Foreign partners in the Indian insurance companies operate in an "extremely uncertain" environment due to snake and ladder like laws governing the sector, the US Trade office said.
While an Insurance Laws (Amendment) Bill is pending with the Standing Committee of Parliament for increasing the foreign investment in insurance joint ventures to 49(%) per cent, an existing regulation requires that after completing 10 years of operation, overseas investment in such companies would have to be brought back to 26(%) per cent.
Several of the insurance joint ventures, including Reliance Life are about to complete 10 years of operations in India. Whereas HDFC Standard Life has already completed a decade of business here.
So, unless this provision is amended, passage of the Insurance Laws (Amendment) Bill allowing foreign equity to 49(%) per cent would be meaningless.
The US Trade Office in its 2011 National Trade Estimate Report on Foreign Trade Barriers talks about this paradox in the Indian insurance laws.
"While the Insurance Regulatory and Development Authority (IRDA) said it plans to publish a clarification of these regulations, foreign investors continue to operate in an extremely doubtful environment," the US said.
India first opened its insurance sector for foreign participation of up to 26(%) per cent in both life and non-life segment in 1999. A bill pertaining to raising FDI ceiling to 49(%) per cent in the sector is pending before Parliament.
The Bill, when enacted, would allow raising the FDI cap for the industry to 49(%) per cent. However, it has been awaiting approval since 2008, as it was delayed by strong opposition from the Left parties during UPA-I government.
"As with other sectors being considered by the government for greater FDI liberalisation, opposition party lawmakers are concerned that passing the Insurance Bill will result in foreign companies' holdings increasing significantly," the report said.
Keen to enter the Indian insurance market, legendary investor Warren Buffett had also said during his recent visit to New Delhi that a foreign investment cap of 26(%) per cent in insurance sector here was a deterrent.
Buffett's Berkshire Hathaway had recently forayed into the Indian non-life insurance sector as a corporate agent of Bajaj Allianz General.
In India, besides, state-owned LIC, 22 private companies offer life insurance policies. While the general insurance sector has 21 players, which include four PSUs.
Showing posts with label HDFC Standard Life. Show all posts
Showing posts with label HDFC Standard Life. Show all posts
Tuesday, April 5, 2011
US disappoint with India's insurance laws
Tuesday, November 16, 2010
Under Irda scanner NAV-guaranteed Products
After life insurance products, the sector’s regulator is now rotating its attention to unit-linked insurance products (Ulips) that guarantee the highest net asset value over its term. Two life insurance companies that have filed for Ulips guaranteeing such NAVs have been questioned by the Insurance Regulatory & Development Authority (Irda).
“The regulator has asked us why they should allow us to sell such a product,’’ admitted a senior executive of a life insurance company. “It is not influenced about the idea of guaranteeing the highest NAV.”
Unlike regular Ulips that calculate payouts on the basis of NAV at the time of maturity, these policies guarantee the highest NAV over the first seven-year term.
NAV is the current market value of a fund’s net assets divided by the number of outstanding shares.
Insurance companies have to maintain additional reserves to offer such guarantees. Most firms set aside 0.5-1(%) per cent of investments as reserves. This extra capital is maintained over and above the solvency requirement prescribed by the insurance regulator.
These new products are also facing problems because of an additional layer of scrutiny. Products now have to go through actuarial, life and finance departments. Earlier, only actuarial and life departments use to approve products.
“New products are facing difficulty in getting clearance, since a new department has been added. If it is an investment-related product, then it goes to the finance department. The actuarial department use to go through the mechanism earlier,” explained G N Agarwal, appointed actuary at Future Generali.
Before the new department was added, a few insurers — including SBI Life Insurance and HDFC Standard Life — launched Ulips guaranteeing the highest NAV. While SBI Life’s product is called Smart Performer, HDFC’s is branded HDFC Standard Life Crest.
Life Insurance Corporation of India collected a record Rs15,000 crore from Wealth Plus, its guaranteed NAV product. The plan offers payment of fund value at the end of the policy term, based on highest NAV over the first seven years of the policy or NAV applicable at the end of the term, whichever is higher, according to LIC’s website.
“The regulator has asked us why they should allow us to sell such a product,’’ admitted a senior executive of a life insurance company. “It is not influenced about the idea of guaranteeing the highest NAV.”
Unlike regular Ulips that calculate payouts on the basis of NAV at the time of maturity, these policies guarantee the highest NAV over the first seven-year term.
NAV is the current market value of a fund’s net assets divided by the number of outstanding shares.
Insurance companies have to maintain additional reserves to offer such guarantees. Most firms set aside 0.5-1(%) per cent of investments as reserves. This extra capital is maintained over and above the solvency requirement prescribed by the insurance regulator.
These new products are also facing problems because of an additional layer of scrutiny. Products now have to go through actuarial, life and finance departments. Earlier, only actuarial and life departments use to approve products.
“New products are facing difficulty in getting clearance, since a new department has been added. If it is an investment-related product, then it goes to the finance department. The actuarial department use to go through the mechanism earlier,” explained G N Agarwal, appointed actuary at Future Generali.
Before the new department was added, a few insurers — including SBI Life Insurance and HDFC Standard Life — launched Ulips guaranteeing the highest NAV. While SBI Life’s product is called Smart Performer, HDFC’s is branded HDFC Standard Life Crest.
Life Insurance Corporation of India collected a record Rs15,000 crore from Wealth Plus, its guaranteed NAV product. The plan offers payment of fund value at the end of the policy term, based on highest NAV over the first seven years of the policy or NAV applicable at the end of the term, whichever is higher, according to LIC’s website.
Saturday, October 30, 2010
HDFC SL hopes to break-even in FY-12
Insurer HDFC Standard Life Insurance Company Ltd expects to break-even in the 2011/12 financial year, helped by an increase in premium income and reduction in operating costs, its chief executive said.
The joint venture between India's top mortgage lender, HDFC, and Britain's Standard Life, had posted a loss of 2.75 billion rupees ($62 million) in the year ended March 2010, lower than 5.03 billion a year ago and is expected to stay in the red this year.
"If the premium continues to see the growth we are seeing and if we are able to manage the costs well, we should be able to break-even next year," Amitabh Chaudhry said in an interview late on Wednesday.
HDFC Standard Life could launch an initial public offering in the second half of 2011 if an insurance bill, which proposes raising the foreign holding in insurance firms to 49 per cent from 26 per cent, is approved by the Indian parliament.
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The joint venture between India's top mortgage lender, HDFC, and Britain's Standard Life, had posted a loss of 2.75 billion rupees ($62 million) in the year ended March 2010, lower than 5.03 billion a year ago and is expected to stay in the red this year.
"If the premium continues to see the growth we are seeing and if we are able to manage the costs well, we should be able to break-even next year," Amitabh Chaudhry said in an interview late on Wednesday.
HDFC Standard Life could launch an initial public offering in the second half of 2011 if an insurance bill, which proposes raising the foreign holding in insurance firms to 49 per cent from 26 per cent, is approved by the Indian parliament.
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Friday, October 29, 2010
Listing daytime still away for insurers
Insurance companies will have to wait for some more time before listing, despite SEBI clearing disclosure rules, as the final guidelines from IRDA have not come and the Insurance Bill has not been passed.
Before insurance companies come out with IPOs, there are a couple of issues that need to be resolved: When will the 26 per cent FDI limit be increased to 49 per cent and two, will FII investments be included in the limit.
“There should be a clear idea on when the Insurance Bill is going to be passed,” said Mr Amitabh Chaudhry, Managing Director and CEO of HDFC Standard Life. “We would like to wait for the Bill before listing. But the final decision will depend on how much time it takes. It will take at least 9 more months for the companies to come out with an IPO.”
There is no clarification on the 25(%) per cent public shareholding clause, he added.
Companies that have evinced interest in listing include Reliance Life, HDFC Standard Life, ICICI Prudential and SBI Life.
Insurers said the SEBI disclosure requirements are on the lines of the recommendation of the SEBI-IRDA committee. The capital markets regulator had said that the SEBI (ICDR) Regulations, 2009, will also apply to insurance companies.
According to the recommendations of the committee, SEBI has asked insurers for additional disclosures, like risk factors specific to insurance companies and broad headings under which an overview of the insurance industry will be disclosed. However, companies were exempted exemption from appointing a monitoring agency.
Another stumbling block is that the IRDA may not relax the listing requirement that insurers have to be 10 years old for IPOs. The rule disqualifies Reliance Life Insurance.
Mr Malay Ghosh, Executive Director and President, Reliance Life Insurance, said: “As and when the guidelines come, and if they (the regulators) allow us, we will come out with an IPO.”
Insurance company officials say that most companies have seen some major changes in operating models in the last month after the new IRDA guidelines. “Investors will expect that some kind of an operating model be in place and will need to look at the emerging trends. But there is no trend currently due to the changes in the guidelines as there have been major changes in the operating model. It will take at least six months for a trend to emerge,” said Mr Chaudhry.
Before insurance companies come out with IPOs, there are a couple of issues that need to be resolved: When will the 26 per cent FDI limit be increased to 49 per cent and two, will FII investments be included in the limit.
“There should be a clear idea on when the Insurance Bill is going to be passed,” said Mr Amitabh Chaudhry, Managing Director and CEO of HDFC Standard Life. “We would like to wait for the Bill before listing. But the final decision will depend on how much time it takes. It will take at least 9 more months for the companies to come out with an IPO.”
There is no clarification on the 25(%) per cent public shareholding clause, he added.
Companies that have evinced interest in listing include Reliance Life, HDFC Standard Life, ICICI Prudential and SBI Life.
Insurers said the SEBI disclosure requirements are on the lines of the recommendation of the SEBI-IRDA committee. The capital markets regulator had said that the SEBI (ICDR) Regulations, 2009, will also apply to insurance companies.
According to the recommendations of the committee, SEBI has asked insurers for additional disclosures, like risk factors specific to insurance companies and broad headings under which an overview of the insurance industry will be disclosed. However, companies were exempted exemption from appointing a monitoring agency.
Another stumbling block is that the IRDA may not relax the listing requirement that insurers have to be 10 years old for IPOs. The rule disqualifies Reliance Life Insurance.
Mr Malay Ghosh, Executive Director and President, Reliance Life Insurance, said: “As and when the guidelines come, and if they (the regulators) allow us, we will come out with an IPO.”
Insurance company officials say that most companies have seen some major changes in operating models in the last month after the new IRDA guidelines. “Investors will expect that some kind of an operating model be in place and will need to look at the emerging trends. But there is no trend currently due to the changes in the guidelines as there have been major changes in the operating model. It will take at least six months for a trend to emerge,” said Mr Chaudhry.
Listing daytime still away for insurers
Insurance companies will have to wait for some more time before listing, despite SEBI clearing disclosure rules, as the final guidelines from IRDA have not come and the Insurance Bill has not been passed.
Before insurance companies come out with IPOs, there are a couple of issues that need to be resolved: When will the 26 per cent FDI limit be increased to 49 per cent and two, will FII investments be included in the limit.
“There should be a clear idea on when the Insurance Bill is going to be passed,” said Mr Amitabh Chaudhry, Managing Director and CEO of HDFC Standard Life. “We would like to wait for the Bill before listing. But the final decision will depend on how much time it takes. It will take at least 9 more months for the companies to come out with an IPO.”
There is no clarification on the 25(%) per cent public shareholding clause, he added.
Companies that have evinced interest in listing include Reliance Life, HDFC Standard Life, ICICI Prudential and SBI Life.
Insurers said the SEBI disclosure requirements are on the lines of the recommendation of the SEBI-IRDA committee. The capital markets regulator had said that the SEBI (ICDR) Regulations, 2009, will also apply to insurance companies.
According to the recommendations of the committee, SEBI has asked insurers for additional disclosures, like risk factors specific to insurance companies and broad headings under which an overview of the insurance industry will be disclosed. However, companies were exempted exemption from appointing a monitoring agency.
Another stumbling block is that the IRDA may not relax the listing requirement that insurers have to be 10 years old for IPOs. The rule disqualifies Reliance Life Insurance.
Mr Malay Ghosh, Executive Director and President, Reliance Life Insurance, said: “As and when the guidelines come, and if they (the regulators) allow us, we will come out with an IPO.”
Insurance company officials say that most companies have seen some major changes in operating models in the last month after the new IRDA guidelines. “Investors will expect that some kind of an operating model be in place and will need to look at the emerging trends. But there is no trend currently due to the changes in the guidelines as there have been major changes in the operating model. It will take at least six months for a trend to emerge,” said Mr Chaudhry.
Before insurance companies come out with IPOs, there are a couple of issues that need to be resolved: When will the 26 per cent FDI limit be increased to 49 per cent and two, will FII investments be included in the limit.
“There should be a clear idea on when the Insurance Bill is going to be passed,” said Mr Amitabh Chaudhry, Managing Director and CEO of HDFC Standard Life. “We would like to wait for the Bill before listing. But the final decision will depend on how much time it takes. It will take at least 9 more months for the companies to come out with an IPO.”
There is no clarification on the 25(%) per cent public shareholding clause, he added.
Companies that have evinced interest in listing include Reliance Life, HDFC Standard Life, ICICI Prudential and SBI Life.
Insurers said the SEBI disclosure requirements are on the lines of the recommendation of the SEBI-IRDA committee. The capital markets regulator had said that the SEBI (ICDR) Regulations, 2009, will also apply to insurance companies.
According to the recommendations of the committee, SEBI has asked insurers for additional disclosures, like risk factors specific to insurance companies and broad headings under which an overview of the insurance industry will be disclosed. However, companies were exempted exemption from appointing a monitoring agency.
Another stumbling block is that the IRDA may not relax the listing requirement that insurers have to be 10 years old for IPOs. The rule disqualifies Reliance Life Insurance.
Mr Malay Ghosh, Executive Director and President, Reliance Life Insurance, said: “As and when the guidelines come, and if they (the regulators) allow us, we will come out with an IPO.”
Insurance company officials say that most companies have seen some major changes in operating models in the last month after the new IRDA guidelines. “Investors will expect that some kind of an operating model be in place and will need to look at the emerging trends. But there is no trend currently due to the changes in the guidelines as there have been major changes in the operating model. It will take at least six months for a trend to emerge,” said Mr Chaudhry.
Tuesday, September 28, 2010
Insurance firms squeeze outsourcing to cut costs
Hemmed in by regulatory changes and a potential squeeze in profitability, insurance companies are now increasingly looking to outsource many of their non-core functions to cut costs and remain competitive. ICICI Prudential, Max New York Life and HDFC Standard Life are among those who have initiated discussions to outsource some of their activities as focus shifts to cost control and consolidation.
Claims administration, analytics, customer care, policy administration, sales and distribution and even product development, are some of the areas that insurance companies are looking to outsource to specialist firms.
This is a departure from the past when insurance companies’ corporate strategies largely revolved around growth in policy sales and premium collection.
Max New York Life has engaged consulting firm McKinsey to carry out a comprehensive cost-benefit analysis across verticals.
“We are looking at ways to reduce costs and one of the options could be to outsource certain areas but we need to see what exactly the impact would be,” a senior official at a Mumbai-based private insurance company, who did not wish to be identified, told Hindustan Times.
Insurance companies are desperately seeking options to cut costs after sector watchdog Insurance Regulatory Development Authority (IRDA) enforced a new set of norms from this month for the controversial Unit Linked Insurance Products (ULIPs).
ULIPs — a hybrid product where a part of the money is invested in equities and the balance is set aside as premium and charges and fees — accounts for more than half of the life insurance firms’ total business.
The new norms have capped surrender charges of policies, slashed agent commissions and seek to make charges more transparent to prevent mis-selling. This will reduce profitability of companies but also help consumers by making their investments more transparent.
Business process outsourcing companies expect a major jump in their insurance related services in India in the coming months.
“We are in healthy discussions with many of the insurance companies in India for providing specialist services across all sub-verticals,” said Keshav R Murugesh, Group CEO of WNS, a leading global business process outsourcing company.
Claims administration, analytics, customer care, policy administration, sales and distribution and even product development, are some of the areas that insurance companies are looking to outsource to specialist firms.
This is a departure from the past when insurance companies’ corporate strategies largely revolved around growth in policy sales and premium collection.
Max New York Life has engaged consulting firm McKinsey to carry out a comprehensive cost-benefit analysis across verticals.
“We are looking at ways to reduce costs and one of the options could be to outsource certain areas but we need to see what exactly the impact would be,” a senior official at a Mumbai-based private insurance company, who did not wish to be identified, told Hindustan Times.
Insurance companies are desperately seeking options to cut costs after sector watchdog Insurance Regulatory Development Authority (IRDA) enforced a new set of norms from this month for the controversial Unit Linked Insurance Products (ULIPs).
ULIPs — a hybrid product where a part of the money is invested in equities and the balance is set aside as premium and charges and fees — accounts for more than half of the life insurance firms’ total business.
The new norms have capped surrender charges of policies, slashed agent commissions and seek to make charges more transparent to prevent mis-selling. This will reduce profitability of companies but also help consumers by making their investments more transparent.
Business process outsourcing companies expect a major jump in their insurance related services in India in the coming months.
“We are in healthy discussions with many of the insurance companies in India for providing specialist services across all sub-verticals,” said Keshav R Murugesh, Group CEO of WNS, a leading global business process outsourcing company.
Saturday, August 14, 2010
Insurance IPOs doubtful till hike in FDI limit
Listing plans of life insurance companies may take longer, with the delay in raising the foreign direct investment (FDI) cap to 49 per cent from the present 26 per cent.
According to a study by HSBC, insurance companies may not go for an initial public offer (IPO) till the FDI limit was raised
“Political winds have changed in recent weeks and the FDI limit increase was not tabled in the monsoon session of Parliament as expected. Indian insurance IPOs are unlikely until the FDI limit is raised, as the foreign partner understandably prefers to raise their stake ‘off market’ first,” the report said.
At present, insurance companies may list only after completing 10 years of operation. HDFC Standard Life will be the first since the sector was opened to complete 10 years, this October, while ICICI Prudential will do so in November. Birla Sun Life will be eligible to tap the public market in January and SBI Life, promoted by the country’s largest bank, can do so by March.
“We do not see the current grey requirement of a 10-year track record as an immovable object… The vast majority of insurers we met seemed keen to do an IPO once regulations permit, owing to a desire to raise capital and/or establish a price discovery mechanism,” the report said.
Foreign partners are interested in increasing their stake from 26 per cent to 49 per cent once the FDI limit is raised. “Then, both the local promoter and the foreign partner would sell down equally in any IPO to meet Sebi’s (the regulator) recently introduced 25 per cent minimum free float,” the report said.
While most insurance companies have agreed to a fair market price at which foreign partners can increase their stake, Allianz has set a price with Bajaj to raise its stake.
Valuations, however, will be subject to negotiation, with each partner appointing an investment bank to hammer out the deal. Most Indian insurers have not disclosed their embedded value (EV) or the valuation of a company in the absence of a standard industry norm. Three insurers — HDFC Standard Life, Max New York Life and Birla Sun Life — have disclosed their EV.
According to a study by HSBC, insurance companies may not go for an initial public offer (IPO) till the FDI limit was raised
“Political winds have changed in recent weeks and the FDI limit increase was not tabled in the monsoon session of Parliament as expected. Indian insurance IPOs are unlikely until the FDI limit is raised, as the foreign partner understandably prefers to raise their stake ‘off market’ first,” the report said.
At present, insurance companies may list only after completing 10 years of operation. HDFC Standard Life will be the first since the sector was opened to complete 10 years, this October, while ICICI Prudential will do so in November. Birla Sun Life will be eligible to tap the public market in January and SBI Life, promoted by the country’s largest bank, can do so by March.
“We do not see the current grey requirement of a 10-year track record as an immovable object… The vast majority of insurers we met seemed keen to do an IPO once regulations permit, owing to a desire to raise capital and/or establish a price discovery mechanism,” the report said.
Foreign partners are interested in increasing their stake from 26 per cent to 49 per cent once the FDI limit is raised. “Then, both the local promoter and the foreign partner would sell down equally in any IPO to meet Sebi’s (the regulator) recently introduced 25 per cent minimum free float,” the report said.
While most insurance companies have agreed to a fair market price at which foreign partners can increase their stake, Allianz has set a price with Bajaj to raise its stake.
Valuations, however, will be subject to negotiation, with each partner appointing an investment bank to hammer out the deal. Most Indian insurers have not disclosed their embedded value (EV) or the valuation of a company in the absence of a standard industry norm. Three insurers — HDFC Standard Life, Max New York Life and Birla Sun Life — have disclosed their EV.
Thursday, July 15, 2010
HDFC Standard Life evaluation at Rs - 3,380 cr
In a primary of its kind, HDFC Standard Life Insurance has put a worth of Rs 3,380 crore on itself as on March 31, 2010. The company has followed marketplace reliable implanted value (MCEV) technique to calculate the valuation.
The embedded value (EV) of a life insurance company is the current value of upcoming profits plus adjusted net asset value. It is constructed from the field of actuarial science which allows insurance companies to be valued.
The valuation comprises Rs 670 crore on account of shareholders’ accustomed net worth and Rs 2,710 crore for the business in strength. Meanwhile, the company is expected to impart Rs 350 crore throughout the current financial, as against Rs 172 crore in last financial. “The idea behind doubling-up our capital infusion is basically two-fold,” said the company’s CFO Vibha Padalkar said.
The bigger capital mixture for the business growth throughout the current financial is on account of the new scheme which is being unveiled following the the sweeping regulatory changes for unit linked insurance plans (Ulips) by Insurance Regulatory & Development Authority (Irda), Padalkar added.
The company is also looking for primary public offering (IPO) in 2012. Assets under management of the company double to Rs 20,770 crore in 2009-10 as against Rs 10,600 crore in 2008-09.
The embedded value (EV) of a life insurance company is the current value of upcoming profits plus adjusted net asset value. It is constructed from the field of actuarial science which allows insurance companies to be valued.
The valuation comprises Rs 670 crore on account of shareholders’ accustomed net worth and Rs 2,710 crore for the business in strength. Meanwhile, the company is expected to impart Rs 350 crore throughout the current financial, as against Rs 172 crore in last financial. “The idea behind doubling-up our capital infusion is basically two-fold,” said the company’s CFO Vibha Padalkar said.
The bigger capital mixture for the business growth throughout the current financial is on account of the new scheme which is being unveiled following the the sweeping regulatory changes for unit linked insurance plans (Ulips) by Insurance Regulatory & Development Authority (Irda), Padalkar added.
The company is also looking for primary public offering (IPO) in 2012. Assets under management of the company double to Rs 20,770 crore in 2009-10 as against Rs 10,600 crore in 2008-09.
Friday, July 9, 2010
Insurance Subsidiary of private banks gets FDI cover up
Other downstream investment by Indian-owned foreign banks to be treated as FDI. Two of India's biggest private sector lenders — ICICI Bank and HDFC Bank — have succeeded, although partially, in their attempt to retain the Indian tag. Investment by these banks and others, where foreign shareholding exceeds 50(%) per cent, in their subsidiaries will be treated as overseas investment with insurance life form the sole exception, they have been told.
At present, there are 5 such lenders in India, including IndusInd Bank, ING Vysya and Yes Bank. These banks were classified as overseas banks when the norms were changed in February 2009. Since then, these lenders, which are confidential sector Indian banking companies, have been begging the department of industrial policy and promotion (DIPP), the finance ministry and the Reserve Bank of India for a review of the norms.
“It has been obviously communicated to the banks that they are overseas-owned Indian banks as they are registered in India but their equity is owned by foreigners for purposes of downstream investment. They are companies owned by foreigners. They have the right to open branches, as they are registered here and they are not like foreign banks. But if they invest in any subsidiary, except in their insurance businesses, then that investment would be treated as FDI (foreign direct investment),” a DIPP official told Business Standard.
DIPP, the nodal agency for FDI policy, is predictable to soon release a detailed clarification on how the downstream investment would be designed, the official said, and requesting anonymity. The issue was firstly raised by ICICI Bank and HDFC Bank, whose ownership had come under the scanner in the backdrop of new norms as foreign stakes in these two banks are 77(%) per cent and 64(%) per cent, correspondingly.
“A problem would happen when the banks intend to put in money into sectors that have particular FDI caps on them because that would be calculated as FDI,” said a Mumbai-based banker who refused to be recognized.
“This (the DIPP move) would impact the supplementary businesses of the banks. They would now be more careful in making any downstream investment, as the new rule would definitely act as a big deterrent. It might also lead to some reorganization of the groups in their shareholding patterns to comply with the norms,” said Punit Shah, leader of financial services (taxation) at KPMG.
An exemption from including insurance subsidiaries would particularly help ICICI Bank-promoted ICICI Prudential Life and ICICI Lombard General Insurance, as overseas investors hold 26(%) per cent each in the two joint ventures. If ICICI Bank’s holding is treated as overseas holding, there would be a breach of the sectoral overseas investment ceiling of 26(%) per cent for insurance.
The fate of HDFC Standard Life and HDFC Ergo are, however, indistinct as the companies are promoted by HDFC, which operates like a holding company with HDFC Bank also as a subsidiary.
In case of other subsidiaries of banks, such as mutual funds and brokerages, the problem of sector caps does not arise as foreign investors can set up wholly-owned Indian ventures.
A banker said the other sector where FDI cap would be breached was pension fund managers. The ICICI group had set up a pension fund management company to manage the New Pension Scheme corpus.
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At present, there are 5 such lenders in India, including IndusInd Bank, ING Vysya and Yes Bank. These banks were classified as overseas banks when the norms were changed in February 2009. Since then, these lenders, which are confidential sector Indian banking companies, have been begging the department of industrial policy and promotion (DIPP), the finance ministry and the Reserve Bank of India for a review of the norms.
“It has been obviously communicated to the banks that they are overseas-owned Indian banks as they are registered in India but their equity is owned by foreigners for purposes of downstream investment. They are companies owned by foreigners. They have the right to open branches, as they are registered here and they are not like foreign banks. But if they invest in any subsidiary, except in their insurance businesses, then that investment would be treated as FDI (foreign direct investment),” a DIPP official told Business Standard.
DIPP, the nodal agency for FDI policy, is predictable to soon release a detailed clarification on how the downstream investment would be designed, the official said, and requesting anonymity. The issue was firstly raised by ICICI Bank and HDFC Bank, whose ownership had come under the scanner in the backdrop of new norms as foreign stakes in these two banks are 77(%) per cent and 64(%) per cent, correspondingly.
“A problem would happen when the banks intend to put in money into sectors that have particular FDI caps on them because that would be calculated as FDI,” said a Mumbai-based banker who refused to be recognized.
“This (the DIPP move) would impact the supplementary businesses of the banks. They would now be more careful in making any downstream investment, as the new rule would definitely act as a big deterrent. It might also lead to some reorganization of the groups in their shareholding patterns to comply with the norms,” said Punit Shah, leader of financial services (taxation) at KPMG.
An exemption from including insurance subsidiaries would particularly help ICICI Bank-promoted ICICI Prudential Life and ICICI Lombard General Insurance, as overseas investors hold 26(%) per cent each in the two joint ventures. If ICICI Bank’s holding is treated as overseas holding, there would be a breach of the sectoral overseas investment ceiling of 26(%) per cent for insurance.
The fate of HDFC Standard Life and HDFC Ergo are, however, indistinct as the companies are promoted by HDFC, which operates like a holding company with HDFC Bank also as a subsidiary.
In case of other subsidiaries of banks, such as mutual funds and brokerages, the problem of sector caps does not arise as foreign investors can set up wholly-owned Indian ventures.
A banker said the other sector where FDI cap would be breached was pension fund managers. The ICICI group had set up a pension fund management company to manage the New Pension Scheme corpus.
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Thursday, June 17, 2010
Life insurers deployed Rs 3,941 cr in FY10
The life insurance industry deployed Rs 3,941 crore into the business in financial year 2009-10. According to data from Life Insurance Council, around 98(%) per cent of the capital was infused by private sector life insurers, while LIC, the behemoth public sector life insurer, saw mixture of Rs 5 crore during the previous financial year.
Reliance Life, HDFC Standard Life, Metlife Insurance, Aviva Life Insurance, Bharti Axa Life Insurance and Future Generali Life Insurance were along with the firms that infused capital in 2009-10.
“We infused close to Rs 231 crore in the previous financial year,” a senior official at Reliance Life said. According to him, the company will instill an equal amount of money in this financial year to uphold solvency requirements.
HDFC Standard Life infused Rs 172 crore to take its paid-up capital base to Rs 1,978 crore.
Companies such as ICICI Prudential Life, Bajaj Allianz Life and Kotak Mahindra Old Mutual Life did not infuse any capital in the previous financial year. “We did not infuse anything in the previous financial year as we were relaxed on solvency and profits were retained too,” said Kamesh Goyal, chief executive of Bajaj Allianz Life. According to him, the company will not infuse any capital in this financial year as well.
While the total capital deployed up to FY10 was Rs 28,929 crore (Rs 24,988 crore up to FY09 and Rs 16,692 crore up to FY08), management operating cost too have fallen considerably. Commission as a percentage of premiums has declined by 30 basis points to 6.71(%) per cent in FY10.
A release from the industry council said renewal premium of the industry grew 13(%) per cent to Rs 151,812 crore. Payouts to policyholders (claim settlements, bonus and money back) increased 42.82(%) per cent to Rs 83,327 crore in FY10 compared with Rs 58,343 crore in the parallel period last year.
“Life insurance companies have sold more than 2.8 crore policies in rural areas in FY09 and FY10. India also has the difference of having the largest number of in-force policies in the world,” said SB Mathur, secretary general of Life Insurance Council.
The total assets held by the industry stood at about Rs 1,290,000 crore as of March 31, 2010.
Reliance Life, HDFC Standard Life, Metlife Insurance, Aviva Life Insurance, Bharti Axa Life Insurance and Future Generali Life Insurance were along with the firms that infused capital in 2009-10.
“We infused close to Rs 231 crore in the previous financial year,” a senior official at Reliance Life said. According to him, the company will instill an equal amount of money in this financial year to uphold solvency requirements.
HDFC Standard Life infused Rs 172 crore to take its paid-up capital base to Rs 1,978 crore.
Companies such as ICICI Prudential Life, Bajaj Allianz Life and Kotak Mahindra Old Mutual Life did not infuse any capital in the previous financial year. “We did not infuse anything in the previous financial year as we were relaxed on solvency and profits were retained too,” said Kamesh Goyal, chief executive of Bajaj Allianz Life. According to him, the company will not infuse any capital in this financial year as well.
While the total capital deployed up to FY10 was Rs 28,929 crore (Rs 24,988 crore up to FY09 and Rs 16,692 crore up to FY08), management operating cost too have fallen considerably. Commission as a percentage of premiums has declined by 30 basis points to 6.71(%) per cent in FY10.
A release from the industry council said renewal premium of the industry grew 13(%) per cent to Rs 151,812 crore. Payouts to policyholders (claim settlements, bonus and money back) increased 42.82(%) per cent to Rs 83,327 crore in FY10 compared with Rs 58,343 crore in the parallel period last year.
“Life insurance companies have sold more than 2.8 crore policies in rural areas in FY09 and FY10. India also has the difference of having the largest number of in-force policies in the world,” said SB Mathur, secretary general of Life Insurance Council.
The total assets held by the industry stood at about Rs 1,290,000 crore as of March 31, 2010.
Friday, June 11, 2010
Insurance take wrath on corporate agents
The Insurance and Regulatory Development Authority (IRDA) has cancelled the licences of 4,261 corporate agents, including Housing Development Finance Corporation, HDFC Bank, Development Credit Bank, Standard Chartered Bank, after them unsuccessful to renovate their licences by March 31 this year.
The regulator has asked the people not to do any business with these entities.
IRDA chairman J. Hari Narayan said the licences would not be changed with presentation effect. There are 7,000 agents in the country selling life and non-life insurance policies.
However, Hari Narayan said the policies bought from these entities would stay valid. The insurer concerned will allocate another agent so that the policies can be converted.
Among the 4,261 agents, a famous entity is HDFC, which was selling policies of its general insurance supplementary HDFC Ergo.
The licence of HDFC Bank, which sold policies of HDFC Ergo and Bajaj Allianz General Insurance Company, has also been withdrawn.
The licences of Corporation Bank and Standard Chartered Bank for selling products of Life Insurance Corporation and Bajaj Allianz Life, respectively, have also been revoked.
Others in the list comprise Bajaj Capital Financial Services (Bajaj Allianz General Insurance and ICICI Prudential Life Insurance), Way2Wealth Consulting (Bajaj Allianz General Insurance and HDFC Standard Life), India Bulls Insurance Advisors (Birla Sun Life), India Infoline and Aditya Birla Money (ICICI Prudential Life Insurance policies).
However, Way2Wealth is planning to apply for an insurance brokering licence.
“In a corporate agency representation, one cannot sell products of more than one life and one non-life insurer. But with a brokering licence, products of different insurers can be sold,” an official said.
The regulator has asked the people not to do any business with these entities.
IRDA chairman J. Hari Narayan said the licences would not be changed with presentation effect. There are 7,000 agents in the country selling life and non-life insurance policies.
However, Hari Narayan said the policies bought from these entities would stay valid. The insurer concerned will allocate another agent so that the policies can be converted.
Among the 4,261 agents, a famous entity is HDFC, which was selling policies of its general insurance supplementary HDFC Ergo.
The licence of HDFC Bank, which sold policies of HDFC Ergo and Bajaj Allianz General Insurance Company, has also been withdrawn.
The licences of Corporation Bank and Standard Chartered Bank for selling products of Life Insurance Corporation and Bajaj Allianz Life, respectively, have also been revoked.
Others in the list comprise Bajaj Capital Financial Services (Bajaj Allianz General Insurance and ICICI Prudential Life Insurance), Way2Wealth Consulting (Bajaj Allianz General Insurance and HDFC Standard Life), India Bulls Insurance Advisors (Birla Sun Life), India Infoline and Aditya Birla Money (ICICI Prudential Life Insurance policies).
However, Way2Wealth is planning to apply for an insurance brokering licence.
“In a corporate agency representation, one cannot sell products of more than one life and one non-life insurer. But with a brokering licence, products of different insurers can be sold,” an official said.
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.
Friday, April 16, 2010
Many Ulips propose life cover of 50 time’s annual premium
While unit-linked insurance policies (Ulips) of life insurance companies have come under disapproval for their focus on investment rather than offering sufficient life cover, insurers point out that a number of ULIP offer very much high humanity benefits that can be as high as 50 times the annual premium or still higher in a few select instances.
The minimum sum assured (life cover) in Ulips is 5 times and most policies offer cover of between 5-10 times the annual premium. The life-cover multiple could also be the term of the policy or otherwise what is called as sum-assured several.
HDFC Standard Life offers up to 40 times life cover on all its Ulips, Aegon Religare Life’s Protect Gain and ICICI Prudential Life Insurance Lifetime Maxima offer up to 50 times humanity cover. Met Life Insurance’s Met Smart Life offers life cover up to 100 times the annual premium. Typically, in an Ulip, the higher the risk cover, the higher the mortality charges are and therefore the lower is the amount invested in equities.
Akshay Gupta, chief marketing officer, Bajaj Allianz Life Insurance, said, if a person buys an Ulip for investment point, they go for a low life cover multiples, which ranges from 5-15 times the annual cover. Those who look for extra humanity cover and at the same time also expect a certain quantity of money at the end of the term, go for high multiple life covers. He added “Unlike the general awareness, such policies are meant for retail customers and these are our bread and butter policies that are popular among our customers”.
Bajaj Allianz generally offers life cover in multiples of the term of the policy. However, some of its policies such as New Family Gain II and Unit Gain offer life cover up to 85 times the annual premium.
KS Gopal Krishnan, chief financial officer and appointed actuary, Aegon Religare, said, high multiple life cover products are made for retail investors, who have liabilities such as home loans, child’s education and marriage.
However, some experts believe Ulips are not the best options for higher life cover up to multiples of 50-60 times.
Rahul Agarwal, CEO, Optima Insurance brokers, said, when there are cheaper options available in terms plans, why would someone go for Ulips to get higher life cover? He added “People invest in Ulips because of the return on equity investments and if one opts for higher life cover, the investment section becomes limited and so do the returns.”
The minimum sum assured (life cover) in Ulips is 5 times and most policies offer cover of between 5-10 times the annual premium. The life-cover multiple could also be the term of the policy or otherwise what is called as sum-assured several.
HDFC Standard Life offers up to 40 times life cover on all its Ulips, Aegon Religare Life’s Protect Gain and ICICI Prudential Life Insurance Lifetime Maxima offer up to 50 times humanity cover. Met Life Insurance’s Met Smart Life offers life cover up to 100 times the annual premium. Typically, in an Ulip, the higher the risk cover, the higher the mortality charges are and therefore the lower is the amount invested in equities.
Akshay Gupta, chief marketing officer, Bajaj Allianz Life Insurance, said, if a person buys an Ulip for investment point, they go for a low life cover multiples, which ranges from 5-15 times the annual cover. Those who look for extra humanity cover and at the same time also expect a certain quantity of money at the end of the term, go for high multiple life covers. He added “Unlike the general awareness, such policies are meant for retail customers and these are our bread and butter policies that are popular among our customers”.
Bajaj Allianz generally offers life cover in multiples of the term of the policy. However, some of its policies such as New Family Gain II and Unit Gain offer life cover up to 85 times the annual premium.
KS Gopal Krishnan, chief financial officer and appointed actuary, Aegon Religare, said, high multiple life cover products are made for retail investors, who have liabilities such as home loans, child’s education and marriage.
However, some experts believe Ulips are not the best options for higher life cover up to multiples of 50-60 times.
Rahul Agarwal, CEO, Optima Insurance brokers, said, when there are cheaper options available in terms plans, why would someone go for Ulips to get higher life cover? He added “People invest in Ulips because of the return on equity investments and if one opts for higher life cover, the investment section becomes limited and so do the returns.”
Wednesday, April 14, 2010
Life insurance companies see latest selling premiums up 15%
Life insurance companies are pulling out all stops in the last combine of months before the close of the financial to cover the over 15% percent degrowth that it had to stand in the first 6 months.
Insurers are betting large on the February and March numbers for latest business premium to gather in an overall industry growth of around 15% percent in the current financial year.
While the first half of the year showed a separate degrowth, mostly among private insurance players, February growth statistics seem to show positive signs on the new business premium collected.
Data from the Insurance Regulatory & Development Authority (Irda) shows that the overall new business premiums grow by 16.5% percent between April and February.
While public-sector behemoth LIC grew by 24% percent, almost all private insurance companies registered good development in new business premium. SBI Life Insurance, Reliance Life Insurance, ICICI Prudential Life Insurance grew their new business premiums by 21.1% percent, 5% percent, 16.09% percent, respectively. HDFC Standard Life grew by 19.45% percent, Bajaj Allianz Life Insurance by 9.5% percent and Tata AIG Life Insurance grow 16.7% percent throughout April-February.
Amitabh Chaudhry, CEO, HDFC Standard Life, told DNA Money, “The economic recession took its toll and constant to have its result on the industry till the first few months of the current financial. Things are revolving around and February and March are the biggest months. A 15% percent growth for the industry can be expected.”
M N Rao, managing director and CEO, SBI Life, said, “We have posted a net profit of Rs 199 crore in the first 9 months and would positively improve it to at least Rs 225 crore. We are also looking at a 25% percent growth in the new business premium for the full year to around Rs 7,000 crore.”
Malay Ghosh, president, Reliance Life, said, “I expect the industry to grow at an average of around 10-12% percent and our increase rate should be around 15% percent for new business premium. We do be expecting a slight balancing of portfolios. For 2009-10, we expect an overall premium growth of 50% percent to around Rs 7,000 crore.”
Interestingly, however, the growth in weighted new received premium (WNRP), or real new business premium weighted for single and group premiums at 10% percent, equal to February 2010, over the previous equivalent period, is around 12.9%.
Alpesh Mehta and Parag Jariwala, analysts with Motilal Oswal, said in a recent report, “In February 2010, industry WNRP grew 4%....in January 2010, WNRP declined 25% month on month. On a year-to-date (YTD) basis, industry WNRP grew 13% due to a strong 25% growth posted by LIC. YTD, private players grew just by 4% (WNRP). Among big private players, only SBI Life reported a strong 35% year-on-year growth in WNRP, whereas for others it has been 10% to (-) 20%.
Insurers are betting large on the February and March numbers for latest business premium to gather in an overall industry growth of around 15% percent in the current financial year.
While the first half of the year showed a separate degrowth, mostly among private insurance players, February growth statistics seem to show positive signs on the new business premium collected.
Data from the Insurance Regulatory & Development Authority (Irda) shows that the overall new business premiums grow by 16.5% percent between April and February.
While public-sector behemoth LIC grew by 24% percent, almost all private insurance companies registered good development in new business premium. SBI Life Insurance, Reliance Life Insurance, ICICI Prudential Life Insurance grew their new business premiums by 21.1% percent, 5% percent, 16.09% percent, respectively. HDFC Standard Life grew by 19.45% percent, Bajaj Allianz Life Insurance by 9.5% percent and Tata AIG Life Insurance grow 16.7% percent throughout April-February.
Amitabh Chaudhry, CEO, HDFC Standard Life, told DNA Money, “The economic recession took its toll and constant to have its result on the industry till the first few months of the current financial. Things are revolving around and February and March are the biggest months. A 15% percent growth for the industry can be expected.”
M N Rao, managing director and CEO, SBI Life, said, “We have posted a net profit of Rs 199 crore in the first 9 months and would positively improve it to at least Rs 225 crore. We are also looking at a 25% percent growth in the new business premium for the full year to around Rs 7,000 crore.”
Malay Ghosh, president, Reliance Life, said, “I expect the industry to grow at an average of around 10-12% percent and our increase rate should be around 15% percent for new business premium. We do be expecting a slight balancing of portfolios. For 2009-10, we expect an overall premium growth of 50% percent to around Rs 7,000 crore.”
Interestingly, however, the growth in weighted new received premium (WNRP), or real new business premium weighted for single and group premiums at 10% percent, equal to February 2010, over the previous equivalent period, is around 12.9%.
Alpesh Mehta and Parag Jariwala, analysts with Motilal Oswal, said in a recent report, “In February 2010, industry WNRP grew 4%....in January 2010, WNRP declined 25% month on month. On a year-to-date (YTD) basis, industry WNRP grew 13% due to a strong 25% growth posted by LIC. YTD, private players grew just by 4% (WNRP). Among big private players, only SBI Life reported a strong 35% year-on-year growth in WNRP, whereas for others it has been 10% to (-) 20%.
Monday, March 22, 2010
Thumbs up: Happy days are now over again
A strong rebound in the domestic economy has ensured that the third seasons of the Indian Premier League (IPL) will nearly dual the sponsorship revenues of each of the eight team-owners compared to last year.
Team sponsorships, which on an average fetched Rs 24 crore for each team owner last year, is set to garner average revenue of Rs 40 crore this year.
Sources, who did not wish to be recognized, said that the Mumbai Indians are set to fetch the highest revenue of Rs 48 crore this year.
IPL organizers and team owners have carved out new slices of revenue, monetizing every prospective source from Internet, movie theatres, mobile phones and even the "strategic time out" sessions.
From merchandise sales to team jerseys and kits, insurance, chewing gum deals and radio and flying partners, team owners have managed to extract revenue from every possible source.
For instance, private life insurance company HDFC Standard Life has announced its second year of association with the Rajasthan Royals. Under the terms of agreement, HDFC Standard Life is the associate sponsor in the third season of the IPL.
It also plans several actions in the coming months with the Royals and some of them include financial planning sessions for young players in the team.
The association also leads to lots of other on-ground initiatives.
The other team owners have worked out parallel sponsorship deals.
The revenue earned from each of these deals will be channelised into the central revenue pool, a proportion of which is given away to the team owners in what is basically a pre-determined formula.
For instance, industry sources said tyre major MRF is dishing out Rs 16 crore for the blimp at match venues while Maxx has inked a Rs 20 crore per annum deal as the strategic time out partner.
Team sponsorships, which on an average fetched Rs 24 crore for each team owner last year, is set to garner average revenue of Rs 40 crore this year.
Sources, who did not wish to be recognized, said that the Mumbai Indians are set to fetch the highest revenue of Rs 48 crore this year.
IPL organizers and team owners have carved out new slices of revenue, monetizing every prospective source from Internet, movie theatres, mobile phones and even the "strategic time out" sessions.
From merchandise sales to team jerseys and kits, insurance, chewing gum deals and radio and flying partners, team owners have managed to extract revenue from every possible source.
For instance, private life insurance company HDFC Standard Life has announced its second year of association with the Rajasthan Royals. Under the terms of agreement, HDFC Standard Life is the associate sponsor in the third season of the IPL.
It also plans several actions in the coming months with the Royals and some of them include financial planning sessions for young players in the team.
The association also leads to lots of other on-ground initiatives.
The other team owners have worked out parallel sponsorship deals.
The revenue earned from each of these deals will be channelised into the central revenue pool, a proportion of which is given away to the team owners in what is basically a pre-determined formula.
For instance, industry sources said tyre major MRF is dishing out Rs 16 crore for the blimp at match venues while Maxx has inked a Rs 20 crore per annum deal as the strategic time out partner.
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