Max India Ltd expects to sustain profitability in 2011-12 after it swung to its first full-year profit in a decade aided by a turnaround in life insurance business, sending shares up by as much as 8%
Earlier in the day, Max India reported a consolidated profit of Rs 8.7 crore for 2010/11 against a loss of Rs 71.6 crore in the previous year. Consolidated revenue grew 20% to Rs 667 crore.
“This performance is sustainable. Going forward we hope to better it,” Mohit Talwar, director, corporate development, told Reuters over the telephone.
Max India, which draws about 85% of its revenue from life insurance business, has a 74:26 joint venture with New York Life International.
The insurance unit turned profitable after it shifted away from Ulips (mutual fund like insurance products) to traditional products, boosted distribution by partnering lender Axis Bank, cut costs and targetted higher-income customers, Talwar said.
Ulips’ share has now fallen to about 20% of its offering from 70% before August 2010, after regulatory restrictions squeezed margins on Ulips and prompted most insureres to shift to traditional products.
“The shift towards traditional products is working for us. Also the bancassurance with Axis Bank is doing very well,” Talwar said, adding that the partnership has given Max access to Axis Bank’s network of 1,000 branches that is expected to grow 15-20% every year.
Max is looking for more such alliances and is open to offloading 4-6% equity to a state-run bank for a bancassurance partnership “provided it adds incremental embedded value,” said Talwar.
Max will continue to focus on profitable growth. “We are not in the game of just growing the topline at the cost of profitability,” Talwar said. The life insurance business needs no fresh capital infusion going forward, he addedd.
Talwar forecast a 10% growth in new insurance business at Max in the current fiscal and said the firm will continue its emphasis on high-income customers as they are more likely to renew policies and sustain insurer’s income.
Gross premium income for the Jan-March quarter grew 21% on year to Rs 1682 crore. The assets under management as at March-end was at Rs13,836 crore, up 37% on year.
Max India’s hospital unit also turned cash profitable in 2010-11 and is on its way to double capacity to 2,000 beds by March 2012. The board of the hospital unit has also approved plans to raise Rs 150 crore via a rights issue this year, Talwar said.
Max India’s Jan-March standalone loss rose to Rs 13.47 crore from Rs 1.6 crore a year ago.
Shares in Max India, valued at about $811 million rupees, ended 3.5% higher at Rs 163.40 on Thursday in a Mumbai market that closed up 1.19%.