Non-life players churn top deck

MUMBAI: A host of senior-level changes are in the offing in the general insurance industry. Gaurav Garg is expected to join Tata AIG General Insurance as CEO in place of Michael Carlin who put in papers a couple of months after taking charge. Shrirang Samant, former CEO of HDFC Chubb General Insurance has joined Lloyds of London as their representative in India. Lloyds is expected to open an office in India soon. Mr Garg was formerly head of Tata AIG General Insurance’s personal lines before moving to AIG New York. He will now be returning to take over as managing director. Meanwhile, the search is on for chief executives for Royal Sundaram Insurance and for the public sector United India Insurance. The top position in Royal Sundaram fell vacant after present chief Antony Jacob got larger responsibilities for the region from UK insurer Royal Sun Alliance. The government is engaged in identifying a candidate to replace MK Garg who put in his papers last month. The non-life industry association is also looking for a new CEO for managing the motor insurance pool. Non-life companies are bracing themselves for a fresh round of poaching with several companies planning to set shop this year. The joint ventures include Bharti Axa General Insurance, the joint venture between Future Group (Pantaloon) and Generali of Italy, and Allahabad Bank Sompo joint venture. Shriram Sanlam has already started recruiting a big way Insurance officials are forecasting more changes at senior management level as people leave on account of opportunities created by new entrants. In addition to the already established partnerships a number of new companies are looking at non-life. These include State Bank of India and the Aditya Birla Group. There are also a number of foreign players such as Ergo, IAG of Australia, Berkshire Hathway and a couple of Japanese insurance companies looking at the Indian market. Lloyds of London is planning to open an office in Mumbai soon. Unlike other companies, Lloyds has a different organisational structure. Lloyds recently opened an office in Shanghai to sell reinsurance. Mr Samant, who will represent Lloyds in India, quit HDFC Chubb after HDFC decided to buy out Chubb . over differences over the two partners’ approach to growth.

Source: Times News Network

there is reliance there is TATA why should birla be behind in general insurance

Aditya Birla group plans foray into general insurance
june 14th economic times
The Aditya Birla group is weighing a foray into general insurance. “We are now considering entering the general insurance sector. While companies from the US, UK and Canada have been approaching us for sometime, it is only now that we are thinking about it,” SK Mitra, director at Aditya Birla Management Corporation said. He was here to launch Birla Sun Life Insurance Co’s (BSLI) new unit-linked policy — Gold-Plus Plan. Mr Mitra, however, clarified that general insurance currently remains at a very preliminary stage, although a proposal for entering into the non-life sector has recently been sent to board of directors of the group. Nevertheless, the group has launched a general insurance broking outfit. The present proposal, however, involves floating a company that will design and sell non-life policies possibly in joint venture with a foreign insurer. “The decision to get into general insurance will be based on the overall plans and programmes of the entire group. The Aditya Birla Group has entered into a few large ventures. The non-life venture will be considered in light of these developments,” Mr Mitra said. Aditya Birla Group’s life insurance venture BSLI is now gearing up to regain some market share it lost to other players in the sector. It is targeting a Rs 2,000-crore first premium income in 2007-08 against Rs 950 crore achieved in the previous fiscal. “Our market share declined from 12% three years ago to 5% now. We are gearing up to get the lost share back,” said Mr Mitra. “The promoters will have to double the equity base of the company. They will be required to infuse fresh equity of about Rs 700 crore into BSLI’s capital in 2007-08,” said Fabien Jeudy, vice-president, chief and appointed actuary at BSLI. Meanwhile, speaking to newspersons in Mumbai, Birla Sun Life Insurance CEO Vikram Mehmi said that Birla Sun Life Insurance has changed its strategy and has decided to pursue aggressive growth even at the cost of delaying its breakeven targets. The company, which has a paid-up capital of Rs 672 crore expects to need further investments from shareholders for two more years. Mr Mehmi said that the insurance industry growth rate has turned out to be higher than expected. “Analysts are now estimating that the industry will record a compounded annual growth rate of 45% for the next three years and we want to grow in line if not faster than the industry,” said Mr Mehmi. To increase its share of the market, BSLI would target the second- and third-rung of customers of its bancassurance partners, including Citibank and Deutsche Bank. The bank was also changing its strategy of seeling to subscribers of Idea telecom — an Aditya Birla Group company. After finding that the pilot not very successful BSLI is coming out with tailor made products which can be sold to telcom subscribers. BSLI is a 74:26 joint venture between the Rs 49,440-crore Aditya Birla group and Canadian major Sun Life Financial. “In order to achieve this growth, BSLI has decided to increase its branch network a few fold — by at least 400 in the current fiscal. Currently, the company has 137 branches. Agency force will simultaneously be enhanced to 1 lakh from 58,000 now,” EN Goveia, senior vice-president, direct sales force, told reporters.

With Rs8,000 cr, LIC remains key player

The country’s largest life insurance company, which follows a very conservative investment policy, is still the market-maker with a kitty that is getting bigger every year

Until about five years ago, when India wasn’t on the radar of many foreign institutional investors (FIIs), the Life Insurance Corp. of India (LIC)—the country’s largest life insurance company—along with the Unit Trust of India (UTI)—the largest mutual fund—used to rule the stock market.
LIC was the market-maker and always ready to cushion any fall in the market by its liberal support, often at the unofficial call of the government.
UTI has since collapsed. But LIC, which follows a very conservative investment policy, continues to be there with a kitty that is getting bigger every year, even if FIIs and hedge funds are the ones moving the markets these days.
“We don’t get tempted by the rise in market and rush to put in money,” said LIC managing director D.K. Mehrotra in an interview with Mint. “We need to respect the trust our policy holders have in us.”
Mehrotra oversees the insurance behemoth’s investment portfolio. The size of LIC’s investment book is Rs6 trillion and it expects to add Rs1.15 trillion to it in 2007-08. LIC has 200 million policyholders and an agency force of 1.1 million.
“Out of Rs1.15 trillion, we expect the unit-linked schemes to garner at least Rs35,000 crore. About 8-10% of the rest Rs80,000 will be invested in equities,” says Mehrotra. That translates into some Rs8,000 crore of LIC money flowing into the Indian equity market this year.
Unit-linked policies are those where investors choose to play in the capital market and are ready to bear the risk.
Under the investment norms of insurance firms, LIC needs to invest 50% of its money in Union and state government bonds and another 15% in infrastructure projects. This means it can use 35% of its funds to invest in equities. That’s not a small amount, considering the fact that last year it mopped up Rs1.25 trillion as premium income, out of which Rs40,000 crore was new premium.
But LIC does not want to play aggressively in the equity market.
“We can’t put all our eggs in one basket. We put money in corporate bonds, give project loans and even long-term working capital loans. About 8-10% of our funds is invested in equities,” says Sushobhan Sarkar, executive director (investment).
The average return from investments in the Indian market over the past five years has been 33.12%.
At LIC, an eight-member investment committee, supported by a 10-member research team, helps India’s largest insurance firm in making investment decisions.
“We do not invest in mid-caps. Our focus is the frontline stocks,” says Sarkar. Thirty frontline stocks form the Sensex, the benchmark index of the Bombay Stock Exchange. LIC primarily focuses on them and, beyond them, the top 200 stocks. It has at least 1% stake in more than 300 top Indian firms.
LIC’s outstanding equity investment is about Rs40,000-45,000 crore, says Sarkar. This is the book value of its investments, or the price at which it has bought shares. The market value could be anywhere above Rs1 trillion. That is roughly a fourth of the assets under management of the entire Indian mutual fund industry.
“We are a long-term investor,” says Mehrotra. Does that mean LIC never sells stocks?
“Of course, we sell and make money. All the money we generate through market operations goes to a pool of surplus and after adjusting for all expenses, 95% of the surpluses are distributed among our policy-holders in form of bonus and 5% goes to the owner, the government,” Mehrotra says. LIC describes its profits as “surplus”.
Technically, it does not book profit in the stock market by selling stocks. It books “appreciation” of stock prices.
Even though it has huge amounts of cash to invest, LIC does not want to play the role of a private-equity player, invest in unlisted firms and hand-hold them to the stock market. “We won’t do that,” says Sarkar, as such investments do not necessarily offer handsome returns.
However, given a choice, the insurance major would like to float a bank. “We have relationship with 28 banks that distribute our policies. Ideally, we should have a bank of our own as it is in sync with our business,” says Mehrotra. It holds 27% in Managalore-based Corporation Bank and close to 10% in Delhi-based Oriental Bank of Commerce. It has recently moved the government to raise its 26.32% stake in UTI Bank to over 50%.

Source: Mint

Life insurance industry grows 49% in April

The life insurance industry clocked 49 per cent growth in new businesses, while general insurance players saw 16 per cent increase in April, the first month of the current financial year.

Strong performance by Life Insurance Corporation, ICICI Prudential and SBI Life helped the 16 player-strong life insurance industry to mop up Rs 2,982 crore in April this year compared with Rs 1,996 crore collected in the same month last year, according to data compiled by the Insurance Regulatory and Development Authority.

However, some life insurers such as Bajaj Allianz, ING Vysya Life and Reliance Life saw a decline in premium collections during the period under review.

The country’s largest life insurer, LIC, saw new premiums grow 57 per cent to Rs 2,134 crore in April by selling 15,89,684 policies against Rs 1,355 crore a year ago. It had a market share of 71.56 per cent in April.

The 15 private players together saw their business grow 32 per cent to Rs 848 crore with a market share of 28.44 per cent.

ON THE RISE

Insurers Premium (Rs cr)

ICICI Prudential 271.00
Bajaj Allianz 124.00
SBI Life 90.00
HDFC Standard 70.00
Max New York Life 69.00
Tata AIG 48.00
Aviva 39.00
Reliance Life 33.00
Birla Sunlife 28.00
Kotak Mahindra Old Mutual 26.00
ING Vysya 22.00
Met Life 19.00
Shriram Life 4.50
Sahara Life 1.70
Bharti Axa Life 0.72

ICICI Prudential topped the private players’ chart with its premium income rising 84.5 per cent to Rs 271 crore and had 9.08 per cent share of the market. Bajaj Allianz, which saw 15 per cent decline in business, collected Rs 124 crore with a market share of 4.16 per cent.

The general insurance industry grew 16 per cent in April, which also saw ICICI Lombard emerging as the second-largest non-life insurance player.

If the robust growth is any indication, private players such as ICICI Lombard, Bajaj Allianz and Reliance General are going to give a tough fight to four established public sector players — New India Assurance, Oriental Insurance, United India and National Insurance — in 2007-08.

The eight private players together have increased their market share to 40.5 per cent in April from 34 per cent in the same month a year ago.

With a modest 8 per cent growth in premium collection at Rs 651 crore, New India retained its number one slot by cornering 20.72 per cent of the market.

ICICI Lombard, a formidable challenger to New India now, grew its new premium 36 per cent to Rs 448 crore and had a market share of 14.28 per cent.

Oriental Insurance was at the third place with a flat growth in premium collection at Rs 413 crore and a market pie of 13.16 per cent.

United India saw a 3 per cent growth in business at Rs 407 crore and had 12.97 per cent of the market.

National Insurance grew premium income 8 per cent to Rs 396 crore and had a market share of 12.6 per cent.

Bajaj Allianz General Insurance collected 215 crore in April, followed by Reliance General (Rs 221 crore), Tata AIG (112 crore), Iffco Tokio (Rs 107 crore), Cholamandalam (Rs 73 crore), Royal Sundaram (Rs 73 crore), HDFC Chubb (Rs 22 crore).

Specialised institutions ECGC and Star Health & Allied Insurance collected Rs 38 crore and Rs 34 crore, respectively, in April.

Source: Business Standard

General insurers may revise rates

Non-life insurers may soon get the freedom in pricing their products with the Insurance Regulatory Development Authority (Irda) asking them to file their revised-base rates along with the discounts they wish to offer to their customers, supported by adequate statistical information justifying the discounts.

When representatives of all the 12 general insurance companies met Irda chairman C S Rao on Monday, they had asked him to do away with caps on discounts. The insurance regulator had capped discounts that general insurers can offer on the base rates when it lifted the price controls with effect from January 1, 2007.

Irda has agreed to give insurers the freedom in pricing their products, CS Rao told Business Standard . Rao further said, “Each insurance company will have to give a rating structure to us as each insurer’s rating philosophy differs. On the base rate filed by an insurance company, there will be a set-off.” Rao noted that six months of detariffing had also helped companies “gain experience” to deal with new market situations.

The Irda has left it to insurers to file their revised rates whenever they are ready with them.

The non-life insurance industry was detariffed from January this year. Though Irda lifted price controls on insurance products (fire, engineering and motor) from January 1 this year, it had put caps on the discounts, fearing a price war between them.

Insurers can give a maximum discount of up to 51.25 per cent of the erstwhile tariff rates on individual rated products (those risks where the sum insured is more than Rs 10 crore), up to 43.75 per cent in case of class-rated products (those risks whose sum insured is less than Rs 10 crore) and 20 per cent on motor own damage for private vehicles.

At the meeting with the Irda chief, insurers also reiterated their demand to advance the second phase of detariffing to January 1, 2008, from March 31, 2008, which was accepted by the regulator.

The second phase of detariffing will allow insurers the freedom to change wordings, terms and conditions of insurance policies. The demand of preponing the second phase is keeping in mind the renewals of major corporate insurance policies which falls on April 1 so as to give insurers a three-month time to prepare.

Rao said, “Insurers will have to identify the revised terms and conditions, flexibility they want in terms of packaging of insurance products, alternative wordings in respect of certain areas. However, in certain conditions there will be no changes in terms and conditions and the interests of the insured will be protected. The initiative has to come from the insurance companies.”

Meanwhile, the General Insurance Council ( a self-regulatory body of all insurers) is working on developing common market wordings that can be used by all insurance companies once Irda allows insurers the freedom to frame their own wordings.

About the demands put forth by insurers at the meeting, an insurance official said, “Let there be competition on product innovation and packaging of insurance policies. The limitations by the Irda are restricting competition. Insurance companies have requested Irda that these restrictions may be dispensed with and they be allowed to rate the policies based on their perception of risks so that the benefits of competition can go to the customer.”

Source: Business Standard