SECTOR PROFILE

Brief History of the Insurance Sector The business of life insurance in India in its existing form started in India in the year 1818 withthe establishment of the Oriental Life Insurance Company in Calcutta. Some of the importantmilestones in the life insurance business in India are:1912: The Indian Life Assurance Companies Act enacted as the first statute to regulate the lif einsurance

business.1928: The Indian Insurance Companies Act enac ted to enable about the both government life and tocollect statistical non-life insurance

information

businesses.1938: Ear lier legislation consolidated and amended to by the Insurance Act with the objective of protecting the interests of the insuring

public.1956: 245 Indian and foreign insurers and provid ent societies taken over by thecentral government and

nationalized. LIC formed by an Act of Parliament, viz. LIC Act, 1956, with acapital contribution of Rs. 5 crore from the Government of India. The General insurance businessin

India, on the other hand, can trace its roots to the Triton Insurance Company Ltd., the firstgeneral insurance company established in the year 1850 in Calcutta by the British

Some of the important milestones in the general insurance business in India are:1907: The Indian Mercantile Insurance Ltd. set up, the first company to transact all classes of general insurance business

1957: General Insurance Council, a wing of the Insurance Association of India, frames a code of conduct for ensuring fair conduct and sound business practices.1968: The Insurance Act amended to regulate investments and set minimum

solvencymargins and the Tariff Advisory Committee set up.1972: The General Insurance Business (Nationalization) Act, 1972 nationalized the generalinsurance business in India with effect from 1st January 1973. 107 insurers amalgamated andgrouped into four companies viz. the National Insur ance Company Ltd., the NewIndia Assurance Company

Ltd., the Oriental Insurance Company Ltd. And the United India InsuranceCompany Ltd. GIC incorporated as a company.

INSURANCE SECTOR The opening up of Insurance sector was a part of the on going liberalization in the financial sector of India. The changing face of the financial sector and the entry of several companies inthe field of life and non life Insurance segment are one of the key results of these liberalization efforts. Insurance business by way of generating premium income adds significantly to be the GDP. Over the past three years, more than thirty companies have expressed interest in doingbusiness (Insurance Regulatory Development in India. The IRDA Authority) is the

regulatoryauthority, which looks over all related aspects of the insurance business. The provisions

of theIRDA bill acknowledge many issues related to in surance sector. The IRDAbill provides

guidance for three levels of players - Insurance Company, Insurance brokersbrokers and Insurance agent. Life Insurance sector is one of the key areas where enormous businesspotential

exists In India currently the life insurance premium as a percentage of GDP is 1.3 % against, 5.2 per cent in the US. General Insurance General Insurance is another segment, which has been growing at a faster pace. But as per thec urrent comparative statistics, the general insurance premium has been lower than life insurance. General Insurance premium as a percentage of GDP was a mere 0.5 'per cent in 1996. In theGeneral Insurance Business, General Insurance Corporation (GIC) and its four subsidiaries viz.New India Insurance, Oriental

Insurance, National Insurance and United India Insurance, are doing major business. The General Insurance Industry has been growing at a rate of 19 percentper year.The entr y of several private insurance companies, particularly international insurance companies,through joint ventures, will speed up the process of insurance mobilization. The competition willunleash new schemes and benefits, which will give consumers a better Chance to save as well asinsure. The regulatory system in India is relatively new and takes some more time to make theInsurance sector a perfectly competitive one. Insurance Regulatory Authority of India issuedregulations on 15 subjects

which included appointed. Actuary, actuarial report, Insurance agents,Solvency margins, reinsurance, registration of Insurers, and obligation of insurers to rural andsocial sector, investment and accounting procedure. The reform in Insurance in India is guidedby factors like availability of a variety of products at a competitive price, improvement in thequality of customer services etc. Also the employment opportunities in the Insurance sector wil1increase as major players set their business plans in India. The policy of the government to openup the financial sector and the Insurance sector is expected to bring greater FDI inflow into thecountry. The increase in

the investment limit in this vital sector has generated cons iderablebusiness interests among the foreign Insurance

companies" Their entry wil1 certainly change theInsurance sector considerably.

Insurance Sector Reforms: In by 1993, former Malhotra Finance Committee, Secretary headed and

RBI Governor R.N.Malhotra was formed to evaluate the In dian insurance industry and recommend itsfuture direction. The Malhotra committee was set up with the objective of complementing the reformsinitiated in the financial sector.In 1994, the committee submitted the report and some of the key recommendations included:Structure:1. Government stake in the insurance Companies to be brought down to 50%. 2. Government should take over the holdings of GlC and its subsidiaries sothat these subsidiaries can act as

independent corporations.3. All the insurance companies should

be given greater freedom to operate.Competition:1. Private Companies with a minimum paid up capital of Rs. 1 bn should be allowed to enter theindustr y.2. No Company should deal in both Life and General Insurance through a single entity.3. Foreign companies may be allowed to enter the industry in collaboration with the domesticcompanies.4. Postal General Insurance should be allowed to operate in the rural market.5. Only one State Level General Insurance Company should be allowed to operate in each state.Regulator y Body: . The Insurance Act should be changed.2.3. An Insurance Regulatory body should be set up.Controller of Insurance (Currently a part from the Finance Ministr y) should be madeindependent.15

Investment: 1.Mandatory Investments of LIC Life Fund in government securities to be reduced from 75% to50%.2. GIC and its subsidiaries are not to hold more than 5% in any company (There current holdingsto be brought down to this level over a period of time.)Customer Service:1. LIC should pay interest on delays in payments beyond 30 days.2. Insurance companies

must be encouraged to set up unit linked pension plans.3. Computerization of operations and updating of technology to be carried outin the insurance industr y. The committee emphasized that in order to

improve the customer Services and increase thecoverage of the insurance industry should open up to competition. But at the same time, thecommittee felt the need to exercise caution as any failure on the part of new players could ruinthe public confidence in the industry. Hence, it was decided to allow competition in a limitedway by stipulating the minimum capital requirement of Rs. 100 crores. The committee felt theneed to provide greater autonomy to insurance companies in order to improve.

SOME PLAYERS IN THE INDUSTRY:

Life Insurance General Insurance Life Insurance Corporation of India General Insurance Corporation of India.

1. Oriental Insurance Company Ltd.2. New India Assurance Company Ltd.3. National Insurance Company Ltd. . 4. United India Insurance Company Ltd New Entrants ICICI Bajaj . Ltd . Tata AIG Life Insurance Corporation Ltd. Reliance General Insurance Company Ltd.ING Vysya Life Insurance Corporation Ltd. Tata AIG General Insurance Company Ltd.O m K o t a k Mahindra Royal Sundaram Life Alliance Insurance Insurance Prudential Allianz Life Insurance Ltd

General

Insurance Company

CompanyCorporation Ltd. MaxNewYork Life Insurance Ltd.

MARKET SHARE

In the witnessed

FY2008

ICICI Lom bard and Bajaj aggressive growth

Allianz have bymaking

the retail segment their target segment ,aggressive growth strategies an dhuge distribution network.The general insurance industry has witnessed the entry of many non-traditional players .IRDA has issued a license to the Rajan Raheja Group(RRG) for settingup a general insurance joint veture with Australias QBE Insurance Group.Last two

yearshave seen the emergence of special institutions,such as ECGC, Star Health &Insurance ,Appolo DKV and Agriculture Insurance Co.

Business mix of Bajaj Allianz Motor insurance has the biggest share in general insurance market and show a high growthover three years. Corporate ex-health shown a low depression in Fy 2006-07 andhigh depression in Fy2007-08.Health insurance shows positive trend in all these FYs.

COMPANY PROFILE

Bajaj Allianz General Insurance Company Limited between Bajaj FinservLimited (recently demerged from Bajaj Auto Limited) and Allianz SE. Both enjoy a reputationof expertise, stability and strength.Bajaj Allianz General Insurance received the Insurance Regulatory and Development Author-ity (IRDA) certificate of Registration on 2nd May, 2001 to conduct General Insurance busi-ness (including Health

Insurance business) in India. The Company has an authorized and paidup capital of Rs 110 crores. Bajaj Finserv Limited holds 74% and the remaining 26% is heldby Allianz, SE.As on 31st March 2009, Bajaj Allianz General Insurance maintained its premier position inthe industry by achieving growth as well as profitability. The company garnered a premiumincome of Rs. 2866 crore, achieving a growth of 11 % over the last year. Bajaj Allianz hasmade a profit before tax of Rs. 149.8 crore and has become the only private insurer to crossthe Rs.100 crore mark in profit before tax in the last three years. The profit after tax was Rs.95crores, which is also the highest by any private insurer.

Bajaj Allianz today has a countrywide network connected through the latest technology for quick communication and response in over 200 towns spread across the length and breadth of the country. From Surat to Siliguri and Jammu to Thiruvananthapuram, all the offices are in-terconnected with the Head Office at Pune.

Vision To be the first choice insurer for customers To be the preferred employer for staff in the insurance industry. To be the number one insurer for creating shareholder value Mission As a responsible, customer focused market leader, we will strive to understand the insurance needs of the consumers and translate it into affordable products that deliver value for money.A Partnership Based on Synergy.Bajaj Allianz General Insurance offers technical excellence in all areas of General and HealthInsurance as well as Risk Management. This partnership successfully combines BajajFinserv's in-depth understanding of the local market and extensive distribution network withthe

global experience and technical expertise of the Allianz Group. As a registered IndianInsurance Company and a capital base of Rs. 110 crores, the company is fully licensed tounderwrite all lines of general insurance business including health insurance. Achievements Bajaj Allianz has received "iAAA rating, from ICRA Limited, an associate of Moody'sInvestors Services, for Claims Paying Ability.This rating indicates highest claims payingability and a fundamentally strong positionBajaj Allianz General Insurance has received the prestigious awarded by Business NDTV Leader in GeneralInsurance,

Profit

Business

Leadership Awards 2008. The company wasone of the top three finalists for the year 2007 and 2008 in the General Insurance Company of the Year award by Asia Insurance Review.

COMAPNY HISTORY

Bajaj Allianz General Insurance Company: Allianz AG: Allianz group was founded in 1890 and is one of the world's leading insurance companies withover 100 year's experience in insurance and related services. It is also multi-

the largest insurer inEurope. Allianz group has local structur e and presence in over

70 countries.

The keybusiness areas of Allianz group include General Insurance (property, engineering, marine, motor,casualty and miscellaneous), Reinsurance, Risk Management, Life

& health insurance, AssetManagement and Pension Funds Management. Bajaj Auto Ltd. Bajaj Auto Ltd

the flagship company of Bajaj Group was incorporated in 1945 as BachrajTrading Corporation. Initially it started by

assembling two and three wheelers in collaborationwith Piaggio of Italy. After the expiry of the Agreement in 1971 the two and three wheelersacquired the brand name of Bajaj. The strength of the company lies in its strong brand image andability

to offer value for money products leveraging on its large-scale operations. The Joint Venture Bajaj Allianz General Insurance a joint venture non-life company promoted jointly by Bajaj Autoand German insurerAllianz. Indian auto major holds 74% while Allianz holds 26% in the JointVenture, and has an authorized and paid up capital of Rs. ll0 crores. Mr. Graham

Norris is theCEO of the company. Bajaj Allianz General I nsurance will leverage the customer base and expertise of Bajaj Auto Ltd and Allianz. P e r o d o f u c t company/industry r a n g

o Personal Accidento Hospital Cash Daily Allowance Policyo Health Guardo Critical Illnesso Travel Burglary Companiono Insuranceo Fidelity

Householders

Insuranceo

Guarantee Policyo Office packageo Money Insurance Public Liabilityo Plate Glass Insuranceo Consequential Loss (Fire) Insurance Policy

Performance of the company over the lastfew years Despite conditions which were not conducive for growth of gross premium, the companymanaged to maintain a growth rate which was more than twice that of the m arket. Thecompanys gross written premium (excluding

share of premium from the IMTPIP), grew by33.3% during 2007-08 and, despite intense price competition, company maintained its secondposition among the private

sector companies in terms of gross written premium. The marketshare of company (excluding premium of specialized insurers) increased from 7.2% in 2006-07to 8.5% in 2007-08. Including the share of inward reinsurance business from the IMTPIP, thegrowth rate would have been 43.0%. During 200708, company clocked gross written premiumof Rs. 24,045 Mn excluding share of business from the IMTPIP as compared to Rs 18,033 Mn in2006-

07. Including share of inward business from the IMTPIP, the gross written premiumamounted to Rs. 25,780 Mn. On account of companys policy of steadily increasing its retentionin line with its capital base, the net earned premium for the year (excluding net premium frominward business of the

IMTPIP), rose to Rs. 13,266 Mn, an increase of 58.6% over the previousyear of Rs. 8,366 Mn. Including the net premium arising out of the share of business from theIMTPIP, the net premium for the year 2007-08 was Rs. 14,134 Mn. Although detariffication hadan adverse effect on the price per policy, the number theyear as of policies sold continued to grow. In

under review, company sold 6.61 Mn. policies against 4.90 Mn. policies sold in

theprevious year. This growth indicates that despite severe price competition, more customers preferred companys service offerings, drawn by its strong brand image, convenience of buyingand satisfaction with its service levels. The total incurred claims for the current year includingactuarial provisions but excluding share of claims of the IMTPIP, were Rs. 8,375 Mn. as againstRs. 5555 Mn. in the previous year. The number of claims reported during the year was 413,281as compared to 309,160 in the previous year.As on 31st March 2008, Bajaj Allianz General Insurance maintained its

premier position in theindustr y by garnering a premium income of Rs. 2578 crore, achieving a growth of 43 % over the last year.Bajaj Allianz has made a profit before taxes of Rs. 167

crore and is the first company tocross the Rs.100 crores mark in profit after tax first quarter by of generating 2008-09, Rs. 105 crores.In the the company garnered

a gross premium of Rs.733.53 croresagainst Rs.573.73 core last year for the same period registering a growth of 28%.Bajaj Allianz today has a countrywide network connected through the latest technology for quick communication and response in over 200 towns spread across the length and breadth of the coun-tr y. From Surat to Siliguri and Jammu to Thiruvananthapuram, all the offices are interconnectedwith the Head Office at Pune.

F i n a n c i a l anization

s t a t u s

o f

t h e org

Figure

shows

profit

after

taxes

in

Rs.(In

Millions)The company has earned a Profit Before Tax of Rs. 1,679 Mn for the year ended 31 March st 2008, an increase of 43.5% over the previous year profit of Rs. 1,170 Mn. The Profit Before Taxincludes a provision of Rs. 361 Mn towards provisions for losses from the IMTPIP. The netprofit for the year, after provisions for reported losses from the IMTPIP, was Rs. 1,056 Mn asagainst Rs. 754 Mn reported in 2006-07, which is an increase of 40.0%. In a year when prices of insurance fell significantly, increasing

its profitability whilst improving the market share hasbeen a significant achievement for your Company. It is a matter of pride for Bajaj Allianz that

ithave become the benchmark for other companies in the market in so far as underwritingprofitability and return on equity are concerned. The Earnings per share (EPS) for the year ended31st March 2008 was Rs. 9.59/- (compared to Rs. 6.85/for the previous year) and the book value of equity shares on 31st March 2008 was Rs. 52.15/- per share (as against Rs. 37.40/- per shares as on 31st March 2007).516

4702171056

Futureprospects/plans The Indian gener al insurance industry detarrification to start a new growth story.Share of motor insurance was 43.1% of the total general insurance premium in April-Dec 2008.Motor insuranceis expecting to increase with motor sale,this year, there is a sharp rise in

the auto industry(passenger car sales

increased at a rate

CAGR of 17% during FY08) as income levelrise.How ever last year and the initial months of this year showed a negative trend in sales but asthe market is recovering ,auto sales showed a positive trend. Post detarrifictio, in January 07,drop in motor premiums was expected ,but rise in car sales has helped boost total motor premiums.Recent hike of 70-150% in loss making motor third party liability segment

will helpreduce losses.Its very important time for Bajaj Allianz to formulate new plans strategies and tocapture more marketing share.