LIC to retain market exposure at Rs 9,000cr

Life Insurance Corporation of India has decided to maintain their capital market exposure at the level of Rs.9000 crores at the same level of last year. They have plans to invest the funds in the primary and secondary market in 2006-2007.

“This would be about 9% of the total investible surplus. The absolute figure, however, would be way higher if we consider investments made on account on unit linked insurance policies (ULIP). Last year, we invested an additional amount of about Rs 5,500 crore on account of ULIP. This year the figure would depend on the premiums we mop up from ULIPs,” DK Mehrotra, managing director, LIC told ET.

LIC, however, has reduced the share of ULIPs in favour of traditional policies. The ratio between unit linked and traditional plans moved to 42:58 in ’05-06 against the previous year’s 65:35.

“Since April ’06, LIC has already invested about Rs 1,600 crore and the rest of the fund would be pumped into the secondary market in due course,” he added. Out of Rs 1,600 crore, the insurance behemoth has, in fact, spent about Rs 700 crore in the last few weeks. It has been buying oil, IT and banking stocks in the past week. It is also looking at favorable infrastructure-related stocks.

“We have decided to cap the investment to last year’s level because of huge volatility in the market. In the last few weeks the stock markets have swayed to extremes when the sensex fell 300-400 points in a single day.

The last has been the sensex’s 1,100 fall when we had pumped in about Rs 200 crore,” he said. Mr. Mehrotra said, “LIC is a long term investor and it buys whenever it finds good opportunity.” Historically, LIC cashes in on the market when there is a downswing. The book value of LIC’s equity investment is around Rs 44,000 crore.

HDFC snaps ties with Chubb

HDFC Chubb the world’s largest non-life insurance company has decided to part way in their JV. The Indian partner has expressed their intention to walk out of their four year old partnership. When approached for their comments they declined to comment on this issue. Both the companies are looking out for their own alternative options in India.

What crystallized the decision, insiders say, was the differing risk appetite of the two partners. “Chubb has a low appetite for risk in the Indian market. This has been a bone of contention between the two partners and resulted as a barrier for the JV’s rapid roll out, specially in the commercial segment,” sources said.

HDFC, given its size and distribution strength in India, is expected to move faster, but Chubb’s overcautious approach in acquiring businesses which were risky by international standards was proving to be a drag. While HDFC has made its intentions clear to Chubb Corporation, the formal announcement may take some time. Industry experts say, the JV will soon appoint a firm for the valuation of the company. This and other negotiations, apart from other legal procedures, may take up to six months to complete.

Paterson is new MD for Aviva India

Mr. Bert Paterson is appointed as New Managing Director in India for Aviva Life Insurance with effect from 1 September 2006. Mr. Paterson will succeed Mr. Stuart Purdy who is moving to Ireland as Deputy Chief Executive of Hibernian Insurance Group.

Mr Paterson in a statement said, "India is one of the fastest growing market with tremendous potential for insurance business. I hope the Government will increase the FDI cap on insurance to 49 per cent soon so that we can further and expand our operations in the country.''

41% growth in Life insurance industry in '06

The Indian Life Insurance sector grew by 41% in the year 2005-2006. The major contribution to this growth comes from LIC, Bajaj Allianz and ICICI Prudential. All the 15 life insurance companies together collected Rs 35,898 crore in the fiscal ended March this year, compared to Rs 25,343 crore in the previous fiscal, according to data compiled by regulator IRDA.

Life Insurance Corporation's premium income rose more than 28 per cent to Rs 25,645 crore after it sold 3.16 crore policies as against Rs 19,972 crore collected a year ago. However, LIC's market share dipped by 6.63 per cent to 71.44 per cent from 78.07 per cent in the year ago period due to stiff competition and aggressive marketing of private life insurers. The 14 private players were able to steadily increase their market share from 21.93 per cent to 28.56 per cent in a year's time by collecting Rs 10,252 crore during the period under review.

Tata AIG liability cover for unlisted cos

Tata AIG General Insurance company Ltd, has launched a new Insurance cover for Directors and Officers of unlisted small and mid-sized businesses. The product is named as “Highlight”. Small and medium companies and family-owned concerns typically are unlisted and flexible but often with little management infrastructure and few formal control processes. The directors and officers of these companies face the same risks as their listed counterparts such as regulatory investigations, employment practice litigations, including sexual harassment issues, stakeholder claims and accounting irregularities.

Any stakeholder can sue directors and officers for decisions taken on behalf of the company in their professional capacity. `Highlight' would provide protection to directors and officers from business-related risks, a press release from Tata AIG said.

This liability insurance cover is a pre-underwritten product that requires minimum documentation.

Insurance grabs shelf space

So long, Banks have been selling insurance products successfully, now, a new trend is emerging, and retailers are discovering that customers who walk into buy groceries can be sold policies. This concept, Shopassurance was pioneered in the UK, where retailers Tesco and Marks & Spencer and pharmacist Boots have been selling insurance for years. In South Africa too, retail chain Pick ‘n’ Pay has been selling insurance. This trend is now catching on in Asia. In Phillipines SM Malls is turning out to be significant distributor of insurance products.

According to a report on insurance distribution by consultancy firm Watson Wyatt, in Indonesia, shopassurance is a new developing channel. According to the report, US insurer Cigna is targeting a 50% increase in premium in Indonesia following its tie-up with French retailer Carrefour of France. The retailer’s outlets in 21 locations will be used to sell life insurance to customers holding Carrefour credit cards. In the US, Bajaj Allianz Life Insurance had made an attempt to sell life insurance at retail outlets through a tie up with Shoppers’ Stop.

ING Vysya shuffles top management

Life insurer ING Vysya Life Insurance Company Ltd has shuffled its top management and appointed Mr Kshitij Jain as the new Chief Executive Officer and Managing Director.

The appointment will make Mr Jain the first Indian MD & CEO of ING Vysya Life. According an ING Vysya Life press release, the current CEO and MD, Dr Frank Koster, is moving back to the parent company's global headquarters in Amsterdam.

The change of guard would, however, have to be approved by the Insurance Regulator. The release said that Mr Jain's appointment takes effect from July 1 this year. Mr Jain has been with ING Vysya Life since its inception in 2001 and been a senior member of the management team primarily responsible for sales and distribution.

ICICI Lombard eyes Rs 100-cr biz in Kerala

ICICI Lombard General Insurance Company is aiming to achieve Rs 100 crore business in Kerala this year. Mr.Bharathan, Head, Government Solutions Group, ICICI Lombard said “We are entering in the retail insurance sector in the State in a big way by branching out to new areas. The share in the market is bound to increase once retail insurance which covers motor, travel, individuals etc goes well.”

ICICI Lombard wanted to become a most important player in motor and travel insurance in the State. The company had already collected a premium of Rs 30 crore in the State up to March 31 and is performing well in Kerala through its six offices in various parts of the State.

The company has already joined hands with several state and central public sector undertakings as well as leading companies in the corporate sector including Dubai Ports, Cochin International Airport Ltd, Apollo Tyres etc for insurance cover for employees. Apart from this, ICICI Lombard had tied up with various state governments in 13 states for group personal accident cover of 126 million lives and health cover to 3.3 million weavers in six states in health insurance.

Market to determine LIC's product mix

Mr T.S. Vijayan, Chairman, said “Life Insurance Corporation of India will let the market determine its product composition rather than have a `prescriptive model, "In the last financial year, LIC had set a target business mix and taken a position on having a prescriptive model. But today, the market is indicating that our prescriptions are not right," Mr Vijayan said. "As of today, the market demand is for ULIPs, but its too early to say because we have achieved just 10 per cent of our target",

In the last financial year, the corporation had made a conscious attempt to reduce the share of unit-linked policies in favour of traditional policies. The ratio between unit-linked and traditional plans moved to 42:58 in 2005-06 against the previous year's 65:35.
Going forward, the company has set a target of 35 per cent growth in its new business premium. "While the target has been set at 35 per cent, we expect it to exceed 40 per cent," Mr Vijayan said.

The Chairman said the corporation's investments in equity would also be dictated by its product mix. "If we sell more of ULIPs and customers opt for equity funds, our investment will also increase."

"We are long-term investors and today infrastructure is offering us good opportunities. We invest about 8 to 10 per cent of our investible funds in equity and depending on the valuations and corporate performance, the same level may be maintained in the current year also," Mr Vijayan said.

Birla Sun Life capital enhanced

Birla Sun Life Insurance (BSLI) has received an additional capital infusion of Rs 30 crore, taking its total capital base to Rs 490 crore, at the end of May. According to a press release from BSLI, this has been done to expand the company's distribution network and to conform to the solvency margin requirements stipulated by the Insurance Regulatory and Development Authority. At present, BSLI has a network of 85 branches. The additional infusion is in the ratio of 74:26 between the Aditya Birla Group and Sun Life Financial. "BSLI is aiming to continuously strengthen its operations nationally, thereby, increasing its penetration into smaller towns," said Mr Anil Jhala, CFO, BSLI.

Bajaj Allianz plans to raise equity capital

Bajaj Allianz Life Insurance Company intends to further raise its paid-up equity after July, when the new ULIP (unit linked insurance policy) guidelines come into force. The Insurance Regulatory and Development Authority's new guidelines come into effect from next month onwards.

Speaking to Business Line, its Chief Executive Officer, Mr Sam Ghosh, said, "We are still assessing the capital requirement. Both partners are committed to raising the capitalisation of the company." The company is currently capitalised at Rs 500 crore. This capital would last up to September, he said.

Mr Ghosh said it was targeting a growth rate in excess of 100 per cent. Based on this growth in business acquisition, the joint venture partners would have to bring in more The company is a 74:26 joint venture between the Bajaj group and Allianz Insurance of Germany. It reported a premium growth of 400 per cent in the first month of this financial year at Rs 146 crore. More than 75 per cent of the accretions, however, came from ULIPs.

He said the stock market turndown had not translated into any large-scale migration from growth funds to balanced or fixed income funds. However, he added, in the case fresh accretions, there was some bias in favour of the latter two schemes. He said the company's growth was powered mostly by its agency force.capital, he said.

New Heads At ING Vysya Life and Aviva Life

Two private life insurers, ING Vysya Life and Aviva Life have appointed new heads to oversee their operations in India.

ING Vysya Life, the joint venture between the ING Group of Netherlands and Vysya Bank of India has appointed Mr Kshitij Jain as its new Chief Executive Officer and Director with effect from 1 July 2006. Mr Jain is currently serving as Director-Sales of the company. He will succeed Mr Frank Koster, who has been promoted as General Manager, Corporate Communication of ING Group in Amsterdam

Aviva Life, the joint venture between Dabur of India and Aviva of the UK has appointed Mr Bert Paterson as Managing Director with effect from 1 September 2006. Mr Paterson will succeed Mr Stuart Purdy who is moving to Ireland as Deputy Chief Executive of Hibernian Insurance Group.

ICICI insurance to expand

ICICI Prudential Life Insurance has plans to increase its presence in the northeast and would open branches in several states of the region. "There has been tremendous response from the customers in the region for which ICICI will have to be present in most of the NE states," company Vice President Prasun Sikdar said here.

ICICI with a market share of 29.3 per cent has Rs 8000 crore funds under management as in May, which is the largest fund base amongst all private life insurers. The company had registered a 64 per cent growth in its new business premium in the financial year ending at March 2006 taking its premium up to Rs 2,412 crore. In this period the company had written 837,963 retail policies and the sum assured in force stands at Rs 45,888 crore at a growth of 65 per cent during the year. ICICI has 177 branches in 132 areas and has advisor strength of over 72,000.

LIC group business sees brisk growth

LIC's market share for April has increased to 81.97 per cent, compared to 78.8 per cent at the end of March, 2006. Mr R. Venugopal, Executive Director, Pension and Group schemes, LIC, said that rationalisation of the fringe benefit tax on group superannuation schemes had helped the company in expanding its group business.

For the months of April and May, the corporation has raked in new business premium of Rs 647 crore, a 67-per cent growth from the previous year. Of this, group superannuation gratuity and annuity schemes contributed Rs 111 crore, Rs 106 crore and Rs 118 crore respectively. In the last financial year, the imposition of fringe benefit tax had dented the growth prospects of group business. As per the recent Union Budget however, FBT will only apply to contributions above Rs 1 lakh. Given that 90 per cent of the contributions to superannuation schemes fall within the Rs 1 lakh bracket, the measure came has a huge relief to insurance companies.

"Corporates today want to provide better benefits to their employees so that they can retain talent. While group gratuity schemes fall under statutory liabilities, pension as well as leave encashment schemes are offered as perks," said Mr Venugopal.

ICICI Prudential Registers 64% Growth In New Business In 2005-06

ICICI Prudential Life Insurance Company, has become the largest private sector life company in India and registered a 64% growth in new business premium, which amounted to Rs2,412 crore (US$480 million) in the financial year ended 31 March 2006.

The company has sold 837,963 retail policies with a sum assured of Rs45,888 crore in the last financial year. ICICI Prudential has become the first private life insurer to cross the two million policies-mark and 500,000 rural policies mark, during the last fiscal.

The company’s market share among private life insurers stands at 29.3% for 2005-06 and 9.3% of the overall market share. New business achieved profits has increased to Rs528 crore, a 69% increase from last year’s Rs312 crore and the renewal premium was up by 113% to Rs1,657 crore, which is 39% of the total premium. Funds under management registered an increase of 130% to Rs8,822 crore and group business premium increased by 157% to Rs286 crore, contributing 7% of the total premium.

Government Plans Bill For Amending Insurance Act

The Finance Ministry of the Government of India is planning to introduce a Bill in Parliament to amend the Insurance Act 1938, which among other things, provides for increasing the foreign direct investment (FDI) cap in the insurance industry from the current 26% to 49%. The Finance Minister had in his Budget speech announced that the IRDA was examining the Narasimhan Committee report on comprehensive law in insurance. A comprehensive bill has been prepared on the basis of this review, which includes raising the FDI cap on insurance to 49% from 26%.

The insurance industry is in favour of the bill, which seeks to amend various provisions of the Insurance Act, 1938, and IRDA Act, 1999. A hike in FDI cap in the insurance sector would require Parliamentary approval for amendment of the IRDA bill. The leftists who support the ruling coalition oppose any increase in FDI cap in the insurance sector.

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