Birla Sun Life Insurance Company Ltd, the insurance business of the Aditya Birla Group, could break even by 2010, nine years after it commenced operations. “We are investing aggressively in the business and the company should be able to break even in three years,” said Vikram Mehmi, president and chief executive officer of Birla Sun.
Aditya Birla Nuvo is a diversified company of the group with interests in textiles, business process outsourcing, financial services among others.
With a revenue of Rs1,960 crore, insurance is Aditya Birla Nuvo’s largest business in terms of revenue. The business recorded a growth of 24% even as its losses mounted. The company had attributed the losses to high operating costs.
Birla Sun had earlier expected to break even in the last fiscal. But it has now pushed back that target and wants to focus on increasing its market share. “The company has developed a road map for launching more products. We will get into all segments of insurance over a period of time,” Mehmi said. The company has just launched a new product, the Birla Sun Life Insurance- Gold-Plus Plan, a unit linked insurance plan. The company is also focusing on expanding its distribution reach. It currently has 137 branches as against 85 in the preceding year and the direct sales force has increased to 56,603 from 17,986 in the preceding year.
In its sixth year of operations, the company’s total premium revenue is now Rs1,746 crore. For financial year 2006-07, its annualized premium income was at Rs953 crore and asset under management over Rs4,000 crore.
Life insurance is a key business of Aditya Birla Nuvo and will be thrust area for the company’s future along with its BPO and retail businesses.
“These business have lots of scope to grow, and cash that is generated from some of our mature business will be utilized to build these businesses,” said Bharat Singh, managing director of Aditya Birla Nuvo.
“We had slowed down last year but we will grow rapidly this year as we have brought in a lot of innovation and we expect these to increase revenue,” said S.K. Mitra, business head, financial services at Aditya Birla Nuvo.
Birla Sun is a joint venture between the Aditya Birla Group and Sun Life Financial Inc. of Canada for asset management, life insurance and wealth management businesses. The Aditya Birla Group holds 74% in the company.
A recently report of Enam Securities Pvt. Ltd, a Mumbai-based brokerage, says that increase in market share holds the key for the company’s insurance business. “The coming year should see expansion in distribution reach, new product launches and efficient improvement in processes,” the report says. Insurance analysts say normally a life insurance firms takes seven to nine years to reach the break-even point.
State Bank of India’s life insurance venture is an exception as it has posted net profit ahead of this time frame.