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New business growth of Reliance Life to grow 12% in 2 years

According to a report by Deutsche Bank, general insurance still has to provide for ~INR 1.4bn of motor pool loss over next couple of years

October 08, 2012 4:44 IST | India Infoline News Service
The Deutsche Bank report released on 8th October said that new business growth of Reliance Life is expected to grow 10%-12% over next two years in life insurance compared to 35%-45% decline in last two years (ii) cost rationalisation strategies which have been implemented across its businesses leading to improving profitability as growth revives (iii) increasing profit contribution from operating businesses as opposed to treasury profits leading to lower earnings volatility.

Reliance Life would be among the key beneficiaries of proposed reforms in the life insurance sector. Reliance Life has restructured its product portfolio over the past couple of years to offer more traditional policies. Product mix is now more skewed towards traditional (70%) with balance being group (20%) and linked products (10%). It has reduced the number of agents and is focusing on improving operating metrics like higher ticket size and selling longer tenor policies. The company is actively talking to banks for a bancassurance tie-up. Such a tie-up should help in further improving the distribution, the report added.

In the lending business the focus is clearly on secured lending – mortgages (including loan against property), vehicle and infrastructure financing. Funding costs are likely to decline with falling wholesale rates and further cut in bank lending rates over 2HFY13. Recent stock market rally augurs well for the mutual fund business. General insurance still has to provide for ~INR 1.4bn of motor pool loss over next couple of years and would potentially require capital infusion of ~INR 1.5bn over this period, the report further said.

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