Murugappa group kicks off non-life insurance biz  ( October '22,2002, ET)

The Rs 4,200-crore diversified conglomerate, Murugappa group, has finally launched its non-life insurance business through its wholly-owned company, Cholamandalam General Insurance Company (CGICL). After Reliance, Murugappa group is the second Indian company to enter the insurance market without a foreign partner.

By far, the group has made one of the largest investments in entering the field. It has capitalised CGICL at Rs 105 crore and group companies — Tube Investments of India (TII) and Cholamandalam Investment and Finance Company (CIFCO)— have contributed 75% and 15% of the initial capital. Two privately held group companies have picked up 5 % each.

Chief executive of CGICL, Arun Agarwal, said the company would reach breakeven in its fourth year of operations, by which time it would underwrite business worth Rs 500 crore. In the current fiscal, CGICL plans to underwrite around Rs 25-30 crore and in its first full year of operations it is expected to do around Rs 95-100 crore business.

Asked about tapping group business, he said the annual premium outgo of the group comes to Rs 8 crore. Besides, the vehicle finance of Cifco generates insurance business of Rs 25 crore. However, he made it clear that CGICL could hope to tap them only based on its service, innovation and hard selling the products.

M A Alagagppan, chairman, Cifco and CGICL told mediapersons on Monday that Cifco has transformed itself from a single product to a multi product company with a network of 125 offices, 3,000 channel partners, three lakh stakeholders and doing one million transactions a year."

He said "CGICL has been built on the foundation of the financial strengths and credibility of the murugappa group and on the brand equity of Cholamandalam." Mr Agarwal said " our USPs are: innovation, application and service."

Initially, the group had two successive agreements with Sun Alliance and AXA, to enter the insurance business through a joint venture.

However, both fell through for different reasons. At the same time, AXA of France
continued its alliance with the group through the 50:50 Cholamandalam AXA Risk

Management Services floated in 1995. Currently, Murugappa group is holding talks with Mitsui Sumitomo of Japan for divesting 26% in CGICL, the maximum allowed under the regulations.

M A Alagappan, said, “If we find a good partner, we are willing to rope them into the insurance business.”

As per the business plans, the insurance company would require capital infusion in the third year of operations; hence, whenever Mitsui decides to pick up 26% equity, existing shareholders will have to divest their holding.

CGICL will offer its products in six areas — engineering, marine, motor, property and property crime, casualty and financial lines. Now, it has offices in seven locations - four metros besides Bangalore, Hyderabad and Pune. It plans to swiftly spread to 30 cities in 18 months. The network is supported by a six-seat outsourced call centre and a host of other distribution channels.

The company has already invested a hefty Rs 11-12 crore to implement an enterprise-wide on IT backbone. According to Mr Agarwal, this allows for real-time issuance of quotes and policy generation with related finance and accounting controls.