Capital infusion – Is the business appealing

Transcript:Capital infusion – Is the business appealing:
Capital infusion – Is the business appealing enough to attract investors? Serving the Cause of Public Interest Indian Actuarial Profession Vichitra Malhotra Gopal Kumar Ishwar Gopashetti Guide: Mayur Ankolekar Agenda 2 Introduction Industry Analysis General Insurance Life Insurance E-Commerce Summary Questions Introduction - Appeal to Investors 3 From purely economic view point, business which earns highest risk adjusted return compared to other investment opportunities (opportunity cost) is most appealing to investors. Introduction – Appeal to investors SURPLUS CAPITAL & OPPORTUNITY COST INVESTMENT TIME HORIZON & PAST EXPERIENCE RISK APPETITE & VALUE Business Appealing or Not ? Business Appealing also depends on investors’ 4 Introduction – Industry attractiveness Determining if the option at hand is the best depends on various factors: 5 Introduction – Industry attractiveness 6 7 Alternative analysis Introduction – Industry attractiveness Introduction – Industry valuation Future Oriented Measure Problem Forecast accuracy 8 GI Industry – Growth & Market Size 9 Significant top line growth – EXPECTED TO CONTINUE IN FUTURE From a Rs 12,000 crore top-line industry in 2001–02, today it is worth 70,000 crore, clocking an annual growth rate of 17% over the last decade. The industry today provides a cover of Rs 1,000 lakh crore. GI penetration still on the lower side. GI Industry, with low startup capital, is projected to grow at 16% in medium to long term mainly on account of economic growth, socio economic drivers and greater penetration. Source: KPMG Analysis, IRDA Annual Report 2012 16% GI Industry – Profitability (low and fluctuating) Profitability low – driven by intense competition and regulated Motor TP prices. De-tariffication has resulted in prices being cut significantly. 10 GI Industry – Profitability (low and fluctuating) 11 GI Industry – Regulatory update 12 Key Regulatory Changes Change in Industry 2007 Price Detariffication Creation of Indian Motor Third Party Insurance Pool Mechanism to equitably share CVTP losses Significant change in premium rates for commercial lines 2011 Merger and Acquisition Guidelines Enabled consolidations, inorganic transactions in the industry 2012 Introduction of declined risk pool, TP premium rates increase Improvement in overall profitability of the CV segment 2013 New health insurance guidelines introduced Streamlining of products GI Industry - Challenges 13 14 GI Industry - Challenges GI Industry - Future prospects 15 Industry has huge potential; but initiatives needed to exploit full potential and grow irrespective of economic environment Competition of Product Differentiation versus Price Differentiation Better customer segmentation to meet