Without this and some other provisions, the net profit would have been around Rs 150 crore. NICs chairman and managing director, HS Wadhwa, said income from investments was Rs 662.69 crore during the year, with average yield being 16.7 per cent against 12.63 per cent the previous year.
He indicated that NIC has provided Rs 1,259 crore for its unexpired risks in 2003-04 against Rs 1,138 crore in 2002-03 and added Rs 121 crore to its reserves. Mr Wadhwa admitted that Reliance Infocomm Ltds problem with defaulting subscribers of its mobile telephony business had impacted NIC, which had insured the entire business.
For 2003-04, NIC had to provide Rs 152 crore as claims liability on the Reliance Infocomm account. Most of it came by way of unpaid bills of subscribers. Plainly put, NIC covered Reliance for up to Rs 11,000 per subscriber in return for a premium of only Rs 90.
He pointed out that NIC had purchased reinsurance cover known as alternate risk transfer (ART), but had not been able to derive any benefit from it since it had not done the homework. The company could not take the benefit of getting relief because it has been observed that ART is a new concept and requires in-depth study, he stated.
Under the reinsurance terms, the liability of Rs 152 crore will be spread over four years, with a net liability of Rs 40 crore a year. The recovery from the reinsurance will be effective in excess of Rs 30 crore, subject to a limit of Rs 123 crore, Mr Wadhwa observed.
Mr Wadhwa claimed that Reliance Infocomm has not filed a single claim in the current financial year since it has shifted its focus to prepaid schemes. In fact, he said, Reliance has promised to pay the premium for ART and also make up by giving NIC more group business.
Reliance pays a total premium of around Rs 700 crore to the insurance companies put together, and NIC is aiming to increase its share of this pie, Mr Wadhwa averred. During 2003-04, premium income on Indian business grew by 18 per cent on that for the previous year, against the average growth of three per cent reported by the other three public sector insurers.
For 2003-04, NIC reported a total premium income of Rs 3,400 crore against Rs 2,863 crore the previous year, he informed. This includes renewal premiums as well as new premiums.