Bangalore/ New Delhi July 31 Public sector Vijaya Bank has decided to completely pull out of the life insurance joint venture with Punjab National Bank and the Principal Financial Group (PFG) of the US.
The move has jeopardised PFG’s proposal to enter the domestic life insurance market. This is because under the current Reserve Bank of India guidelines at least two banks are necessary in any joint venture.
The Vijaya Bank Chairman and Managing Director, Mr Prakash P. Mallya, told Business Line, “We are pulling out completely from the joint venture, since there is no financial benefit for Vijaya Bank in it.”
As per the shareholder agreement, the proposed capital for the life insurance venture was Rs 110 crore. Vijaya Bank was a minority stakeholder with a stake of just 12 per cent. PNB and PFG were expected to hold 30 and 26 per cent respectively. In fact, Vijaya Bank had sought a larger equity role in the venture. Vijaya Bank had proposed to buy out Berger Paints’ 32 per cent stake in the joint venture. But the proposal had become deadlocked, sources said. This was because PNB wanted to takeover the stake and retain majority control in the venture. In fact, PNB’s Chairman and Managing Director, Mr K.C. Chakraborty, had recently said, “The company has still not been formulated and there might be a rethink on all the issues. The shareholding pattern and the constitution of the company might change.”Passive investor
Vijaya Bank fears that it would become a passive financial investor. “Small stakes will not give us any big benefits,” Mr Mallya said. Asked whether the pullout included all the joint ventures with the partners, Mr Mallya said, “We are pulling out completely from all the joint ventures.” This implied that the operational companies in the three-way joint venture arrangement would also be impacted. The operational ventures include the Principal PNB Asset Management Company, where Vijaya Bank is a 5 per cent stakeholder and the PNB Principal Insurance Advisory Company where it is a 19 per cent stakeholder.
However, PFG was still attempting to salvage the joint venture. PFG’s country head, Mr Rajan Ghotgalkar, said, “Principal Financial is committed to expand its operations in India. At the moment we are reviewing the entire strategy and currently, negotiations are on with the other joint venture partners.”Other suitors
The pullout now leaves the floor open for other suitors to woo Vijaya Bank. Those in the race include private sector insurers that Mr Mallya declined to name. He said, “We will examine all the options before us. We also have other foreign companies before us.” But almost all the private sector insurers were on the lookout for the induction of third partners to increase the paid-up equity and accelerate their respective growth rates. This was because under the current guidelines foreign partner stakes in domestic insurance ventures is capped at 26 per cent.
Accelerated growth implied increase in liabilities and consequent solvency pressures that would have to be offset by periodic capital infusions. Bangalore/ New Delhi July 31 Public sector Vijaya Bank has decided to completely pull out of the life insurance joint venture with Punjab National Bank and the Principal Financial Group (PFG) of the US.
The move has jeopardised PFG’s proposal to enter the domestic life insurance market. This is because under the current Reserve Bank of India guidelines at least two banks are necessary in any joint venture.
The Vijaya Bank Chairman and Managing Director, Mr Prakash P. Mallya, told Business Line, “We are pulling out completely from the joint venture, since there is no financial benefit for Vijaya Bank in it.”
As per the shareholder agreement, the proposed capital for the life insurance venture was Rs 110 crore. Vijaya Bank was a minority stakeholder with a stake of just 12 per cent. PNB and PFG were expected to hold 30 and 26 per cent respectively. In fact, Vijaya Bank had sought a larger equity role in the venture. Vijaya Bank had proposed to buy out Berger Paints’ 32 per cent stake in the joint venture. But the proposal had become deadlocked, sources said. This was because PNB wanted to takeover the stake and retain majority control in the venture. In fact, PNB’s Chairman and Managing Director, Mr K.C. Chakraborty, had recently said, “The company has still not been formulated and there might be a rethink on all the issues. The shareholding pattern and the constitution of the company might change.”Passive investor
Vijaya Bank fears that it would become a passive financial investor. “Small stakes will not give us any big benefits,” Mr Mallya said. Asked whether the pullout included all the joint ventures with the partners, Mr Mallya said, “We are pulling out completely from all the joint ventures.” This implied that the operational companies in the three-way joint venture arrangement would also be impacted. The operational ventures include the Principal PNB Asset Management Company, where Vijaya Bank is a 5 per cent stakeholder and the PNB Principal Insurance Advisory Company where it is a 19 per cent stakeholder.
However, PFG was still attempting to salvage the joint venture. PFG’s country head, Mr Rajan Ghotgalkar, said, “Principal Financial is committed to expand its operations in India. At the moment we are reviewing the entire strategy and currently, negotiations are on with the other joint venture partners.”Other suitors
The pullout now leaves the floor open for other suitors to woo Vijaya Bank. Those in the race include private sector insurers that Mr Mallya declined to name. He said, “We will examine all the options before us. We also have other foreign companies before us.” But almost all the private sector insurers were on the lookout for the induction of third partners to increase the paid-up equity and accelerate their respective growth rates. This was because under the current guidelines foreign partner stakes in domestic insurance ventures is capped at 26 per cent.
Accelerated growth implied increase in liabilities and consequent solvency pressures that would have to be offset by periodic capital infusions.
source:Business Line
Wednesday, August 1, 2007
United India Insurance posts 24% growth in net
Chennai, July 30 United India Insurance Company, the Chennai-headquartered public sector insurance company, has reported a 24 per cent growth in net profit at Rs 529 crore for the year 2006-07.
The company has also announced a 70.5 per cent dividend of Rs 105.77 crore on the enhanced capital of Rs 150 crore.
Gross premium of the company climbed 11 per cent to Rs 3,499 crore. Of this, Rs 664 crore was contributed by fire segment, Rs 263 by marine insurance (both cargo and hull) and Rs 2,570 crore by miscellaneous items including engineering, motor, health and other insurance.
Announcing the results, Mr M.K. Garg, Chairman & Managing Director, said that prudent underwriting and improved claims management besides cutting down of expenses had helped post an improved performance. Additional provision
Mr Raju Sharan, Financial Advisor, said profits might have been higher but for an additional provision of Rs 163 crore on account of Accounting Standard – 15 (employee benefits).
He said the company had taken the decision to absorb the additional provision this year itself (instead of spreading it over the next few years).
Mr Garg said that there was not much of an impact on the results because of the detariffing that came into effect in the last quarter of the last fiscal. The company could maintain a growth rate of 11 per cent despite a 25 per cent decline in fire and engineering insurance rates.
Asked about the drop in investment income, Mr Garg said that this was due to markets being volatile last year and the company’s own cautious approach.
In 2005-06, there had been a higher target for sale of shares in view of the requirements to meet wage arrears. This year there was no compulsion and the management also felt that there would be a further rise in stock prices and hence did not liquidate its holdings significantly.
The company expects to achieve a premium income of Rs 4,000 crore in the current fiscal.
source:Business Line
The company has also announced a 70.5 per cent dividend of Rs 105.77 crore on the enhanced capital of Rs 150 crore.
Gross premium of the company climbed 11 per cent to Rs 3,499 crore. Of this, Rs 664 crore was contributed by fire segment, Rs 263 by marine insurance (both cargo and hull) and Rs 2,570 crore by miscellaneous items including engineering, motor, health and other insurance.
Announcing the results, Mr M.K. Garg, Chairman & Managing Director, said that prudent underwriting and improved claims management besides cutting down of expenses had helped post an improved performance. Additional provision
Mr Raju Sharan, Financial Advisor, said profits might have been higher but for an additional provision of Rs 163 crore on account of Accounting Standard – 15 (employee benefits).
He said the company had taken the decision to absorb the additional provision this year itself (instead of spreading it over the next few years).
Mr Garg said that there was not much of an impact on the results because of the detariffing that came into effect in the last quarter of the last fiscal. The company could maintain a growth rate of 11 per cent despite a 25 per cent decline in fire and engineering insurance rates.
Asked about the drop in investment income, Mr Garg said that this was due to markets being volatile last year and the company’s own cautious approach.
In 2005-06, there had been a higher target for sale of shares in view of the requirements to meet wage arrears. This year there was no compulsion and the management also felt that there would be a further rise in stock prices and hence did not liquidate its holdings significantly.
The company expects to achieve a premium income of Rs 4,000 crore in the current fiscal.
source:Business Line
Friday, July 27, 2007
SC breather on insurance claims of shipping firms
In a judgement that could lead to hassle-free settlement of insurance claims, the Supreme Court has held that an insurance firm is liable to compensate for any damage of goods till it reaches the final destination.
The judgement would give relief to shipping companies engaged in imports as they can claim compensation for the stock destroyed before reaching the consignee at the final destination.
This means insurance coverage was valid till the goods were delivered to the consignees’ warehouse or other final warehouse.
A bench comprising Justice A K Mathur and Justice Tarun Chatterjee in a judgement delivered last week said the extended insurance policy would cover goods till they reached the destination in any part of the country.
The apex court dismissed United India Insurance Company’s appeal that challenged National Consumers Disputes Redressal Commission’s judgment asking it to pay Rs 4.94 crore in compensation to Great Eastern Shipping Company which lost 12,000 metric tons of sugar imported from China in 1994.
“When the coverage was extended on same terms and conditions, it would mean that the goods were covered till the same reached in any part of the country in India,” it stated.
The judges held that “while interpreting the policy the courts should keep in view the intention of the parties as well as the words used in the policy. If the intention of the parties subserves the expression used therein then the expression used in that context should be given its full and extended meaning.”
Source: PTI
The judgement would give relief to shipping companies engaged in imports as they can claim compensation for the stock destroyed before reaching the consignee at the final destination.
This means insurance coverage was valid till the goods were delivered to the consignees’ warehouse or other final warehouse.
A bench comprising Justice A K Mathur and Justice Tarun Chatterjee in a judgement delivered last week said the extended insurance policy would cover goods till they reached the destination in any part of the country.
The apex court dismissed United India Insurance Company’s appeal that challenged National Consumers Disputes Redressal Commission’s judgment asking it to pay Rs 4.94 crore in compensation to Great Eastern Shipping Company which lost 12,000 metric tons of sugar imported from China in 1994.
“When the coverage was extended on same terms and conditions, it would mean that the goods were covered till the same reached in any part of the country in India,” it stated.
The judges held that “while interpreting the policy the courts should keep in view the intention of the parties as well as the words used in the policy. If the intention of the parties subserves the expression used therein then the expression used in that context should be given its full and extended meaning.”
Source: PTI
Ulip managers fare poorly in Sensex test
It's a cover drive that has worked well for the insurance industry. When the captain and the vice-captain of the country's cricket squad teams up with a former captain and ask you to buy insurance, you are most likely to be bowled over.
And if this campaign has helped insurers in raising a lot of money, especially through their Unit-linked insurance plans (Ulips), no one's going to be surprised.
Good beginning. But the story's changing as the innings progress.
Though Ulips have raised more than Rs 30,000 crore as new business premium in the last financial year, a study by DNA Money shows that most of the equity Ulips failed to beat the returns generated by the Sensex in the last one year (July 25, 2006, to July 24, 2007).
Of the 23 equity Ulips from 10 private life insurance companies that the study compared, only seven managed to generate returns higher than that of the Sensex's 51.6 per cent. The average return generated by an equity Ulip during the period was 49.4 per cent.
Equity-linked savings schemes (ELSS), better known as tax-savings scheme, scored a much better 57.8 per cent.
In fact, even in a two-year period, none the 16 Ulips that have been in existence have been able to beat the Sensex return of 45.1 per cent per annum. The average return delivered by Ulips over this period is a much lower 38.8 per cent. Before you jump into any conclusion at this juncture, let's hear the Ulip side of the story.
"It is too early to compare Ulip returns with mutual funds' (MFs) as Ulips have been launched only for 3-4 years now," says Sanjay Tripathy, head, marketing, HDFC Standard Life.
Point.
But then, one should remember that individuals hand over money to insurance companies on the belief that experts handle their investments better.
An expert is deemed to have done well when he generates returns that are greater than the broad market. The Ulips, clearly, seem to have floored the experts.
Some plans, indeed, did beat the Sensex - but just by a whisker.
The pick of the lot over a one-year period has been Tata AIG's Equity Fund, with a return of 64.4 per cent. Coming close was Kotak Life Insurance's Aggressive Growth Fund, which generated returns of 59.7 per cent. Five other funds, which managed to beat the Sensex, did it by 1-2 per cent.
"We have beaten our benchmark BSE 100 by 2-3 per cent over the past three years. Not all managers have been able to do over time," says Bryce Johns, development actuary and chief investment officer at Kotak Mahindra Old Mutual Life Insurance.
Why did others fail?
"As your portfolio gets bigger, it gets difficult to beat the market. Also we can invest for a longer period, as we have no redemption pressures that mutual funds have. People save for a 20-year time horizon," he added.
What one needs to be kept in mind here is that the returns we are talking about are the returns earned on the portion of the premium that is invested and not on the entire premium paid.
Most Ulips have a premium allocation charge in the first year of the policy, which varies from 15-71 per cent of the premium paid, depending on the Ulip chosen. In the second year, this charge is around 15 per cent of the premium paid. The amount that remains after paying this charge is invested. Hence, the actual return for the investors is a lot lower.
"Most investors aren't aware and, more importantly, aren't made aware of the high upfront expense. By the time they find out, it is too late. These expenses directly eat into returns," says Sandeep Shanbhag, director, A N Shanbhag NR Group, a tax and investment consultancy.
"The damage done by high costs in the initial years by Ulips is very high. This, along with the MFs' out performance of Ulips, ensure that there is a huge lead in the initial few years in terms of the corpus," says Amar Pandit, who runs My Financial Advisor.
Insurers do not agree with this. "The entry load for an Ulip is in the range of 10-25 per cent, which is fully refunded in the form of loyalty bonus to the customer who stays for the duration of the contract. In fact, the loyalty bonus in our case can go as high as 100 per cent, if the customer stays on for 20 years," says Rajiv Kumar Gupta, senior vice-president, retail and corporate agency, SBI Life. Those cricketers don't seem to believe in one-dayers.
Source: DNA Money
And if this campaign has helped insurers in raising a lot of money, especially through their Unit-linked insurance plans (Ulips), no one's going to be surprised.
Good beginning. But the story's changing as the innings progress.
Though Ulips have raised more than Rs 30,000 crore as new business premium in the last financial year, a study by DNA Money shows that most of the equity Ulips failed to beat the returns generated by the Sensex in the last one year (July 25, 2006, to July 24, 2007).
Of the 23 equity Ulips from 10 private life insurance companies that the study compared, only seven managed to generate returns higher than that of the Sensex's 51.6 per cent. The average return generated by an equity Ulip during the period was 49.4 per cent.
Equity-linked savings schemes (ELSS), better known as tax-savings scheme, scored a much better 57.8 per cent.
In fact, even in a two-year period, none the 16 Ulips that have been in existence have been able to beat the Sensex return of 45.1 per cent per annum. The average return delivered by Ulips over this period is a much lower 38.8 per cent. Before you jump into any conclusion at this juncture, let's hear the Ulip side of the story.
"It is too early to compare Ulip returns with mutual funds' (MFs) as Ulips have been launched only for 3-4 years now," says Sanjay Tripathy, head, marketing, HDFC Standard Life.
Point.
But then, one should remember that individuals hand over money to insurance companies on the belief that experts handle their investments better.
An expert is deemed to have done well when he generates returns that are greater than the broad market. The Ulips, clearly, seem to have floored the experts.
Some plans, indeed, did beat the Sensex - but just by a whisker.
The pick of the lot over a one-year period has been Tata AIG's Equity Fund, with a return of 64.4 per cent. Coming close was Kotak Life Insurance's Aggressive Growth Fund, which generated returns of 59.7 per cent. Five other funds, which managed to beat the Sensex, did it by 1-2 per cent.
"We have beaten our benchmark BSE 100 by 2-3 per cent over the past three years. Not all managers have been able to do over time," says Bryce Johns, development actuary and chief investment officer at Kotak Mahindra Old Mutual Life Insurance.
Why did others fail?
"As your portfolio gets bigger, it gets difficult to beat the market. Also we can invest for a longer period, as we have no redemption pressures that mutual funds have. People save for a 20-year time horizon," he added.
What one needs to be kept in mind here is that the returns we are talking about are the returns earned on the portion of the premium that is invested and not on the entire premium paid.
Most Ulips have a premium allocation charge in the first year of the policy, which varies from 15-71 per cent of the premium paid, depending on the Ulip chosen. In the second year, this charge is around 15 per cent of the premium paid. The amount that remains after paying this charge is invested. Hence, the actual return for the investors is a lot lower.
"Most investors aren't aware and, more importantly, aren't made aware of the high upfront expense. By the time they find out, it is too late. These expenses directly eat into returns," says Sandeep Shanbhag, director, A N Shanbhag NR Group, a tax and investment consultancy.
"The damage done by high costs in the initial years by Ulips is very high. This, along with the MFs' out performance of Ulips, ensure that there is a huge lead in the initial few years in terms of the corpus," says Amar Pandit, who runs My Financial Advisor.
Insurers do not agree with this. "The entry load for an Ulip is in the range of 10-25 per cent, which is fully refunded in the form of loyalty bonus to the customer who stays for the duration of the contract. In fact, the loyalty bonus in our case can go as high as 100 per cent, if the customer stays on for 20 years," says Rajiv Kumar Gupta, senior vice-president, retail and corporate agency, SBI Life. Those cricketers don't seem to believe in one-dayers.
Source: DNA Money
Now, pay for insurance through a simple SMS
New Delhi: You could be soon buying insurance and other financial services with the touch of a finger. Paying the premium for your life insurance cover is now as simple as typing a text message.
ING Vyasa life insurance has tied up with Paymate India to provide the first of its kind premium payment service through a mobile SMS. The company feels, this mode of payment, will help them reach out to more customers.
"Now you can pay insurance premium via SMS. The entire base of mobile customers is very high in India and is going up rapidly. This will make it easier for customers to pay premium,” said Rahul Agarwal, Vice President - Customer Services, ING Vysya Life.
However this service is currently available only for those who hold an account with Citibank or corporation bank."We already have two banks in the kitty and we are looking forward to adding another 3-4 banks in this quarter. Very soon at least half a dozen bank customers would be able to pay their insurance premiums using the SMS service on their mobile phones,” Ajay Adiseshann, Founder & MD, Paymate said.
And while ING Vysya life insurance has gone ahead to facilitate SMS payment, others are making a start to provide financial advisory on SMS.
Aviva life insurance has tied up with Affle to enable people to get in touch with an Aviva agent, through an SMS. They plan to introduce a host of insurance guidance services over a mobile phone. Just through an SMS you can know how much damage you will do to your pocket by delaying your retirement planning.
No more cutting cheques and standing in queues to pay your premium. and no more appointments with the agent for your financial planning. Life insurance companies are now looking at innovative methods to reach out to a larger younger customer base.
SOURCE: IBNLIVE.com
ING Vyasa life insurance has tied up with Paymate India to provide the first of its kind premium payment service through a mobile SMS. The company feels, this mode of payment, will help them reach out to more customers.
"Now you can pay insurance premium via SMS. The entire base of mobile customers is very high in India and is going up rapidly. This will make it easier for customers to pay premium,” said Rahul Agarwal, Vice President - Customer Services, ING Vysya Life.
However this service is currently available only for those who hold an account with Citibank or corporation bank."We already have two banks in the kitty and we are looking forward to adding another 3-4 banks in this quarter. Very soon at least half a dozen bank customers would be able to pay their insurance premiums using the SMS service on their mobile phones,” Ajay Adiseshann, Founder & MD, Paymate said.
And while ING Vysya life insurance has gone ahead to facilitate SMS payment, others are making a start to provide financial advisory on SMS.
Aviva life insurance has tied up with Affle to enable people to get in touch with an Aviva agent, through an SMS. They plan to introduce a host of insurance guidance services over a mobile phone. Just through an SMS you can know how much damage you will do to your pocket by delaying your retirement planning.
No more cutting cheques and standing in queues to pay your premium. and no more appointments with the agent for your financial planning. Life insurance companies are now looking at innovative methods to reach out to a larger younger customer base.
SOURCE: IBNLIVE.com
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