Digit Insurance eyes Rs 600 crore funding in FY20

New-age general insurance company Digit is eyeing raising Rs 600 crore funds through financial investors. In an interaction with Moneycontrol, Kamesh Goyal, Chairman and Founder, Digit Insurance said the funds would purely be used for solvency purposes.

“Capital is purely from a solvency perspective. As we are growing, we need additional capital as our net-worth has been seeing a dip. However, this will be a financial investor and not a strategic investor,” said Goyal. The company has Rs 990 crore capital currently.

The insurer is backed by Prem Watsa’s Fairfax and has so far received total funding of $95 million from Fairfax Holdings.

For the April to September 2019 period, Digit Insurance collected gross direct premium of Rs 994.47 crore, showing a year-on-year (YoY) growth of 263.5 percent. The market share stood at 1.04 percent in H1FY20.

Goyal said that they have issued 1 million policies and settled 100,000 claims. He added that despite them just completing two years of operations, Digit is eyeing a breakeven in FY21. The company will soon start selling health insurance products as well.

“We are already cash-flow positive. We are targeting break-even from an accounting perspective (international accounting standards) by March 2021. The exact time period will depend on the FY20 results and the loss ratio trend,” he added.

General insurers usually take seven to eight years to breakeven. Industry insiders said that Digit is at an advantage because of the asset-light operations and technology-led sales.

With respect to the business, Goyal said 85 percent of the Rs 994 crore premium constitutes of retail business while 15 percent is the corporate business. Next year, he said, the share of corporate business would move to 20-25 percent.

The general industry has seen a slowdown in growth due to a slump in auto sales. Goyal said that this a temporary phenomenon.

“Motor own damage premium has dropped significantly and now 61 percent of the motor business is from the third-party segment. However, I believe this is a cycle and things will improve,” he added.

However, he explained that lack of pricing discipline continues to be a cause of concern in the general insurance industry. He said that it has improved in fire segment and that too only in the 12 occupancies defined by GIC Re.