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Munich Re's India Insurance Venture to Turn Profitable by 2012, CEO Says
HDFC ERGO General Insurance Co., a venture between India’s largest mortgage lender and a Munich Re unit, expects to turn profitable by March 2012, Chief Executive Officer Ritesh Kumar said.
Record car sales in India and higher health-care spending will boost premium income by as much as 40 percent in the next two years from 9.3 billion rupees ($199 million) in the year to March 31, Kumar said. Mumbai-based Housing Development Finance Corp. has a 74 percent stake in the insurance venture, while Ergo Insurance Group owns the rest.
“We are beginning to see revival of industrial activity and in the past four months the industry has grown at a pace that was seen only in 2007,” Kumar said in an interview.
Passenger car sales in India, Asia’s third-largest economy, reached a record in July as economic growth and new models from automakers such as Ford Motor Co. and Volkswagen AG boosted demand. Sales rose 38 percent to 158,764 vehicles from a year earlier, the Society of Indian Automobile Manufacturers said Aug. 9. That’s the highest monthly total recorded by the association.
Demand for drugs in India may grow about 14 percent in the next few years as the government boosts health-care spending and more people buy insurance, Nomura Securities Co. said in a report on June 21.
India needs to raise the cap on foreign ownership of insurance companies from 26 percent, Kumar said.
“Eventually, the sector has to open up and that is the desired direction,” he said. “When we are talking about integrating with the global economy, best practices need to come in.”
Finance Minister Pranab Mukherjee on July 27 introduced a bill in the lower house of parliament seeking to raise the foreign ownership limit for insurance companies to 49 percent.
Allianz SE, Aviva Plc and ING Groep NV are among global insurers that will be able to invest in their Indian partnerships if the limit is raised.
Munich-based Munich Re, the world’s biggest reinsurer, plans to form a life insurance venture in India, Sanjib Chaudhuri, the German company’s chief representative in the country, said on Aug. 11 in New Delhi.
To contact the reporter on this story: Anoop Agrawal in Mumbai at aagrawal8@bloomberg.net
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