Reliance Life closes 26% stake sale to Nippon

Anil Ambani-led Reliance Capital on Sunday announced completion of the transaction for sale of 26% stake in Reliance Life Insurance to Japan-based Nippon Life Insurance.

The entire transaction proceeds of Rs 3,062 crore ($680 million) from Nippon Life Insurance have duly

been received, a company statement said. The transaction pegs the total valuation of Reliance Life Insurance at approximately Rs 11,500 crore ($2.6 billion).

Reliance Capital had signed a definitive agreement in March this year with Nippon Life Insurance to sell the 26% stake in Reliance Life Insurance, subject to regulatory approvals, which have since been received.

Nippon Life is the world's seventh largest life insurer and the largest private life insurer in Asia and Japan.

In July, public sector Punjab National Bank (PNB) Okayed a proposal to partner Metlife India for its proposed life insurance business. Last year, PNB had invited expressions of interest (EoI) from Indian and foreign insurance firms to set up a strategic partnership with second largest public sector lender.

Analysts tracking the sector told HT that the many Indian promoters are in discussions to induct a third partner in the existing joint venture companies. Existing laws limit foreign direct investment (FDI) in the insurance sector to 26%.

Reliance Life Insurance Company Limited, a part of Reliance Capital, has an aggregate business premium of Rs 6,600 crore ($1.46 billion) as on March 31, 2011. Nippon Life Insurance posted revenues of Rs 3,49,834 crore ($80 billion) and a profit of Rs 12,199 crore ($3 billion) for the fiscal year ended March 31, 2011

"Nippon's vast experience of over 122 years will help strengthen Reliance Life Insurance's position as a leading and world class insurance company in India," Sam Ghosh, CEO, Reliance Capital said.

"We are very happy to complete the transaction," said Yoshinobu Tsutsui, president, Nippon Life Insurance.

Banks in talks with Reliance Life for picking up stake

After securing the largest-sized foreign direct investment in the Indian insurance sector, with Nippon Life taking 26 per cent stake in it, Reliance Life Insurance, part of reliance Capital, the financial service arm of the Anil Dhirubhai Ambani Group, is open to dilute a “small” stake to banks.

“Some banks have expressed interest for taking some equity in our company. We are open to it,” Sam Ghosh CEO Reliance Capital told Business Standard. He said both parties are in agreement for such small stake sales with banks. And, the bank, in turn, would also work as a bancassurance partner of the insurance company.

He clarified that in the event of a stake sale, it will be the promoters', that is Reliance Capital’s shareholding that will come down. “Whatever might be the extent of the dilution, say three to five per cent, it will be done by the promoters. Nippon Life’s holding will remain at 26 per cent,” Ghosh added.

In May, the bancassurance committee report recommended that banks be allowed to tie up with sets of two insurance companies, life and non-life, for selling insurance policies. Following this, Punjab National Bank said it was taking a 30 per cent stake in MetLife India. Syndicate Bank is also looking to pick up equity stakes in existing insurance companies and invited bids.

Earlier in the day, the Union finance ministry said domestic insurance company holders could bring down their stake to 26 per cent over 10 years, which effectively paves the way for the Reliance Life-Nippon Life deal. Their deal was signed in March, for a 26 per cent stake to the latter for Rs 3,062 crore. However, clearance was getting delayed as the company was yet to complete 10 years of operation. According to the Insurance Act, a company has to complete 10 years before divesting any stake and Reliance Life will be completing 10 years only in January 2012.

“The circular (of today) clarifies the situation. Now we are waiting for approvals from the Insurance Regulatory and Development Authority and the Reserve Bank of India,” said Ghosh. He added that of the Rs 3,062 crore, about Rs 300 crore will be invested in the life insurance company and the remaining part in the parent company, Reliance Capital. “The life insurance business continues to remain robust and we expect to report higher profits in the current financial year,” he said.

Reliance Life plans to build up traditional products

Reliance Life Insurance Company, a part of Reliance Capital is looking to enhance its offering for protection-oriented plans, as it plans to launch couple of riders that will give the insured added protection at nominal cost. The company has filed two new riders ‘family income benefit’ and ‘waiver of premium’, for which regulatory approvals are awaited.

The firm is also looking to launch competitive online term insurance plan.

“The regulator has already reiterated its focus on protection by increasing the minimum life cover for Ulip policies. We are taking that further by offering opportunities to increase protection beyond the basic life cover,” said Malay Ghosh, CEO, Reliance Life Insurance during a media interaction.

Reliance Life is further considering the launch of fixed benefit simplified health insurance plan for individuals.

The company has, over the last couple of fiscal years, seen significant reduction in its operating losses and is set for turnaround in current fiscal as it aims at profit of over Rs300 crore. The company, which had reported loss of Rs129 crore in FY11, has been making operating profits every month since the last three quarters.

The firm is targeting regular premium of Rs5,000 crore and new business premium (NBP) of Rs3,500 crore in the current fiscal, with half of it likely to come from traditional plans.

The largest private insurance firm (by number of policies) is open to bancassurance strategy, which would help it to significantly increase its topline.

“Reliance Life has been approached by several banks for tie-up with equity partnership and we are keenly exploring innovative partnership models,” said Ghosh.

The company, which has been in the forefront in reaching out to rural mass market, is also launching rural career agent programme, under which it would induct 6,000 agents during the year. It would also recruit 4,000 sales managers during the fiscal, taking the total sales manager’s strength to 12,000.

The company has seen 31% growth in its assets under management (AUM) during fiscal 2011 to `17,855 crore and islooking at doubling it in the next three years.

Reliance Life eyes over Rs 300 cr profit in FY12

Private sector life insurer Reliance Life Insurance has said it will turn profitable in the current financial year and is eyeing an over Rs 300-crore profit in 2011-12.

Speaking about the financial health of the company, Reliance Life said the profitability and capital efficiency of the company has improved a lot in the last 24 months.

“In 2009-10, the loss was reduced by 80 per cent over the previous year. In the last financial year, the loss was brought down even further by 55 per cent. As a result, there has been no capital infusion since August 2010,” Reliance Life Insurance Executive Director and President Malay Ghosh said.

The company has also drawn plans to revisit its business strategy this fiscal by focusing on product mix, new distribution model and increased rural penetration.

On new product strategy, Ghosh said, “The strategy will focus more on protection than investment and the company has filed two new riders that gives customers the option of increasing protection at a nominal cost”.

The company is awaiting regulatory approvals for the same, he said.

Reliance Life is introducing a ‘family income benefit’ rider, which will give a family over 12 per cent of the sum assured annually. This will be for the next 10 years or balance policy term, whichever is longer, in case of death of the life assured.

This will be in addition to the life cover under the base policy.

The company also plans to launch another rider which will ensure that in case of unfortunate loss of life of the insured, apart from the life cover under the basic plan, the family will also continue to get full survival and maturity benefits of the policy.

“This option is normally attached to Best child plan. However, we are keen to make it available for all plans,” Ghosh noted.

Reliance Life had launched its first reimbursement health policy last year. The company plans to launch another simplified policy with a fixed benefit this year.

It is also looking at launching an improved competitive credit shield product that can be bundled with loans of any type on a voluntary basis by the customer to cover the loan outstanding in case anything happens to the loanee.

“A number of times, the family are left with the burden of such financial liabilities if the main earning member dies. This product offers protection against such situations at a relatively lower cost.

The product will cover all types of loans, including mortgage loan, personal loan and educational loan,” he said.

Reliance Life, banks currently pay brokers as low as 5 bps

In an unprecedented move that could spark yet another round of rate cuts in the domestic institutional equity broking business, Reliance Life Insurance has started paying lower brokerages for its equity transactions. According to two people familiar with the matter, broking rates have been halved from 10 basis points (bps) to 5 bps of the transaction amount. Additionally, treasury departments of some banks have cut broking rates from about 15 bps to 10 bps or lower, in the last few months, said market observers.

Reliance ADA Group firm Reliance Life Insurance is the third-largest private insurer with assets under management (AUM) of over R15, 000 crore.

“We are at the mercy of decisions taken by the buyer,” said the institutional head of a broking firm empanelled with Reliance Life. Another institutional head from a different broking firm empanelled with the insurer, however, denied that his firm’s broking rates had been changed. But said it was possible rates could have been slashed for brokers not providing research support.

“Reliance Life pays 8 bps for normal trades and 5 bps for basket trades,” said another institutional broker.

All three people spoke on condition of anonymity.

About 45 brokers are currently empanelled with the insurer, said the first person quoted above. It could not be independently ascertained how many of these empanelled brokers were at the receiving end of rate cuts.

An email sent to the Reliance Group went unanswered. A senior official from a PSU bank admitted that bank treasuries had been cutting broking commissions in the past few months. “It happens in a competitive scenario. It depends on the volumes; if a bank is in a position to demand a cut in broking commissions, they will,” he said, requesting anonymity.

In the past one year, institutional broking rates have come down from 20-25 bps to 10-15 bps, said market observers. Last year in June, insurance behemoth LIC cut broking rates to 10 bps (excluding service tax). “Ten basis points has become the standard now for most domestic institutions,” said the institutional vice-president of a mid-sized broking firm, on condition of anonymity.

The fall in broking commissions is pinching brokers harder this time unlike in the period between 2003 and 2008 when the decline in broking rates were more than adequately compensated by rising turnover, say market observers. Cash volumes on exchanges have now plummeted to historic lows.

The past year saw the entry of several retail brokers into the institutional space fuelling competition. Furthermore, institutions are increasingly taking the direct market access (DMA) route for executing trades, putting pressure on commissions. Declining institutional inflows have also impacted institutional broking revenues for domestic brokerages. Domestic institutional inflows into equities in the past year have declined considerably as the mutual fund industry has faced redemption pressure and equity-linked premium collections of life insurers have plummeted following Irda’s regulatory changes.

Net inflows into equities from insurance firms declined from $7.003 billion in 2009 to $1.114 billion in 2010, while mutual fund outflows increased from $1.175 billion to $6.027 billion in the same period, according to Morgan Stanley. Domestic brokerages rely mainly on domestic institutional investors for business as most of the foreign institutional investors prefer trading through foreign brokers. Kotak, Edelweiss, IIFL and Enam are some of the larger domestic institutional brokerages...

Nippon Life has the same opinion to 5-yr lock-in

Japanese insurer Nippon Life has agreed to lock-in investment for 26 (%) stakes in Reliance Life Insurance for a period of 5 years.

In return for the stake, the company will get one permanent board seat and will also get to recommend one independent director for thought on the board. The Japanese insurer has gone in front with the transaction even after the earthquake tragedy. Both the partners have now submitted their proposal to the Insurance Regulatory and Development Authority.

Interestingly, although there is government proposal to increase foreign direct investment in insurance to 49(%) there is no clause providing for a higher stake. Both the partners have decided that if higher FDI is indeed allowed they will commence discussions afresh in good faith. If Nippon Life does not increase its stake Reliance Life can bring in a financial investor or sell shares through an initial public offering.

Last week, Reliance Capital signed an ultimate agreement with Nippon Life to sell a 26(%) stake in Reliance Life Insurance for Rs 3,062 crore ($680m). This transaction pegs the total valuation of Reliance Life Insurance at approximately Rs 11,500 crore ($ 2.6 bn). Following the deal Bank of America Merrill Lynch in a research report said "The deal values R-Life at $2.6bn, which is over 60% higher than our estimates. RCap has invested around Rs3100cr till date in the life insurance venture. We maintain our life insurance business value at around Rs 7000 crore (Rs286/share), as we would like to still see improved operational performance across the sector currently experiencing regulatory headwinds".

In another report, Ambit said, "The management said that its a compulsory transaction for both the parties and only awaits regulatory approval from IRDA, RBI and Japanese Insurance regulator which management thinks might take anywhere from 1 to 3 months."

Japan's Nippon may purchase 26% in Reliance Life for $724 mn

Japan's largest life insurer Nippon Life Insurance is in talks with financial services firm Reliance Capital, controlled by Anil Ambani, to acquire a 26% stake into the Indian company's life insurance subsidiary for $724 million.

According to a person with information of the deal, the two companies have been in talks for more than 6 months now. “Reliance Life and Nippon Life have been in talks for more than six months. The deal was not going through because of some assessment issues. The talks got revived in the last two weeks," said the person, who declined to be identified as he is not authorized to talk to the media.

Reliance Life is the only life insurance company in which an Indian promoter owns 100% unlike many other ventures where overseas life insurers are partners. India's insurance sector laws have capped FDI at 26% although following governments have attempted to raise the foreign investment threshold.

Reliance Life MD and CEO Sam Ghosh declined to comment on the deal.

The life insurance business is highly capital intensive and takes close to 10 years for an insurer to break-even. That would mean only companies which have a cash pile or financial muscle can last the course. There have been reports of the Indian insurer planning an initial public offering and bringing in a strategic investor ahead of the planned share sale.

Earlier, Reliance Life was in talks with Swiss Life and China Life, but failed to close the deal. The company even tried to divest its stake through a public offer last year. It had approached the government to allow companies to list after carrying out five years of operation against the norm which stipulates that insurers can launch an IPO only after 10 years. Insurance companies are awaiting an adjustment to the Insurance Act, which will raise FDI to 49%.

Dai-ichi Life and Tokio Marine Life Insurance are the Japanese companies operating in India. Dai-ichi Life has tied up with Bank of India and Union Bank of India while Tokio Marine has partnered with Edelweiss for India foray.

New ULIP launched by Reliance Life

Anil Ambani Group Company Reliance Life Insurance launched a unit-linked insurance plan that will provide policyholders the advantage of regular savings with improved protection and market-linked returns.

The new unit-linked plan (Ulip), Reliance Life Insurance Classic Plan, would offer protection to policyholders in the age group of 7-65 years.

"The unique plan of Reliance Life Insurance Classic Plan is that it offers flexibility and triple benefit of savings, insurance and investment - all in one single plan," Reliance Life said in a statement.

The plan also offers liquidity through part withdrawals and loans, top-up payment option and rider benefits to increase protection cover, it added.

"The new Ulip offers multiple benefits and protection - from helping policyholders plan their finances wisely at different stages of life, to providing risk cover on loss of life," Reliance Life Executive Director and President Malay Ghosh said.

Under the plan, the recipient would get double the base sum assured plus total fund value in the event of accidental death, the statement added.

The plan is available under two minimum payment options - Regular option and the Single Premium option.

Under the Regular Option, the customers would have to pay Rs 20,000 annually -- which can also be paid in monthly, quarterly and half yearly options.

For the Single Premium option, customers will have to pay a minimum of Rs 50,000 only once at the beginning during the 15-year policy tenure.

"The flexibility offered to policyholders by the company allows liquidity through partial withdrawals after 5th policy anniversary, loan after the completion of 2nd policy year and top-up option to increase regular savings," Ghosh added.

This is the second Ulip scheme launched by Reliance Life after the insurance regulator Insurance Regulatory and Development Authority came out with its revised strategy on Ulips a few months ago.

In October, the company had launched the Highest NAV advantage Ulip plan, which offers guarantee on maturity with the highest NAV per unit achieved throughout the entire 15 years policy term.

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.

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.

Reliance Life tops in policy sales along with pvt insurers in July

Anil Dhirubhai Ambani Group Company Reliance Life Insurance has emerged as the leading private sector insurer in conditions of the number of policies sold in the month of July.

Reliance Life Insurance sold 2, 81,810 policies throughout the month, according to IRDA data.

However, in terms of total premium collections in July, ICICI Prudential was the top private player, mopping up Rs 584 crore, while SBI Life garnered Rs 563 crore and Reliance Life Insurance Rs 296 crore.

Meanwhile, state-owned LIC collected a total premium of Rs 5,690 crore in the same month.

During the first quarter of the current fiscal, Reliance Life sold 4, 93,899 policies as next to 4, 06,699 policies in the parallel period last year.

Among the private life insurance players, ICICI Prudential saw its premium collections from new business grow by 73(%) per cent to Rs 1,987 crore throughout the April-July period, while Reliance Life witnessed a growth of 23(%) per cent in new premium collections to Rs 901 crore for the 4 months ended July, 2010.

SBI Life's premium collections from new business grew to Rs 1,539 crore in April--July, 2010, from Rs 1,398 crore throughout the same period last year.

LIC recorded an over 70(%) per cent increase in new premium collections to Rs 24,430 crore during April--July this year from Rs 14,265 crore a year ago, according to the data.

Overall, the 23 life insurers in the country collectively mopped up Rs 34,249 crore as new first-year premium during the period, a 55(%) per cent increase from Rs 21,996 crore in the year-ago period.

The private sector, comprising 22 life insurers, together accounted for Rs 9,818 crore worth of new business in the April--July period, compared to Rs 7,730 crore a year earlier, a growth of 27(%) per cent.

Reliance Life plans to dual market share in Three years

Reliance Life Insurance Company (RLIC) plans to twice its market share in the entire life insurance business to 10(%) per cent from the present 5.5(%) per cent in the next 3 years, RLIC President and Executive Director Malay Ghosh said here on 10th July.
“We hope to get an overall premium of Rs 20,000 crore and more than double our assets under management to cross over 30,000 crore in the next 2 years,” said Ghosh. After SBI life and ICICI Prudential, it claims to be the third biggest life insurance company in the private division.
He also announced they have crossed the 6 million policies highlight in less than 5 years. “The company has issued over 2.3 million policies in the last fiscal year, which is the biggest new business adding by the company in any year,” Ghosh said.
He said. “Our rural presence added considerably to this milestone,”
Apart from a healthy combine of unit-linked and traditional products, RLIC plans to focus on developing health insurance segments in the country.
RLIC has an assets under management of Rs 13,677 crore and a marketplace share of 10.2(%) per cent among private players. The company operates during a strong sharing network of 1,247 branches with 195,000 agents.
RLIC has a business premium of Rs 6,605 crore. Catering to individual and corporate needs. It is a part of the Reliance Dhirubhai Ambani Group.
There are 23 life insurance companies in the country, after the insurance sector was liberalised a decade ago.

Reliance Life Insurance introduces mobile phone-based services

Reliance Life Insurance Company Ltd (RLIC) on Monday announced the launch of a mobile-based insurance proposal - ‘Mobinsure’ - a mobile portal present a comprehensive range of insurance related services on mobile phones.

This service would make it easier for its policyholders to path their policies and premiums, do fund switches, pay insurance premium and determine policy-related queries instantly using their web-enabled mobile handsets. It would be available on both CDMA and GSM platforms.

This was announced by Malay Ghosh, president, Reliance Life Insurance, on Monday. “With Mobinsure, most features of internet insurance will now be available on mobile phones, providing a breakthrough improvement in insurance services. Besides easy access and anytime anywhere insurance, the new application offers whole services and security to customers transacting on their mobile phones,” said Mr Ghosh.

Customers can log on to their Reliance Life Insurance accounts on their cell phone handsets and get important information on policies, applications, funds, profile, advisors and also make active online transactions, including premium payments, future allocations and change of address, free of cost.

“All online transactions are real-time transactions. There is no time wait between a transaction done by the customer and its effect on the system. We will offer this service free of charge to our customers,” he added.

Mobinsure application has been developed to ensure complete safety and protection to a customer while doing financial transactions. This is ensured by the high-end encryption used in the application. Unlike a lot of other applications, Mobinsure does not require a customer to download and install any application. Customers can easily use the mobile browser for their transaction.

Customers are required to register for the first time and key in their policy and personal details which will be validated against customer details submitted at the time of new business for protection reasons.

Foreign firms can have to cut venture in insurance JVs

Foreign partners may have to reduce their stake in insurance joint ventures (JVs) on listing to abide by the government command that all listed companies must have 25(%) per cent public shareholding.
“We want Indian promoters to have a minimum 51(%) per cent stake in insurance companies. It is for the government to choose on disinvestment and take a call on raising the foreign direct investment (FDI) limit to 49(%) per cent. Foreign partners will have to reduce their stake if the government sticks to the 25(%) per cent public shareholding standard,” said a senior official with the Insurance Regulatory and Development Authority (Irda).
The government had last week implicit that it was open to a review of the 25(%) per cent public shareholding norm, but as of now, the rules stay in force.
Indian partners own 74(%) per cent in insurance JVs, while foreign partners own the relax. FDI would be raised to 49(%) per cent after the Insurance Amendment Bill, cleared by a parliamentary Standing Committee and pending before the Parliament, comes into force.
According to the Insurance Act, companies can valve the public market after they complete 10 years of operations. The insurance regulator is working out the modalities of the first public offer (IPO). The regulator has optional to the standing committee that both partners reduce stake proportionally after they go public.
As life insurance is a capital thorough business, insurers have been trying to beat the public market. The government had earlier thought of bringing down the minimum term for listing from 10 years to 5 years. However, it later decided to delete that section from the Act and allow insurers to go public at any stage. This is also a part of the Insurance Amendment Bill.
HDFC Standard Life and ICICI Prudential will complete their 10 year of operations in the next few months. Irda is waiting for amendment to the Act before it comes out with the IPO norms. There is an inter-regulatory subcommittee about this, including members of the market regulator, Securities and Exchange Board of India (Sebi), and Irda.
Reliance Life Insurance was the first insurance company to explain interest in listing to raise resource. The company is totally owned by Anil Dhirubhai Ambani Group.
Industry experts said some companies such as Tata AIG Life Insurance, Reliance Life, Shriram Life and ING Vysya Life Insurance would greeting the government’s move on 25(%) per cent public shareholding, as their foreign partners were either looking to dilute stakes in their Indian joint ventures or they were 100(%) per cent owned by an Indian advertiser.
Most foreign partners had expressed their motivation to increase their shareholding in their joint ventures as and when the regulations allowed. Insurers like Bajaj Allianz had even fixed the price at which it would increase its stake.

Low returns, but secure

Buyers of traditional insurance products — endowment and money-back policies — might soon be inundated with options.
Insurance companies, which have been incapable to launch latest investment-cum-insurance plans, better known as unit-linked insurance plans, following the turf war between the Securities and Exchange Board of India and the Insurance Regulatory Development Authority, are introduction a number of traditional products to attract customers.
Some new launches are Bajaj Allianz (BA) Invest plus Premier, Birla Sun Life Insurance (BSLI) Bachat Endowment Plan, Reliance Life (RL) Traditional Investment Insurance Policy and Reliance Life Traditional Golden Years Plan.
The RL Traditional Investment Insurance Policy is the third addition to the traditional crop portfolio of Reliance Life Insurance. Malay Ghosh, executive director and president, RL Insurance, said, “The visible cost structure of the policy is an attractive feature for customers.”
The unique characteristic of the product is that it offers a fixed rate of return – a number which will stay changing every year. This year the rate of return will be 7.75(%) per cent. The next year, a new rate will be announced depending on market circumstances and the interest rate scenario. The only assurance: The return will not fall below the savings deposit rate, which is 3.5(%) per cent at present.
In addition to guaranteed returns, the sum assured in case of RL Traditional will be 7.5 times the premium paid in the 1st year. There will also be riders that one can add by paying extra.
The sum assured, however, will be inconsequential once the accumulation account amount touches the sum assured — a common feature of all traditional insurance products.
The costs include an allocation fee of 30(%) per cent in the 1st year and 5(%) per cent in following years, which is deducted from the premium paid.
Besides the allocation fee, mortality rate (charged per Rs 1,000 of sum assured), policy administration fee (Rs 40 per month) and account administration fee at the rate of 1.25(%) per cent per annum will be charged.
Therefore, if an individual plans to invest the minimum regular base premium of Rs 10,000 this year, Rs 3,500 will be deducted as allocation and policy administration fees.
The rate of return offered is not very competitive compared to other instruments such as the Public Provident Fund, which gives 8(%) per cent and has negligible costs.
Does it make sense to invest in this or similar policies? Financial planners would most probably say no. That’s because the rate of return is quite low. Also, the sum assured is not very high. In comparison, a 30-year-old can buy a 20-year term plan with a sum assured of Rs 20 lakh for a premium of Rs 4,700.
Govind Pathak, director, Acorn Wealth, said, “For sufficient insurance, a simple term plan can be sufficient and a more cost-effective option. And for investment, one can always look for multiple options which will assure higher returns, such as the PPF on the debt side.
On the equities side, there are many more options like mutual funds and stocks. This combination would possibly give higher returns as well as a larger life cover than the Reliance traditional policy.

Reliance Life launches Traditional Investment Insurance Plan

Reliance Life Insurance, an ADAG group company, has launched a savings cum protection plan. It’s a traditional investment plan that provides life protection and regular savings with yearly guaranteed investment income. The new scheme is a regular premium plan offer guaranteed investment returns. The guaranteed return module would be confirmed at the beginning of every financial year during the product term, the Life insurance company said in a statement.

The growth rate for the 2010-11 financial years is 7.75% per cent. At any point of time, the minimum guaranteed growth rate will not be less than the savings bank deposit interest rate as confirmed by the Reserve Bank, the company added. The insurance plan is available to children aged less than 30 days and senior citizens aged up to 70 years, with monthly, quarterly, half-yearly and yearly payment option. The fixed sum assured under the plan is 7.5 times of the annualized premium. The minimum term of the policy is 10 years and the maximum is 30 years. Besides the maturity and tax benefits, it offers health-connected cover which will pay a lump sum to the customer for as many as 33 specific surgeries, including open heart, kidney transplant, and 25 critical conditions. These riders can be added by paying an additional premium.

Riders, add-ons to develop basic policies

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.

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.

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.

Reliance Life mulls venture sale to increase Rs 1,500 cr

Anil Ambani-promoted Reliance Life Insurance is understood to be in talks with global Insurance players, as well as Swiss Re, to raise an expected Rs 1,500 crore by selling 10-15(%) per cent venture.
“Reliance Life Insurance is looking to pass on 10-15(%) per cent stake to raise an estimated Rs 1,500 crore and is talking to various players, including Swiss Re,” investment banking sources in know of the development said.
As per the current rules, a foreign thing can hold up to 26(%) per cent stake in an Indian insurance firm. Reliance Capital totally owns Reliance Life, a business it acquired from AMP Sanmar in 2005.
A Reliance Life representative could not be contacted, while KwokChoi Wong Director Communications Swiss Re (Asia Division) said “Swiss Re does not comment on market rumours”.
For nearly a year, Reliance Capital has been planning either an intial public offering or strategic sale of its Life Insurance business to unlock value for shareholders.