Kotak Life Insurance is estimated to incur a loss of Rs 225 crore to 275 crore in the shareholders account in the first quarter due to rise in COVID-19 claims and increased provisioning.
The life insurer is a wholly-owned subsidiary of Kotak Mahindra Bank. The bank said in a statement to the exchanges that Kotak Life has intimated them that the claims, net of reinsurance, will be significantly higher than expected.
This estimate was given after a board meeting called on this matter on June 16.
In Q4FY21, Kotak Life had a consolidated net profit of Rs 193 crore as against Rs 165 crore in the year-ago period. For the full year, the net profit stood at Rs 692 crore as against Rs 608 crore a year ago.
The solvency ratio for Kotak Life stood at 2.9X as against the regulatory requirement of 1.5. Kotak Life said in its communication to Kotak Bank that the provisioning, going forward, will depend on the trends in mortality.
It added that the life insurer continues to have a strong capital and solvency position.
In Q4FY21, Kotak Life collected total premium of Rs 4,870 crore, which is a year-on-year (YoY) growth of 26 percent. For the full year (FY21), it collected total premium of Rs 11,100 crore, a YoY growth of 7.4 percent.
For the April 1-May 31 period, Kotak Life had collected new premiums of Rs 424.15 crore, showing a YoY growth of 52 percent. The private life insurers' new premiums grew by 33.5 percent in the same period.
Moneycontrol had reported earlier that with the rising cases of COVID-19 in India in FY22, life insurance companies could be required to shore up provisions in the near future.
A sectoral report from Motilal Oswal Financial Services (MOFSL) has said that the surge in COVID-19 infections and fatality rates have raised concerns on the mortality claims the life insurance industry may witness in the coming months.
At present, there is a mismatch between actual deaths and insurance claims. At present, insurance claims (for death) are only 10 per cent of the reported COVID-19 death numbers. COVID-19 claims close to Rs 2,500 crore have been paid out by life insurers as of May 25.
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