HSBC, ICICI PRUDENTIAL SHOULD MANAGE EPFO FUNDS WITH SBI: FIC

New Delhi: More than two years after the Employees Provident Fund Organisation (EPFO) Board’s finance and investment committee (FIC) called for replacing State Bank of India’s (SBI) monopoly over its fund management with a regime of multiple fund managers, the FIC, on Thursday decided to recommend to the board the names of HSBC, ICICI Prudential Asset Management Company and SBI as the new fund managers for EPFO.

In yet another sign of the Right aligning with the Left, BM Rai of the BJP-backed Bharatiya Mazdoor Sangh (BMS) is learnt to have echoed the views recently expressed by his CITU peer W R Varadarajan and called for the fund managers to be picked from the public sector alone. The Congress’ trade union INTUC president G Sanjeeva Reddy and Employers’ Federation’s Sharad Patil didn’t attend the meeting.

With the government keen to press ahead with the long-pending reform move, the committee cleared the three ‘selected’ names with the backing of employer representatives even as employee unions called for more discussions over the matter in the board meeting. The minister for labour and employment, Oscar Fernandes, will chair a meeting of the EPFO’s Central board of trustees summoned on Tuesday, July 29, to finalise the fund managers’ selection and initiate their appointment process.

Employee union reps are expected to oppose the government in the implementation of the decision. “The board may have to take a decision by majority vote rather than consensus,” a trustee told FE . Of the 21 bidders that had expressed interest in managing the corpus of EPFO, the second largest non-banking financial institution in the country after the Life Insurance Corporation of India , 10 players had been shortlisted for financial bids which were opened on Tuesday.

The surprising bids by HDFC AMC and Birla Sun Life AMC, to manage EPFO’s monies at zero fees, threw the EPFO in a tizzy. A legal opinion had to be sought on whether a legally binding contract can be entered into by the EPFO with a bidder who quoted a ‘Nil’ financial bid. With its legal advisor pointing out that no valid contract can be signed if there is ‘no consideration’, HDFC and Birla Sun Life’s bids were rejected.

With those bids out of the way, HSBC AMC, ICICI Prudential AMC, SBI and Reliance Capital AMC had the lowest financial bids. With SBI and Reliance both bidding fees of just 0.01% of assets, SBI... was selected as it had a better score on technical bids’ evaluation (81 out of 100).

Reliance Capital’s technical bid evaluation score was 77 out of 100. It’s another matter that the entire exercie of replacing SBI as EPFO’s sole fund manager was taken up due to the growing realization that it had delivered sub-optimal returns in recent years, idled EPFO funds and often invested them in its own term deposits. Board members also point out that SBI has now quoted fees which are much lower than what it currently charges EPFO.

Source: The Financial Express

HOPE ON PENSION REFORMS

Between 15 million and 20 million of India's 400-million strong work force have a retirement savings plan. The average corpus at the time of retirement is a paltry Rs 52,000 per individual, and only a small proportion of those covered have contributed long enough to also be entitled to the maximum life-long pension of Rs 3,250 per month.

Yet, according to the annual survey by the Invest India Foundation, around 80 million workers are keen on contributing to a retirement fund, acutely aware that the age-old child-supports-parents model is breaking down. So what keeps them from contributing? Ironically, it is the very organisation that has monopoly rights over the country's pension business, the Employees Provident Fund Organisation (EPFO).

Ever since the era of high interest rates got over in the 1990s and private mutual funds started delivering good results, the EPFO has consistently been shown up as a poor performer in terms of returns offered; its service record is so poor that it is still not able to deliver a unique customer ID that subscribers can use all their life — as a result, many users have 2-3 accounts, which, apart from being difficult to manage, also ensures that workers lose out on pension coverage since you have to contribute for at least 10 years to be eligible for the monthly pension benefits.

There are other problems such as the rising gap, already over Rs 25,000 crore, in the pension scheme but this is a problem for the government, which has to make it good, and not for the pensioners.

It was to fix this that, in 2005, the government sent the Pension Fund Regulatory and Development Authority (PFRDA) Bill to Parliament, to allow new pension fund managers, both public sector as well as private, to compete with the EPFO, with the PFRDA acting as an impartial regulator. The Bill languished because the Left parties argued that private fund managers were not to be trusted.

This changed dramatically when, in April, the EPFO itself invited bids from various fund managers to manage the fresh deposits of around Rs 9,000 crore it gets each year — the current corpus of Rs 150,000 crore is managed solely by State Bank of India. Suddenly the PFRDA Bill got a new lease of life: if the EPFO, dominated by Left and other unions, could trust private fund managers, why couldn't the same apply to the rest of the country? While some prominent members of the EPFO's Central Board of Trustees (CBT) are against the idea, the EPFO management has shortlisted seven private asset management companies and plans to open their financial bids next week, after which the CBT will take a call on whether to go ahead. India's plans to allow new players in the pension market have thus made a significant advance. It would be a pity if the labour unions were allowed to snuff out this reform.

Source: Business Standard

BIG BOYS FOR BIG FUND WILL BE NAMED NEXT WEEK

New Delhi: The list of private sector companies to manage Rs 2,40,000-crore Employees Provident Fund (EPF) is likely to be cleared at the upcoming Central Board of Trustees meeting, scheduled to be held next week.

The board, chaired by labour and employment minister Oscar Fernandes, will decide the final names from those who cleared the two-step process of technical and financial bids. The board — with representatives from ten employees’ organisations, ten employers’ organisations, central and state governments, apart from EPFO Central Provident Fund Commissioner — has to decide on a minimum of three fund managers to handle EPF corpus.

Ten firms had cleared technical bids, including Reliance, HDFC, ICICI Prudential, Templeton, HSBC, the Tatas, the UTI subsidiary, SBI and PNB. Of these ten, a few have already been shortlisted on the basis of clearing financial bids, a source told The Indian Express.

Refusing to divulge the names of these firms, the source said that the final list would be based on the board’s stringent evaluation of firms in the fray. The EPF board’s finance and investment committee met and pruned the list of ten fund managers.

Till now, SBI was solely managing the entire EPF corpus. With this move, its monopoly will end. The government last year decided to diversify the funds and appoint private sector companies after it expressed its unhappiness with SBI’s fund management. It was dissatisfied with sub-optimal investments by SBI and held it responsible for lower returns on its large portfolio.

Source: The Indian Express

FARMERS ADVISED TO GET INSURANCE COVER

Nagapattinam: Farmers in the Cauvery delta region of Thanjavur, Nagapattinam and Tiruvarur districts should get proper insurance cover for the current kuruvai paddy crop in time before the expiry date with the dwindling water resources for cultivation this year.
All who have availed loans or not would be insulated from any adverse impact if they get insurance cover in time, said S. Ranganathan, a progressive farmer and General Secretary of the Cauvery Delta Farmers’ Welfare Association, on Thursday.

Decreasing level
Mr. Ranganathan told The Hindu that the water level in the Mettur reservoir had come down to about 60 feet against the full tank level of 120 feet and the water available in the dam would be suffice only for 10 days.

Monsoon truant
The southwest monsoon is playing truant and is still weak in the catchment areas.
This is a serious cause of worry for the farmers who have ventured in a big way to take up the short-term kuruvai paddy cultivation.

Rains in some parts
He pointed out that it was gratifying that at least some part of Tamil Nadu was getting good rains and advised the farmers to get proper insurance cover for the kuruvai crop.

Source: The Hindu

‘MERGE INSURANCE COMPANIES’

Salem: Salem unit of Coimbatore Region General Insurance Employees’ Association urged the Union government to initiate immediate steps to merge the four public sector general insurance companies.

Members of the association adopted a resolution to this effect at the annual general body meeting of the unit held here recently. In another resolution, members appealed to the government to withdraw the compulsory transfer policy and fill up all the vacancies immediately. T. Ganapathi was elected president of the unit during the meeting. M. Karupaiah was elected as Secretary and K. Mailvelu as Treasurer.

Source: The Hindu

INSURERS WAIT FOR FDI HIKE

New Delhi: Max New York Life Insurance chairman, Mr Analjit Singh, said on Thursday that passing of the insurance bill, which seeks to raise the FDI limit, will be a positive development for the industry.

The finance minister, Mr P. Chidambaram had said on Wednesday that centre will try to push the reform process forward and will try to pass the insurance bill. The bill proposes to raise the foreign investment ceiling for insurers to 49 per cent from 26 per cent.

"There are many second tier insurance companies in which the Indian partners are not so active as the foreign partners. If the FDI limit is increased, the foreign companies will make these firms more effective by increasing their stake," Mr Singh said after launching a new life insurance scheme ‘Max Vijay’ for the rural India. He said that there are various international insurance companies which are waiting for the bill to get pass before coming to India. "This will increase the competition which will be a good thing," said Mr Singh.

He said that there is a huge opportunity for growth as the penetration of the insurance companies is very low. "We want the insurance bill to get passed in this tenure of the government. We have been waiting for this from last four to five years," said Mr Singh.

Source: The Pioneer, Asian Age

`WE HAVE NO LISTING PLANS FOR NOW`: ANALJIT SINGH, CHAIRMAN, MNYL

New Delhi: Even as competition in the insurance sector is on the rise, Max New York Life Insurance Co, one of the top five private life insurance firms in India, has announced plans to tap the financially weaker segments of the country through a new insurance and savings scheme called Max Vijay. On the sidelines of the launch of Max Vijay, Analjit Singh, chairman of Max India, spoke to Joe C Mathew and Prashant Sahu about the company's future plans. Excerpts:

Will the government's proposed plans to raise the foreign direct investment (FDI) limit from 26 per cent to 49 per cent impact Max India?

It will allow New York Life to exercise an option to increase its equity stake in Max New York Life Insurance Co. But there will not be any impact on the joint venture business. We have already announced aggressive growth plans. The move will not have any impact on the five or six large insurance companies in India.

However, for second-tier life insurance firms, where the domestic partners are not very active, this might lead to more activity and aggression in the business. There must be some other foreign insurance companies who are waiting for this to happen to announce their plans for India. In any case, competition will increase and size of the business will grow. Overall, it is a positive for the industry.

How important is the life insurance business for Max India?

Life insurance business accounts for almost 75 per cent of Max India's revenues. It will continue to be our major revenue source. We want to be a $5-billion company by 2011-12, and two-thirds of that should come from this business. We are targeting to achieve revenue in excess of $1.7 billion by the end of March 2009.

How do you differentiate yourself from other private life insurance players?

Unlike others, Max is a pure life insurance player. For all the other existing players, the life insurance business is one among many things. For me, Max India being just a holding company, life insurance is the biggest business. You have also announced a joint venture with UK's leading insurance player BUPA for the health insurance sector. How do you intend to go forward?

There are only two or three standalone health insurance players, who have also just started. So it is too early to comment on their performance. Max Bupa Health Insurance will have a very clear business plan. Others might have announced their plans first. But it is not enough to announce it and fire. You have to aim. We are aiming (firming up business plans) for 17 months so that when we fire, we go.

How is your healthcare business?

We have big growth plans for Max Healthcare. Four new hospitals, three in Delhi and one elsewhere in the North are coming up. We are growing in the super-specialty area and will be the biggest private player that provides comprehensive healthcare at a single hospital. There were reports about Max India planning to list of each of its business arms as separate entities in the stock exchanges. Your comments.

The report was incorrect. I had said that we will list them at some point in time. It could be two years or 12 years. Right now we are not listing. I guarantee you that we are not listing them at least for the next few years.

What about your speciality plastic business? Any plans to divest unrelated segments as your focus is now on healthcare service, and the life and non-life insurance segments?

I agree that it is an odd ball in our business mix. But it is a very successful business. It is going on very well on its own. Let it continue.

Source: Business Standard

MAX NEW YORK LIFE LAUNCHES INSURANCE-CUM-SAVINGS PRODUCT

New Delhi: Max New York Life Insurance on Thursday launched “Max Vijay”, an insurance-cum-savings product aimed at the underserved segment of society. Announcing the launch, the company’s Chairman, Mr Analjit Singh, said “Max Vijay empowers millions of Indians, who may not be a part of the economic growth scenario that the country is witnessing, to participate in this revolution and realise their dreams. The business model leverages innovation at every step — be it product design, technology, distribution or service delivery — to ensure a comprehensive offering for the common man.”

Max Vijay has been designed keeping in mind the lifestyle, income patterns and needs of the rural and semi-urban population. It empowers millions of Indians to benefit from the economic boom in financial services that was hitherto denied to them, company officials said.

The minimum premium payable under the product will be Rs 1,000 and the policy will not lapse as long as there is sufficient value in the account. The company has tied-up with IBM to provide end-to-end technology backbone for fulfilment. Apart from this, they will facilitate the handheld terminal, which enables data transfer to the back-end through GPRS and hence facilitates on-the-spot policy receipt

Meanwhile, Mr Singh told newspersons that it would be business as usual for Max New York Life even though there are indications of the Government pushing for legislative changes to increase the sectoral cap on insurance from 26 per cent to 49 per cent. The company was not looking at a listing for the moment, he said, and added that the joint venture partners have committed to raise the paid-up capital from Rs 1,300 crore to about Rs 3,600 crore in the next two years.

Source: The Hindu Business Line

SBI LIFE MAKES LOSS IN Q1 ON RS 150-CR PROVISIONS

Mumbai: SBI Life Insurance Company Ltd has made provisions of Rs 150 crore for mark to market losses on its investment portfolio. The provisions have meant that the company has made a net loss in the first quarter.

Mr U.S. Roy, Managing Director and CEO, said, “An IRDA directive in March had asked companies to make provisions on diminution in assets but there has been no formula prescribed. We are following the method used by banks and are taking a conservative approach by making such prudential provisions,” he said.

The company, which has been profitable in the past two years has not disclosed the net loss made in the first quarter. SBI Life’s assets under management stand at Rs 11,727 crore. Mr Roy said that around Rs 4,000 crore was invested in equity and the depreciation was seen mainly in this portfolio.

SBI Life has, however, shown a sharp growth in new business premium. The new business annualised premium equivalent (APE), that takes single premium income at 10 per cent, has grown by 241 per cent to Rs 972 crore.

The contribution of ULIPs to the company’s portfolio has dropped to 54 per cent, from 70 per cent in March. Mr Roy said the company has been strategically pushing traditional products.

Source: The Hindu Business Line

INSURANCE FIRM ASKED TO PAY COMPENSATION

Hyderabad: The A.P. State Consumer Disputes Redressal Commission has rejected the repudiation of a policy-holder’s claim by a health insurance company and ordered it to pay compensation.

The commission disposed of the appeal by Royal Sundaram Alliance Insurance Company Ltd. and upheld the order by the Krishna District Consumer Forum towards reimbursement of the medical expenses incurred by B. Ramanadham, a policy holder. Mr. Ramanadham, a resident of Vijayawada, had taken Health Shield Insurance Policy and Hospital Cash Insurance Policy from Royal Sundaram Alliance.

Under these policies, he was entitled to full reimbursement of treatment expenses up to Rs.1 lakh apart from Rs.1,000 a day as inpatient treatment charges. Mr. Ramanadham visited the NRI General Hospital at Chinakakani in Guntur district in June 2007 with the complaint of a backache. He was admitted to inpatient ward of the hospital in August 2007 and discharged after 10 days.

Mr. Ramanadham filed a claim with the company for Rs. 10,525 towards daily treatment charges and Rs.14,725 for treatment expenses. The company agreed to pay only daily treatment charges and rejected the claim for treatment expenses saying that his backache was a pre-existing ailment. The policy holder challenged the company’s decision in the Krishna District Consumer Forum.

The District Forum gave a ruling in favour of Mr. Ramanadham in April by considering backache as a natural ache and not pre-existing aliment. Royal Sundaram opposed the Forum’s ruling and appealed in the State Forum for its reversal. However, the State Forum upheld the directive of the lower forum on July 7. It ordered the company to pay Rs.10,525 and Rs.14,725 respectively for inpatient and treatment charges with 9 per cent annual interest and costs of Rs.1,000 to the policy-holder.

Source: The Hindu