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New Delhi: Anil Ambani group firm Reliance Life is planning to increase focus on trimming its major expense heads and is all set to break-even by next year, a senior company official said.
Reliance Life sees its expense ratio drop to below 14 per cent by 2012 from the 34 per cent now.
"Expense management and persistence and are going to be a key focus area for us and we plan to reduce our expense ratio to below 14 per cent in the next three years, in line with global best practices," Reliance Life Insurance President Malay Ghosh said.
Ghosh added that subsequently, the company would bring the expense ratio to below 10 per cent.
At present private insurers are operating at a relatively high expense ratio, which affected their bottom lines. Over the last few quarters these insurers are trying hard to bring this ratio down to become profitable or sustain profitability.
Reliance Life expects to break even next year which will place it among the fastest insurance companies to break even in the industry.
Meanwhile, private insurers are also being hit by the commission to premium ratio, which stands around 9 per cent, while public sector players and market leader Life Insurance Corporation's commission to premium ratio stood around 6 per cent.
"As the private insurers stabilise their operating models and start seeing significant portion of their total premium from renewal premiums, we see this advantage being even out," industry experts said.
Reliance Life is among the top four private sector life insurance players with a market share of 9.4 per cent. For the quarter ended September 30, the total premium was Rs 1,261 crore against Rs 1,161 crore in the same quarter a year ago.
The company was planning to divest around 26 per cent stake either through an initial public offer or through an investment of strategic investors or a combination of both the options.
"The private players are in the early growth phase of their business life-cycle and incur huge expense in establishing a distribution network. We see that stabilizing and providing considerable cost leverage to private players in next quarters," Ghosh said.
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