KKR’s acquisition of a nearly 10% stake in Shriram General Insurance (SGI) will help the insurance company bring new products that are currently not available in India, at cheaper rates as the investment firm has an extensive experience globally in the insurance space, says SGI’s MD & CEO Anil Kumar Aggarwal. In an interview with Mithun Dasgupta, Aggarwal adds that the company is not in the race for market share as its focus is to grow the bottomline. Edited excerpts:
KKR announced the signing of definitive agreements with Shriram General Insurance (SGI) on April 11 to acquire a 9.99% stake in the insurance company. How much time was taken over finalizing the deal?
It took, I would say, almost eight to nine months to complete the due diligence in detail. It was tough for everyone because they (KKR) were going into the minor details of everything like per-person productivity and branch layout, among others. The provisioning part, which is a major space for general insurance companies, actually played a major role. They spent a lot of time interacting with every department and having one-on-one meetings with all the employees.
Enterprise valuation of SGI is estimated at Rs 18,000 crore. How did both the sides arrive at this valuation? When you compare this valuation with the latest deals in India’s general insurance space, what is your comment?
Discussions were going on for the valuation. They (KKR) appointed their advisors and they did their homework very well, and we also did our work. I am very much happy (with the valuation). If you see the condition of the general insurance industry, it is facing tough times with margin compression. We are generating profits consecutively for the last 12 years. I am saying this is a good (enterprise) value and a good deal also.
You have said the company would be looking to benefit from KKR’s global insurance expertise. What are they bringing to the table as an investor?
KKR is a global investor and they have extensive experience in the insurance space. As they have global experience, we will try to understand what we are missing in India. We will try to understand what is happening globally. Whatever is suitable for our environment that we will bring for the Indian population. Insurance penetration in India is very low. I think they will add more value with some common products, which are currently not available in India, at a cheaper rate. KKR will get a board seat on our company’s board of directors.
While the non-life insurance sector’s gross direct premium underwritten grew around 11% year-on-year during the last financial year, for Shriram General Insurance it registered de-growth of around 18% yoy. What are the reasons behind this?
The main reason was the impact of Covid as 95% of our company’s revenue comes from auto sector and sales of automotive vehicles were disrupted during this time. But if you see the business for March, it was the highest in the company’s history. And, currently, we are having very good growth. So, it looks like this year the growth would be more than 30-40%. Our focus area has always been to settle the claims even if they go to the courts and we settle them offline. Last year, we settled approximately 16,000 cases. We are continuously bringing down our outstanding claims as compared to the previous claims.
When is the company expected to enter the health insurance space?
In this current financial year. We will commence the health insurance business organically. But not in a big way. First, we will launch critical illness policies only. As health insurance is a loss-making portfolio, we are waiting for one or two more years. We were not writing any health policies as we were waiting for the right rates.
SGI’s market share in the non-life insurance space stood at 0.79% at the end of the financial year 2021-22. How do you plan to increase the market share in the next two-three years?
First of all, we are not in the race for market share or the topline growth. Shriram group was never in that race. Our focus is to grow our bottomline. If you see our results for the last 13 years, we have been profitable all along. Whatever we should write, that should be a profitable business rather than a loss-making one.