Quite rightly named, insurance riders are tag-along policies that ride along with the essential life insurance. Riders are offered by mainly insurance companies, and add a few benefits to your life policy. Riders are planned to simply supplement your basic life insurance policy. Riders are, of course, optional, and just a way to improve benefits beyond those offered by your regular policy.
Note the key points about riders. One, they come with their own premiums in count to the premium you pay on your base life policy. Rider premiums are based on a fixed sum per thousand of the sum assured.
For example, in Reliance Life Insurance New Critical Conditions Rider, a 35-year-old male will have to pay Rs 5.06 per thousand of sum assured for a 10-year rider period.
Two, riders cannot be bought on their own, and have to be close to a regular life policy. However, riders and premiums may have differing periods of insurance and do not have to be the same as the life policy you have selected.
Three, once the benefit of the rider is availed of, they cease to be prepared, and you will not have to pay out the premiums.
For example, considering the afore-mentioned Critical Conditions rider, you can claim repayment for multiple surgeries and even in the same year, but only to the extent of the benefit stated in the rider terms.
Even if the rider is ended, your actual life plan remains unchanged, and will continue as it is.
Riders are available on life insurance policies, ULIPs or else. With child benefit plans, retirement plans, and pension plans, some providers do offer riders where others do not. For example, ICICI Prudential offers riders on its life insurance policies, but not on most of its retirement policies.
While the finer points of riders differ with providers, most primarily offer benefits on accidental deaths, disability (or a combination of the two), critical illnesses and surgeries and waiver of premiums.
Some providers offer all of these, but accidental death and disabilities benefits are consistently offered.
Accidental death rider simply provides additional cover in the case of death only due to an accident. There are a good many circumstances on what exactly
constitutes an accidental death, so be sure to take a careful look. Similarly, disability covers partial and permanent disability.
As far as critical illnesses go, the insurance providers specify those that they will cover. Within the specific illnesses as well, there are further terms and conditions that have to be satisfy, such as stage of the disease and soon.
Major surgeries are also provided for under some riders.
The third common rider is waiving of premium. This is an offshoot of disability, under which, should you be permanently disabled and thus be unable to meet premium payments, this rider will clear you of having to pay the premiums on your actual policy.
Monday, May 31, 2010
Thursday, May 27, 2010
ICICI Prudential pips SBI Life to become biggest private insurer
ICICI Prudential has pipped SBI Life to recover the top location among private insurance players, garnering new business worth Rs 303 crore as 1st year premium in April this year.
ICICI Prudential collected Rs 303 crore as first-year premium in the first month of the present financial, compared to Rs 135 crore in the equivalent month last year, according to monthly data released by IRDA.
On the other hand, SBI Life, promoted by the country's biggest lender, State Bank of India, earned a first-year premium value Rs 185 crore compared to Rs 460 crore a year in the past.
In 2009-10, SBI Life emerged as the largest player. The insurer collected Rs 7,041 crore as first-year premium, while ICICI Prudential managed to wash up an Rs 6,334 crore premium in the last financial.
Overall, in April this year, the life insurance industry registered a increase of 60(%) per cent in new business compared to the corresponding month previous year.
The 23 life insurers communally mopped up a first-year premium of Rs 5,746 crore in April next to Rs 3,601 crore in the same month of the previous year.
The growth is important, as there is turf war between market regulator SEBI and insurance watchdog IRDA over regulation of ULIP products, which account for more than half of the total business of life insurance companies.
The difference between SEBI and IRDA arise when the previous banned 14 life insurers from raising money from market-linked insurance schemes (ULIPs) in April, following which the last asked the companies to ignore the order.
Subsequently, the Finance Ministry intervened and the two regulators decided to equally seek a legally compulsory mandate from the court as to who has jurisdiction over ULIPs.
Till then, position quo ante was restored by the Finance Ministry.
After the agreement, SEBI amended its order and banned only new ULIPs launched after April 9, when the first order of SEBI was issued.
In April this year, the biggest insurer Life Insurance Corporation's first year premium stand at Rs 4,173 crore, compared to Rs 2,113 crore in the matching month last year, translating into a growth of around 100(%) per cent.
The market share of LIC has also increased to above 72(%) per cent throughout the month, compared to around 58(%) per cent in the same period of the previous year.
In the first month of the current financial, the 22 private insurers together could mop up first-year premium of just Rs 1,572 crore, compared to Rs 1,488 crore in the year-ago, time, translating into a increase of over 5(%) per cent.
ICICI Prudential collected Rs 303 crore as first-year premium in the first month of the present financial, compared to Rs 135 crore in the equivalent month last year, according to monthly data released by IRDA.
On the other hand, SBI Life, promoted by the country's biggest lender, State Bank of India, earned a first-year premium value Rs 185 crore compared to Rs 460 crore a year in the past.
In 2009-10, SBI Life emerged as the largest player. The insurer collected Rs 7,041 crore as first-year premium, while ICICI Prudential managed to wash up an Rs 6,334 crore premium in the last financial.
Overall, in April this year, the life insurance industry registered a increase of 60(%) per cent in new business compared to the corresponding month previous year.
The 23 life insurers communally mopped up a first-year premium of Rs 5,746 crore in April next to Rs 3,601 crore in the same month of the previous year.
The growth is important, as there is turf war between market regulator SEBI and insurance watchdog IRDA over regulation of ULIP products, which account for more than half of the total business of life insurance companies.
The difference between SEBI and IRDA arise when the previous banned 14 life insurers from raising money from market-linked insurance schemes (ULIPs) in April, following which the last asked the companies to ignore the order.
Subsequently, the Finance Ministry intervened and the two regulators decided to equally seek a legally compulsory mandate from the court as to who has jurisdiction over ULIPs.
Till then, position quo ante was restored by the Finance Ministry.
After the agreement, SEBI amended its order and banned only new ULIPs launched after April 9, when the first order of SEBI was issued.
In April this year, the biggest insurer Life Insurance Corporation's first year premium stand at Rs 4,173 crore, compared to Rs 2,113 crore in the matching month last year, translating into a growth of around 100(%) per cent.
The market share of LIC has also increased to above 72(%) per cent throughout the month, compared to around 58(%) per cent in the same period of the previous year.
In the first month of the current financial, the 22 private insurers together could mop up first-year premium of just Rs 1,572 crore, compared to Rs 1,488 crore in the year-ago, time, translating into a increase of over 5(%) per cent.
Thursday, May 20, 2010
BoR contract to provide a raise to insurance arms of ICICI
ICICI Bank’s proposed acquisition of Bank of Rajasthan will expand the distribution reach of ICICI Prudential Life Insurance and ICICI Lombard General Insurance — subsidiary of ICICI Bank.
Shares of ICICI Bank fell by 7% per cent on Wednesday, as investors nervous that the bank had overpaid for acquiring Bank of Rajasthan. On Monday, the bank had indicated an exchange ratio which reflected an 89% premium on Bank of Rajasthan’s market price. Bank of Rajasthan’s price rose 20% to Rs 119.
Bank of Rajasthan presently distributes insurance products for Aviva Life Insurance and United India Insurance. Existing guidelines of the Insurance Regulatory and Development Authority (Irda) do not permit a bank to distribute products of more than one life insurance and one general insurance company.
According to industry sources, the loss of Bank of Rajasthan as a sharing partner will not make a significant dent on the sales of Aviva. Unlike the new generation private banks which have a big wealth management team that is active in selling thirdparty products, BoR sales were more in the form of referrals.
This is the second time that Aviva is losing a bancassurance partner, following an M&A activity. Earlier the insurance firm, which had partnered Centurion Bank of Punjab, lost a big chunk of business after the HDFC Bank-CBoP merger. “Bank of Rajasthan’s distribution capabilities are no where close to that of the erstwhile CBoP and it is unlikely that Aviva will be affected,” said an industry official.
For ICICI Bank, however, BoR provides a significant distribution opportunity. The old generation private bank has close to 500 branches and a large number of savings accounts. “Going by what happened in Bank of Madura (another old generation private banks acquired by ICICI Bank), I expect that BoR will be completely included into ICICI Bank’s IT network soon,” said a banker on condition of anonymity.
There is a proposal with Irda to allow banks to distribute products of multiple companies. However, insurance companies say even if there is a relaxation, banks may be allowed to sell policies of 2-3 life companies.
“It is unlikely that banks will be allowed become a virtual broking firm, offering products of all companies as it would be very difficult for employees to understand the features of so many products,” said a banker.
Shares of ICICI Bank fell by 7% per cent on Wednesday, as investors nervous that the bank had overpaid for acquiring Bank of Rajasthan. On Monday, the bank had indicated an exchange ratio which reflected an 89% premium on Bank of Rajasthan’s market price. Bank of Rajasthan’s price rose 20% to Rs 119.
Bank of Rajasthan presently distributes insurance products for Aviva Life Insurance and United India Insurance. Existing guidelines of the Insurance Regulatory and Development Authority (Irda) do not permit a bank to distribute products of more than one life insurance and one general insurance company.
According to industry sources, the loss of Bank of Rajasthan as a sharing partner will not make a significant dent on the sales of Aviva. Unlike the new generation private banks which have a big wealth management team that is active in selling thirdparty products, BoR sales were more in the form of referrals.
This is the second time that Aviva is losing a bancassurance partner, following an M&A activity. Earlier the insurance firm, which had partnered Centurion Bank of Punjab, lost a big chunk of business after the HDFC Bank-CBoP merger. “Bank of Rajasthan’s distribution capabilities are no where close to that of the erstwhile CBoP and it is unlikely that Aviva will be affected,” said an industry official.
For ICICI Bank, however, BoR provides a significant distribution opportunity. The old generation private bank has close to 500 branches and a large number of savings accounts. “Going by what happened in Bank of Madura (another old generation private banks acquired by ICICI Bank), I expect that BoR will be completely included into ICICI Bank’s IT network soon,” said a banker on condition of anonymity.
There is a proposal with Irda to allow banks to distribute products of multiple companies. However, insurance companies say even if there is a relaxation, banks may be allowed to sell policies of 2-3 life companies.
“It is unlikely that banks will be allowed become a virtual broking firm, offering products of all companies as it would be very difficult for employees to understand the features of so many products,” said a banker.
Wednesday, May 19, 2010
Irda tightens norms for recommendation agencies
To regulate non-banking entities acting as referral agents in the life insurance space, the Insurance Regulatory and Development Authority (Irda) has capped the transfer fee paid to this channel.
Irda said as insurers were following several different practices, this was resulting in high cost of gaining, pushing up premiums for policyholders.
“Referrals are increasing the already spiralling costs of insurers. Therefore, in the interest of prevention of further escalation of costs, it is important to simplify the fee structures allowed to these entities,” Irda said.
At present, the whole area of referral arrangements with non-banking entities, including individuals, is not regulated.
“This will also prevent multi-level agencies from entry into selling insurance products that do not follow any code of conduct. This will support transparency in the system,” said an Irda official.
Irda said referral fee should be paid only on successful conversion, with a linkage to sale by the company’s sales person and such fees. Other costs incurred should not exceed the ceilings on commissions. Commission on pure term plans goes up to 35(%) per cent, whereas on unit-linked insurance plans (Ulips), the commission paid is around 7.5(%) per cent and for Ulip life cover it goes as high as 40(%) per cent.
As per the recommendations of the Govardhan Committee, the regulator proposed a minimum networth of Rs 50 lakh for referral agents and a turnover of at least Rs 1 crore for the last three consecutive years. Also, the company should not have total income from its referral business with an insurance company or any other organisation, more than 10(%) per cent of its total income in any year.
Irda said as insurers were following several different practices, this was resulting in high cost of gaining, pushing up premiums for policyholders.
“Referrals are increasing the already spiralling costs of insurers. Therefore, in the interest of prevention of further escalation of costs, it is important to simplify the fee structures allowed to these entities,” Irda said.
At present, the whole area of referral arrangements with non-banking entities, including individuals, is not regulated.
“This will also prevent multi-level agencies from entry into selling insurance products that do not follow any code of conduct. This will support transparency in the system,” said an Irda official.
Irda said referral fee should be paid only on successful conversion, with a linkage to sale by the company’s sales person and such fees. Other costs incurred should not exceed the ceilings on commissions. Commission on pure term plans goes up to 35(%) per cent, whereas on unit-linked insurance plans (Ulips), the commission paid is around 7.5(%) per cent and for Ulip life cover it goes as high as 40(%) per cent.
As per the recommendations of the Govardhan Committee, the regulator proposed a minimum networth of Rs 50 lakh for referral agents and a turnover of at least Rs 1 crore for the last three consecutive years. Also, the company should not have total income from its referral business with an insurance company or any other organisation, more than 10(%) per cent of its total income in any year.
Tuesday, May 18, 2010
ICICI Prudential may trade Tata AIG stake to Tatas
Prudential CEO Tidjane Thiam today indicated that the British company would sell its stake in Tata AIG Life to the Indian corporation. In March, Prudential had acquired AIG's Asia business for $35.5 billion, which included the 26(%) per cent stake in Tata AIG.
Prudential, which has a 26(%) per cent stake in ICICI Prudential Life Insurance, the country’s largest private sector life insurer, is barred from acquiring stake in another life insurance venture. As a result, it has no option but to sell the stake. Thiam said Tata has the first right of refusal on the shares.
A Reuters report said Tata and Prudential were in advanced stages of talks on the price at which the shares would be sold to the Indian conglomerate.
However, Tata AIG spokesperson could not be reached for comment. While announcing a $21 billion rights issue, the insurer said that it would sell assets to “enhance value for shareholders” and meet the requirements of regulators in China, India and Malaysia.
Thiam said, Prudential will sell a 50(%) per cent stake in AIA’s Chinese business, which has a rooted value of $1.2 billion, and a alternative stake in its Malaysian unit.
Over the last two months, the Tata group has offered no comments on the stake achievement in the life insurance venture. Market sources do not rule out the possibility of the Tatas roping in another partner later.
Earlier, a Tata group executive had told Business Standard that a partner may be inducted later.
Most Indian players, which ventured into the insurance arena, had roped in a foreign partner. While Sahara has so far not roped in a foreign partner, Anil Dhirubhai Ambani Group is looking at different options, including roping in an investor in Reliance Life.
The Prudential-AIG deal covered the life venture with the Tatas but the general insurance venture was outside the ambit of the transaction as the US insurer held the stake through a separate investment outfit.
Tata was among the initial set of players to foray into the insurance sector after the business was opened up to private companies in 2000. Two days after AIG announced its decision to sell the Asian life insurance venture, AIG India executives held detailed discussions with Insurance Regulatory and Development Authority officials.
Prudential, which has a 26(%) per cent stake in ICICI Prudential Life Insurance, the country’s largest private sector life insurer, is barred from acquiring stake in another life insurance venture. As a result, it has no option but to sell the stake. Thiam said Tata has the first right of refusal on the shares.
A Reuters report said Tata and Prudential were in advanced stages of talks on the price at which the shares would be sold to the Indian conglomerate.
However, Tata AIG spokesperson could not be reached for comment. While announcing a $21 billion rights issue, the insurer said that it would sell assets to “enhance value for shareholders” and meet the requirements of regulators in China, India and Malaysia.
Thiam said, Prudential will sell a 50(%) per cent stake in AIA’s Chinese business, which has a rooted value of $1.2 billion, and a alternative stake in its Malaysian unit.
Over the last two months, the Tata group has offered no comments on the stake achievement in the life insurance venture. Market sources do not rule out the possibility of the Tatas roping in another partner later.
Earlier, a Tata group executive had told Business Standard that a partner may be inducted later.
Most Indian players, which ventured into the insurance arena, had roped in a foreign partner. While Sahara has so far not roped in a foreign partner, Anil Dhirubhai Ambani Group is looking at different options, including roping in an investor in Reliance Life.
The Prudential-AIG deal covered the life venture with the Tatas but the general insurance venture was outside the ambit of the transaction as the US insurer held the stake through a separate investment outfit.
Tata was among the initial set of players to foray into the insurance sector after the business was opened up to private companies in 2000. Two days after AIG announced its decision to sell the Asian life insurance venture, AIG India executives held detailed discussions with Insurance Regulatory and Development Authority officials.
Friday, May 14, 2010
Bajaj Allianz Life net up at Rs 427 crore
Bajaj Allianz Life Insurance nowadays reported a profit of Rs 427 crore in FY 10 as compared to Rs 41 crore in the previous year.
However, in the non-life division the company posted a lesser profit of Rs 121 crore during FY 10 as against Rs 150 crore in FY 09.
"As far as profits, cost control, product-mix, fund performance, bottomline and renewals are concerned; FY 10 was a good year. However, for new business it could have been improved, especially in the first-half of the year," Allianz Country Manager and Allianz CEO and Bajaj Allianz Life Insurance CEO, Kamesh Goyal, told PTI here.
He said The insurance company sold 22 lakh new policies in FY 10 in the life segment and is eyeing a 30(%) per cent increase in traditional policies from the 18-20(%) per cent of the previous fiscal "as the instability in the equity market is not liked by several investors,".
Goyal said. "After the sudden dip in the stock markets in 2008-09, some people prefer the constancy of the traditional market,"
The share of ULIPs is likely to be around 70(%) per cent this fiscal as compared to over 80(%) per cent in the previous year, he said, adding this modify, however, has nothing to do with the row between the regulators-Sebi and IRDA-over jurisdiction over them.
He said. There has been no capital infusion into its life insurance company in the last two-years and there would be no need for it this year as well.
For More Information about insurance click here Life Insurance
However, in the non-life division the company posted a lesser profit of Rs 121 crore during FY 10 as against Rs 150 crore in FY 09.
"As far as profits, cost control, product-mix, fund performance, bottomline and renewals are concerned; FY 10 was a good year. However, for new business it could have been improved, especially in the first-half of the year," Allianz Country Manager and Allianz CEO and Bajaj Allianz Life Insurance CEO, Kamesh Goyal, told PTI here.
He said The insurance company sold 22 lakh new policies in FY 10 in the life segment and is eyeing a 30(%) per cent increase in traditional policies from the 18-20(%) per cent of the previous fiscal "as the instability in the equity market is not liked by several investors,".
Goyal said. "After the sudden dip in the stock markets in 2008-09, some people prefer the constancy of the traditional market,"
The share of ULIPs is likely to be around 70(%) per cent this fiscal as compared to over 80(%) per cent in the previous year, he said, adding this modify, however, has nothing to do with the row between the regulators-Sebi and IRDA-over jurisdiction over them.
He said. There has been no capital infusion into its life insurance company in the last two-years and there would be no need for it this year as well.
For More Information about insurance click here Life Insurance
Tuesday, May 11, 2010
Bajaj Allianz ties up with Dena Bank for product sharing
Private sector insurer Bajaj Allianz Life Insurance these days signed an agreement with public sector lender Dena Bank for the sharing of an insurance product.
A joint statement said. As per the agreement Dena Bank will allocate Bajaj Allianz Life Insurance's group life insurance product 'Sarva Shakti Suraksha' through the branches.
Dena Bank General Manager M K Sharma said this tie up will allow the bank to offer a low cost financial product, suitable to a large segment of the population which can't afford insurance.
He said. It is a part of the measures being taken by the bank towards the process of financial inclusion.
A joint statement said. As per the agreement Dena Bank will allocate Bajaj Allianz Life Insurance's group life insurance product 'Sarva Shakti Suraksha' through the branches.
Dena Bank General Manager M K Sharma said this tie up will allow the bank to offer a low cost financial product, suitable to a large segment of the population which can't afford insurance.
He said. It is a part of the measures being taken by the bank towards the process of financial inclusion.
Monday, May 10, 2010
Bajaj Allianz posts maximum profit between pvt life cos
Bajaj Allianz Life Insurance has reported a net profit of Rs 427 crore in 2009-10 beside a net profit of Rs 70 crore in the corresponding period last year. For the same period, Bajaj Allianz General — the non-life support of the group — has reported a net profit of Rs 121 crore against Rs 95 crore in 2008-09.
Total profits of a life insurance company has two segments — profits on the policyholder’s account and profits on the shareholder’s account. Policyholder profits reproduce largely the performance of the life insurance business.
The company’s profit is the highest in private life insurance industry. Among the top 5, ICICI Prudential reported a profit of Rs 258 crore for the first time, which SBI Life had reported a profit of Rs 276 crore. Most of the private life insurance companies carry on being in the red. However, Kotak Mahindra Life had reported a net last year and is estimated to have a higher surplus this year as well.
On the shareholder’s account, Bajaj Allianz has posted a profit of Rs 542 crore against a loss of Rs 70 crore last year. This profit includes a transfer of Rs 125 crore from funds for future appropriation, a large part of which is a result of appropriation of reserves set aside for lapsed unit-linked policies, which are now doubtful to be revived. In addition to this, profits have been bolstered by one-time service tax gain of Rs 156 crore. Without these two exceptional items, the net profit would have been below Rs 300 crore.
Bajaj Allianz Life’s managed to record a 7% growth in its Gross Written Premium (GWP), which touched Rs 11,420 crore, thanks to renewals. New business premium marginally declined to Rs 4,451 crore from Rs 4,491 crore in the previous year. Speaking to ET, CEO Kamesh Goyal said the company continues to be the most capital efficient and did not require any capital mixture for the last two years. Even without capital infusion, Bajaj Allianz Life had a solvency margin of 268% of the statutory requirement.
Both Bajaj Allianz Life and Bajaj Allianz General are subsidiaries of Bajaj FinServ — the companies carved out of Bajaj Auto’s financial service business a few years ago. Until last year, the insurance businesses contributed up to two-thirds of FinServ’s profits.
In non-life, Bajaj has taken a conscious decision to slow down and degrow its business because of the competition. The company managed to grow its profits because of a reduction in expenses, however, underwriting margins worsened by a few percentage points. The non-life company was recently rated ‘iAAA’, which reflects highest claims paying ability from Icra.
Total profits of a life insurance company has two segments — profits on the policyholder’s account and profits on the shareholder’s account. Policyholder profits reproduce largely the performance of the life insurance business.
The company’s profit is the highest in private life insurance industry. Among the top 5, ICICI Prudential reported a profit of Rs 258 crore for the first time, which SBI Life had reported a profit of Rs 276 crore. Most of the private life insurance companies carry on being in the red. However, Kotak Mahindra Life had reported a net last year and is estimated to have a higher surplus this year as well.
On the shareholder’s account, Bajaj Allianz has posted a profit of Rs 542 crore against a loss of Rs 70 crore last year. This profit includes a transfer of Rs 125 crore from funds for future appropriation, a large part of which is a result of appropriation of reserves set aside for lapsed unit-linked policies, which are now doubtful to be revived. In addition to this, profits have been bolstered by one-time service tax gain of Rs 156 crore. Without these two exceptional items, the net profit would have been below Rs 300 crore.
Bajaj Allianz Life’s managed to record a 7% growth in its Gross Written Premium (GWP), which touched Rs 11,420 crore, thanks to renewals. New business premium marginally declined to Rs 4,451 crore from Rs 4,491 crore in the previous year. Speaking to ET, CEO Kamesh Goyal said the company continues to be the most capital efficient and did not require any capital mixture for the last two years. Even without capital infusion, Bajaj Allianz Life had a solvency margin of 268% of the statutory requirement.
Both Bajaj Allianz Life and Bajaj Allianz General are subsidiaries of Bajaj FinServ — the companies carved out of Bajaj Auto’s financial service business a few years ago. Until last year, the insurance businesses contributed up to two-thirds of FinServ’s profits.
In non-life, Bajaj has taken a conscious decision to slow down and degrow its business because of the competition. The company managed to grow its profits because of a reduction in expenses, however, underwriting margins worsened by a few percentage points. The non-life company was recently rated ‘iAAA’, which reflects highest claims paying ability from Icra.
Saturday, May 8, 2010
Insurance business grows 18% in FY10 led by 31% increase of LIC
After two months of muted growth, the industry's March 2010 WNRP grow 1.5 xs M-o-M to Rs126.4b helped by a strong 1.8x M-o-M increase to Rs69.2 billion for LIC. For private players, March 2010 WNRP grew 1.2x to Rs 57.20 billion M-o-M. On an encouraging base, on a Y-o-Y basis WNRP grew by 42% Y-o-Y to Rs 126.40 billion. LIC reported WNRPgrowth of 55% and private players reported WNRP growth of 28% Y-o-Y. For FY10, the industry WNRP grew 18% Y-o-Y to Rs 578 billion led by 31% Y-o-Y growth of LIC to Rs 283 billion.
Strong growth by big private companies: In March 2010, private players reported strong WNRP growth on a Y-o-Y and M-o-M basis led by strong growth by large players like ICICI Prudential Life Insurance (up 72% Y-o-Y and 97% M-o-M), SBI Life Insurance (up 36% Y-o-Y and 1.8x M-o-M), Reliance Life Insurance (up 68% Y-o-Y and 1.6x M-o-M) and HDFC Standard Life (up 18% Y-o-Y and 33% M-o-M). For FY`10 WNRP for SBI Life Insurance grew significantly (37%) against private playersgrowth of 8%. Reliance Life Insurance grew in line with private players. HDFC Standard Life grew slightly higher than private players. Other large private players` growth was flat to negative at 20%.
Private players FY`10 market share declines to 51% against 56% in FY09: Due to strong growth by LIC, private player’s market share declined to 51% from 56% a year earlier. In FY10, ICICI Prudential Life Insurance`s market share declined to 17.7% (19.3%), Bajaj Allianz`s market share declined to 11.1% (13.9%) and Birla Sunlife Insurance share declined to 7.8% (9%). SBI Life Insurance increased its share to 14.4% (11.3%). Reliance Life Insurance and HDFC Standard Life improved their market shares marginally to 10.9% (10.8%) and 8.7% (8.5%) respectively.
Strong growth by big private companies: In March 2010, private players reported strong WNRP growth on a Y-o-Y and M-o-M basis led by strong growth by large players like ICICI Prudential Life Insurance (up 72% Y-o-Y and 97% M-o-M), SBI Life Insurance (up 36% Y-o-Y and 1.8x M-o-M), Reliance Life Insurance (up 68% Y-o-Y and 1.6x M-o-M) and HDFC Standard Life (up 18% Y-o-Y and 33% M-o-M). For FY`10 WNRP for SBI Life Insurance grew significantly (37%) against private playersgrowth of 8%. Reliance Life Insurance grew in line with private players. HDFC Standard Life grew slightly higher than private players. Other large private players` growth was flat to negative at 20%.
Private players FY`10 market share declines to 51% against 56% in FY09: Due to strong growth by LIC, private player’s market share declined to 51% from 56% a year earlier. In FY10, ICICI Prudential Life Insurance`s market share declined to 17.7% (19.3%), Bajaj Allianz`s market share declined to 11.1% (13.9%) and Birla Sunlife Insurance share declined to 7.8% (9%). SBI Life Insurance increased its share to 14.4% (11.3%). Reliance Life Insurance and HDFC Standard Life improved their market shares marginally to 10.9% (10.8%) and 8.7% (8.5%) respectively.
Thursday, May 6, 2010
Bajaj FinServ investors can gain from new pricing norms
Bajaj FinServ has held out hopes of a windfall for shareholders if revised RBI strategy require German insurer Allianz to pay market price for increasing its stake in Bajaj Allianz Life Insurance. Bajaj FinServ has said it will honour all obtainable commitments and be fair to its partners but would struggle to get a better deal for its shareholders.
Later on Tuesday, RBI came out with revised pricing guidelines for transfer of shares to foreign investors. Under the norms, shares of unlisted companies can be transferred at a price not less than the fair value to be determined by a Sebi-registered category — merchant banker or chartered accountant as per the discounted free cash flow method.
He added. A report put out by JM Financial said the revised guidelines could have a positive impact of around Rs 480 per share on Bajaj FinServ. The company’s share price, which had last closed at Rs 339, attempt to a high of Rs 407.15 before falling back at Rs 399.15. “I have not seen the regulations yet in detail. These keep growing and we do not know when the 49% FDI in insurance policy will happen and what the regulations will be at that time,” said Bajaj FinServ MD Sanjiv Bajaj. “When it happens, we will approach the concerned regulators as appropriate,”
When asked whether he would strive to get a better deal for Bajaj FinServ shareholders in terms of the company’s stake in Bajaj Allianz Life, Mr Bajaj said: “My job is to always try and get a better deal for shareholders while honouring all existing commitments and being fair to our partners.”
It is not clear whether JM Financial’s interpretation is correct. The RBI circular seeks to amend existing guidelines that are not applicable to financial service companies. It’s not clear whether revised guidelines apply to finance companies. Moreover, the advantage for Bajaj FinServ will come into play only after the bill, raising foreign investment limit to 49%, is passed.
But this upside is much more significant than the growth potential in other businesses. Bajaj FinServ has ambitious plans for financial services, which includes wealth management and lending. It will also get into the mutual fund business through another tie-up with Allianz and will later this year decide on whether it will get into home loans. But these are all new initiatives unlike the insurance ventures which are mature profit-making businesses and command multi-billion dollar valuations.
According to JM, of the Rs 390 share price, Rs 259 comes from Bajaj Allianz Life and Rs 57 from Bajaj Allianz General Insurance. This valuation assumes that Bajaj has only a 26% economic interest in the life business and 50% in the general business. The report adds that the revised guidelines would put the value of the life business at Rs 737 per share for the Indian parent if Bajaj FinServ had a 74% economic value.
Nine years ago when Bajaj Auto entered into two joint ventures with Allianz, the bike maker gave the German insurer an option to hike its stake up to 76% in the life company and 50% in the non-life venture. The deal took place at a time when capital was in short supply and insurance companies did not enjoy fancy valuations. In return for the option, Bajaj hardly made any monetary investment into the insurance business with Allianz bringing in most of the Rs 1,000 crore invested in the life company.
Citing the agreement, the JM report said Allianz has the call option to increase its stake in the life insurance joint venture from 26% to 74% at a pre-determined price if allowed under applicable laws and subject to regulatory approvals. If the option is exercised by July 30, 2016, the pre-determined price would be Rs 5.42 per share plus interest at 16% per annum, compounded annually from July 31, 2001, to the date of payment. After 2016, Allianz would have to pay the market price.
Later on Tuesday, RBI came out with revised pricing guidelines for transfer of shares to foreign investors. Under the norms, shares of unlisted companies can be transferred at a price not less than the fair value to be determined by a Sebi-registered category — merchant banker or chartered accountant as per the discounted free cash flow method.
He added. A report put out by JM Financial said the revised guidelines could have a positive impact of around Rs 480 per share on Bajaj FinServ. The company’s share price, which had last closed at Rs 339, attempt to a high of Rs 407.15 before falling back at Rs 399.15. “I have not seen the regulations yet in detail. These keep growing and we do not know when the 49% FDI in insurance policy will happen and what the regulations will be at that time,” said Bajaj FinServ MD Sanjiv Bajaj. “When it happens, we will approach the concerned regulators as appropriate,”
When asked whether he would strive to get a better deal for Bajaj FinServ shareholders in terms of the company’s stake in Bajaj Allianz Life, Mr Bajaj said: “My job is to always try and get a better deal for shareholders while honouring all existing commitments and being fair to our partners.”
It is not clear whether JM Financial’s interpretation is correct. The RBI circular seeks to amend existing guidelines that are not applicable to financial service companies. It’s not clear whether revised guidelines apply to finance companies. Moreover, the advantage for Bajaj FinServ will come into play only after the bill, raising foreign investment limit to 49%, is passed.
But this upside is much more significant than the growth potential in other businesses. Bajaj FinServ has ambitious plans for financial services, which includes wealth management and lending. It will also get into the mutual fund business through another tie-up with Allianz and will later this year decide on whether it will get into home loans. But these are all new initiatives unlike the insurance ventures which are mature profit-making businesses and command multi-billion dollar valuations.
According to JM, of the Rs 390 share price, Rs 259 comes from Bajaj Allianz Life and Rs 57 from Bajaj Allianz General Insurance. This valuation assumes that Bajaj has only a 26% economic interest in the life business and 50% in the general business. The report adds that the revised guidelines would put the value of the life business at Rs 737 per share for the Indian parent if Bajaj FinServ had a 74% economic value.
Nine years ago when Bajaj Auto entered into two joint ventures with Allianz, the bike maker gave the German insurer an option to hike its stake up to 76% in the life company and 50% in the non-life venture. The deal took place at a time when capital was in short supply and insurance companies did not enjoy fancy valuations. In return for the option, Bajaj hardly made any monetary investment into the insurance business with Allianz bringing in most of the Rs 1,000 crore invested in the life company.
Citing the agreement, the JM report said Allianz has the call option to increase its stake in the life insurance joint venture from 26% to 74% at a pre-determined price if allowed under applicable laws and subject to regulatory approvals. If the option is exercised by July 30, 2016, the pre-determined price would be Rs 5.42 per share plus interest at 16% per annum, compounded annually from July 31, 2001, to the date of payment. After 2016, Allianz would have to pay the market price.
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