Insurance giant AIG facing possible breakup

CHARLOTTE: Nearly six months after American International Group Inc. got its first massive bailout from the government, it is still stumbling. 

The big insurer keeps losing money and is unable to sell some of its biggest assets. Some Wall Street analysts have stopped tracking it. And it appears on the verge of getting another helping hand from Washington. 

Like Citigroup Inc., which on Friday received another round of federal support, AIG is considered too big and too important to fail. 

``If the government lets AIG fail, I think you are going to see an enormous sort of shock wave across all industries because AIG had their finger in a lot of different areas,'' said Russell Walker, a risk management professor at Northwestern University in Chicago. 

Expectations are that AIG and the government will announce soon, perhaps as early as Monday, their latest plan to prop up the New York-based company. Late Friday, AIG confirmed it will report its fourth-quarter earnings on Monday before the market opens. 

The Financial Times, citing people who spoke on condition of anonymity, reported this week that the government will swap the 80 percent stake it currently holds in AIG for even bigger pieces of three units that would be split off from the company: AIG's Asian operations, its international life insurance business and its U.S. personal lines business. A fourth unit made up of AIG's other businesses and troubled assets could be created as well or sold off in pieces, according to the FT report. 

In return for the breakup, the government would relax the terms, or cancel, a portion of the $60 billion loan that was at the center of a restructured $150 billion rescue package, the newspaper said. 

The company may also need another loan, its fourth, from the government as it is expected to report a $60 billion fourth-quarter loss Monday. 

AIG has been forced to seek more help because of a combination of factors including the recession and its falling stock price, now well under $1. Perhaps its biggest problem is the asset sales that were supposed to help the company pay back government loans aren't happening, in part because the credit crisis that initially landed AIG in trouble last summer is also preventing would-be buyers from getting financing. 

``If companies actually have cash, or the ability to make a purchase, they are not jumping on AIG right now,'' said Donn Vickrey, an analyst with Gradient Analytics Inc. ``The prudent thing for (companies) to do is just say 'no' at this point unless it's just an insanely cheap price.'' 

That advice doesn't bode well for AIG, which said in October it would sell off business units to repay an original $85 billion loan from the Federal Reserve that it received a month earlier. The loan was reduced to $60 billion in November as part of the larger restructured rescue package totaling $150 billion; it had roughly $38 billion outstanding as of this week. 

As of Feb. 13, AIG had already sold interests in nine businesses. But it needs to sell more. 

``In ordinary times, the sale of these assets would have been relatively easy,'' said Bob Hartwig, president of the Insurance Information Institute, a New York-based industry group. ``The inability to sell the assets today appears to be more of a function of the inability to finance the deals as opposed to interest in purchasing many of these assets.'' 

According to analysts, AIG has been unable to solicit bids for some of its top units, including American Life Insurance, AIG's U.S. life insurance operation; American International Assurance, Asia's largest life insurer; International Lease Finance Corp., AIG's aircraft leasing subsidiary; and a broker-dealer operation called AIG Advisor Group. 

The lack of interest can be seen in the company's stock price. Shares of AIG fell 10 cents, or 19 percent, to 42 cents Friday. Shares are down 96 percent since its first bailout was announced. 

Some analysts have given up hope. ``Given the current problems and increased government involvement, it is an unanalyzable company,'' Stifel Nicolaus & Co. analyst Michael Paisan wrote in a note to investors Tuesday, adding he is ending his coverage of the company. ``We have very little confidence in the ability to analyze future earnings.'' 

Last week, Friedman, Billings, Ramsey & Co. analyst Bijan Moazami also dropped coverage of AIG, saying the company's predicament is so uncertain that ``analysis of AIG is no longer relevant.'' 

The government steps expected to be announced could put more of a burden on U.S. taxpayers, but the Obama administration may have no other option than to take a bigger interest in the beleaguered insurer. 

On Friday, Citigroup agreed to give the government up to a 36 percent stake in the struggling bank, a move intended to strengthen its capital base. Citi has already received $45 billion in cash from the government. 

Problems at AIG did not come from its traditional insurance operations, but instead from its financial services units, and primarily its business insuring mortgage-backed securities and other risky debt against default. The government maintains it needed to bail AIG out last September, saying the company's failure would have further disrupt markets and threaten the already fragile economy. 

AIG's traditional insurance subsidiaries are widely viewed as safe. If AIG needed to file for bankruptcy protection, ``AIG's insurance subsidiaries are separately capitalized and would continue to operate,'' Hartwig said. 

In recent days, AIG has said that it's evaluating ``potential new alternatives'' to fix its problems. Exactly what those are, the company won't say. 

``We continue to work with the U.S. government to evaluate potential new alternatives for addressing AIG's financial challenges,'' AIG spokeswoman Christina Pretto said Friday. ``We will provide a complete update when we report financial results in the near future.'' 

Hartwig said, ``we don't know what the form of the deal might be,'' and added, ``obviously there are hot and heavy negotiations going on.''  

Source:Economictimes

   

US stocks slide to 12-year lows, oil also down

NEW YORK: A deep contraction of the US economy pushed oil prices down on Friday while global equity markets fell on the latest US government move to save ailing Citigroup, knocking the S&P 500 and Dow to 12-year lows. 

The US government said it could take as much as a 36 percent state in Citigroup's common stock, leading the US dollar to rise broadly as investors worried that other American banks might also need a similar show of support. 

US Treasuries erased early gains and long-dated bonds turned lower after a brief paring of stock losses led investors to fear a rebounding equity markets could take money away from looming massive sales of government debt. 

The broad market Standard & Poor's 500 Index fell to its lowest close since December 1996, increasing the depth of a bear market that is now off 53 percent from its peak in 2007. 

The Dow Jones industrial average fell to its lowest close since May 1997. 

The US government will swap up to $25 billion of its preferred shares of Citigroup into common stock of the bank in one of its most dramatic efforts to prop up the battered banking sector. 

Citigroup will stop paying dividends on its preferred and common stock and promised to shake up its board of directors. 

Citigroup shares plunged 39 percent to close at $1.50, while shares of Bank of America plummeted almost 26 percent to $3.95. 

"There are continued beliefs that Citibank is not the last bank that the government will take a large stake in," said William Lefkowitz, options strategist at brokerage firm vFinance Investments in New York. 

"Some people believe that if the government takes a 30 to 40 percent stake, which they did in Citibank, that would be considered some form of nationalization," he said. 

The Dow fell 119.15 points, or 1.66 percent, at 7,062.93. The S&P 500 lost 17.74 points, or 2.36 percent, at 735.09. The Nasdaq Composite Index declined 13.63 points, or 0.98 percent, at 1,377.84. 

The dollar rose but the yen rebounded from sharp weekly losses as month-end and repatriation flows gave some support to the currency, analysts said. 

The dollar rose against a basket of major currencies, with the US Dollar Index up 0.33 percent at 88.132. Against the yen, the dollar fell 0.87 percent at 97.53. 

The euro was down 0.47 percent at $1.267. Oil prices fell. US crude fell 46 cents to settle at $44.76 a barrel after touching a session low of $42.55, reversing a three-day rally. London Brent crude fell 16 cents to $46.35 a barrel. 

Despite persistent concerns about the fragility of global banks, evidenced by another battering of US and British financial stocks on Friday, investors are becoming warier of buying longer-term Treasury notes and bonds. 

Investors fear that a massive tide of government bond issuance will push prices lower. 

The benchmark 10-year US Treasury note fell 8/32 in price to yield 3.03 percent. But the 2-year US Treasury note rose 6/32 in price to yield 0.99 percent. 

"The Treasury market is acting as a safe haven and going forward I am somewhat concerned because I am not sure what will stimulate the interest in Treasuries, with all the financing we are doing," said Joe Keetle, senior wealth manager at Dawson Wealth Management in Cleveland. 

US gold futures settled a hair lower, falling for a fifth straight session after bullion climbed above $1,000 last week, as investors sold the metal amid volatile stock markets. 

Gold for April delivery settled down 10 cents at $942.50 an ounce in New York. 

European shares fell on the Citigroup news and as a big loss at Lloyds Banking Group hit British banks. 

The FTSEurofirst 300 index of top European shares fell 1.78 percent to close at 719.40 points. 

"Citigroup was the main thing today," said Howard Wheeldon, strategist at BGC Partners in London, "even though everybody knew it's been coming for a while." 

The deal is "a creeping step towards full nationalization," he said. 

Lloyds fell 22.3 percent after it unveiled a big loss for 2008 and said it had not yet finalized details of its plan to put billions of pounds of assets into a UK government-backed insurance scheme.

Source:Economictimes 

Second health insurance product launch by HDFC Standard Life

CHENNAI: HDFC Standard Life on Friday launched its second health insurance product - 'SurgiCare', aimed at providing timely financial (fixed lump sum) support to policy holders in case of medical surgeries.'

The policy covers an individual against 82 surgical procedures and includes an assured lump sum benefit, irrespective of actual medical cost incurred, HDFC Standard Life, Health Business Senior Vice President Fredrick D'Souza told reporters here.

The policy comes with a hospitalisation cash benefit option, providing additional financial security to the insured during the period of hospitalisation, he added.

He said the initial sum assured chosen by the customer automatically increases by five per cent every policy year. "The five per cent is a simple addition with a maximum increase of upto 50 per cent of the initial sum assured, allowing an individual to successfully cater to increasing medical costs", he said.

He said HDFC SurgiCare offers premium payment options (monthly, half-yearly and annually) and offers a premium discount of 35 per cent to policy holders opting for cover in excess of Rs two lakh. 

LIC shortlists 4 cos for IT platform rejig

MUMBAI: Life Insurance Corporation of India (LIC) has shortlisted four of the leading Indian IT companies for its front office modernisation plan. The shortlisted companies include Infosys Technologies, L&T Infotech, Tata Consultancy Services (TCS) and Wipro. 

The corporation has sought bids from IT companies for modernisation of its Micro Focus COBOL based FEAP, which is the core insurance solution of LIC. The FEAP runs in all branches of the corporation and is currently using Red Hat Enterprise Linux Version 4.4. 

This extremely low-cost and home-grown software caters to the requirements of all offices of the corporation. 

“We currently have a distributed IT framework on a Cobol platform. Now, we want to centralise it in some locations,” said LIC chairman TS Vijayan. 

He added it was becoming necessary to integrate the distributed system, because LIC was rapidly increasing its network by opening many satellite offices which have skeletal staff, but provide most of the basic service functions. 

“With the number of offices going up, we are finding distributed system expensive and controls are not that effective. To go to the next level, we want to centralise the IT in around 100 centres,” said Mr Vijayan. 

A centralised solution will require database migration from the Cobol platform and web enablement of LIC’s business. in the range of Rs 200-500 crore.

Source:Economictimes 

SBI likely to receive Rs 2,000-crore investment from LIC

MUMBAI: State Bank of India has plans to raise around Rs 2,000-crore through the issue of upper Tier-II bonds to Life Insurance Corporation of India (LIC) by the end of this month, an SBI source said.

"SBI plan to raise around Rs 2,000-crore from LIC by the end of this month. This is a part of our regular capital-raising programme," the source told PTI here today.

The bonds will have a maturity of 15-years and the capital will be used to fuel the business expansion plans of SBI, the source said.

Country's largest lender has plans to raise around Rs 18,000-crore worth funds over a period of 1-2 years, out of which it has already raised Rs 4,000-crore, the source said.

"With the LIC's Rs 2,000-crore investment, the bank would be completing Rs 6,000-crore investment in the current fiscal," the source said. 

Source:Economictimes

Wall St sinks on Obama’s health sector plans

New York: US stocks fell in volatile trading on Thursday as investors sold off shares of healthcare companies such as Merck & Co on worries that US President Barack Obama’s budget proposal will strangle profits.

A batch of sour economic data added to the gloom, spurring investors to sell shares in big consumer companies such as McDonald’s Corp and Coca-Cola Co, which slid 3%

.

The plan to expand healthcare coverage and curb costs calls for cutting Medicare payments to private insurers, letting consumers buy cheaper medicines and preventing drug companies from making deals that block generic competition.

Merck was the Dow’s biggest weight, down 6.7% at $26.04. Health insurers also fell, including Humana, which lost 19.5% to $23.64.

“They are certainly looking at providing healthcare across the board for everyone, but to pay for that they are looking to obviously reduce revenue for some of the healthcare agencies,” said Peter Jankovskis, director of research at OakBrook Investments LLC in Lisle, Illinois.

The Dow Jones industrial average dropped 88.81 points, or 1.22%, to 7,182.08. The Standard & Poor’s 500 Index shed 12.07 points, or 1.58%, to 752.83. The Nasdaq Composite Index fell 33.96 points, or 2.38%, to 1,391.47.The Dow is down 10.2% for the month and 18.2% year-to-date.

Adding pressure, financial shares trimmed gains after a report showed the number of troubled US banks soared in the fourth quarter, tempering optimism about the prospect of another government bailout for the sector. Among laggards, Citigroup slid 2.4% to $2.46.

On Nasdaq, biotech companies including Gilead Sciences and Amgen were among the primary laggards, falling 5 and 9.4%, respectively.The S&P Health Care index fell 5.1%.

After the closing bell, Dell Inc reported fourth-quarter earnings of 29 cents a share, excluding items, above the 28-cent average estimate of analysts surveyed by Reuters Estimates. However, revenue of $13.4 billion missed analysts’ estimates of $14.06 billion.

Shares of the world’s No. 2 personal computer maker rose 2.1% to $8.38 in extended trade.

The government released more bleak news on the economy on Thursday as one report showed the number of US workers continuing to claim jobless benefits notched a fresh record in the second week of February while another showed US orders for long-lasting manufactured goods fell for a sixth straight month in January to a six-year low, and data showed new homes sales slumped to their lowest since 1963.

Shares of General Motors fell 6.7% to $2.38 after the auto-maker posted a quarterly loss and said its auditors were likely to cast doubt on its viability.Declining stocks outnumbered advancers on the NYSE by 10 to 9 and on the Nasdaq by about 5 to 3. 

Source:livemini

MFs gear up to counter election uncertainty

MUMBAI: With the uncertainty over general election looming large, mutual funds are taking positions to counter any market volatility till a new government comes in place. Some fund houses are looking at conservative sectors which are less impacted by market trends, maintaining a cash level of 10-20 per cent in their equity schemes. 

Election is perceived to be the biggest domestic event that could dent markets in 2009. Already bruised by the global recession, cautious fund mangers are taking investment calls. 

FMCG, pharmaceutical, infrastructure oil and gas, agriculture and auto have emerged as the preferred sectors to counter any sudden market volatility from the election results. 

“The pay hikes under Sixth Pay Commission for 34 per cent of employees in organised sector will boost sales of FMCG and automobile industries; operating margins of the big companies are expected to go up consequently,” said Gopal Agrawal, head-equity, Mirae Asset. 

Increasing rural income with higher minimum support price for various commodities will add to the prosperity of the FMCG sector. 

“In view of rising rural income and more agricultural produce despite recessionary impact, we will invest in any company (fertilizer, agri products etc.) wherein income comes from rural marketing,” added Mohit Mirchandani, head – equity, Taurus Mutual. 

Taurus Mutual Fund is looking at low beta and low correlation (to broader market) stocks. “These stocks chart their own course with less impact from broader market conditions. Hence, they will act as a cushion against any uncertainty,” reasoned Mirchandani, who is also mulling investing in infrastructure and agriculture sectors. 

Sanjay Sinha, chief executive officer, DBS Cholamandalam, is also positive on the infrastructure sector. “Once a stable government is in place, infrastructure spending is bound to increase with commencement of a slew of greenfield projects,” he explained. 

Tata Mutual Fund has 50 per cent exposure to large cap banks and FMCG companies under Tata Pure Equity Fund, while Mirae Asset is significantly overweight on FMCG, pharma and auto companies under its India Opportunity Fund. 

Pharma companies with adequate cash flows are also seen as a defensive bets against uncertainty by fund managers. 

Meanwhile, UTI AMC is looking at domestic demand driven companies with high cash flows and relatively higher return on equity in the space of telecom, FMCG and pharma.

Source:Economictimes

Life insurers see 3.5% growth in FPI

KOLKATA: The period from January to March every year, is considered heavy selling months for the life insurance sector and companies that lag behind during the initial period of any fiscal, have always been depending on this period to catch up with their targets for the fiscal. Insurance sale goes up since almost every individual embarks on their tax planning during these three months. 

This has possibly helped the sector register a positive growth figure in first premium income (FPI) for the period April to January 2009, after reporting a fall in FPI during April-December 2008. 

Data released by the Insurance Regulatory Development Authority (Irda) for January 2009 revealed that the life cover sector managed a 3.5% growth in first year premium during April 2008 to January 2009 vis-à-vis a 2.39% fall during April-December 2008. 

FPI refers to the first premium paid by an individual while buying a life cover. It also includes single premium policies, where an individual pays a premium only once. 

Total premium income for January 2009 stood at Rs 13,043 crore (Rs 9,551 crore) while for the period April 2008 to January 2009 it was Rs 65,337 crore (Rs 63,128 crore). 

Overall growth for the period may have been positive, but the private sector showed a fall in growth rate for FPI to 13% in April 2008 to January 2009 against 20% during April-December 2008. Life Insurance Corporation (LIC), on other hand managed to almost arrest its 15% fall in FPI income during April-December 2008 to 2% during April 2008 to January 2009. 

Interestingly, the private companies registered a 24% fall in FPI income during January 2009, while LIC witnessed a 72.53% growth in FPI. Sale of individual single premium policies, which rose 198% in January 2009, saved the day for LIC. This has, in fact, pushed up the growth rate for the segment in the entire life insurance sector by about 168%. 

In contrast, private insurers saw FPI decline for almost all categories of products except group policies. Individual single premium policies saw a 44% fall followed by group single premium policies at 37% and individual non-single premium policies at 25%. 

Individual non-single premium policies for the entire life insurance industry saw a 32% fall in premium income during January 2009, while for the period April-January 2009, the fall was 9%

Source:Economictimes

Be careful while filing your tax return

At the outset a common misconception that a taxpayer may carry is that he is not required to 

file any return because his employer has deducted the requisite tax at source from his salary. Every person, however, is supposed to file a return even if the entire tax has been deducted and paid to the government by employer. 

SELECTION OF RETURN FORM TO BE USED

The first step in filing of a tax return is to select the correct Form of return. It should be noted that the Forms of return may be changed in the middle of the year. The taxpayer, therefore, need to file in the new form. There are eight Forms of return notified by the tax authorities. Out of these, four are applicable to individuals/HUFs. Therefore, correct form needs to be filled in.


COMMON MISTAKES WHILE FILING THE RETURN FORM

1. Interest from bank deposits or NSC certificates should be disclosed

Even though the deduction for interest incomes was withdrawn three years back, many people still do not disclose the interest which they may have earned from their bank deposits or NSC certificates. No matter how small the amount is, such interest should be disclosed in the return. One should not make the mistake of skipping the interest income altogether on the basis that it is not shown in Form 16, as in many cases, the employer may have not at all considered the interest income for computing the TDS of the employee.

2. Deduction for investment made under 80C, 80CCC & 80 CCD is restricted to Rs 1 lakh

Further, it should be noted that deduction for investment made under Section 80C, contribution to pension fund under Section 80CCC or for contribution to pension scheme of the employer under Section 80CCD is restricted to an overall limit of Rs 1 lakh. Benefit under Section 80C can also be claimed for tuition fees paid by an individual for their children and for the repayment of principal amount in respect of home loan taken by him.

3. Income of spouse or minor child may have to be clubbed with the income of taxpayer

There can also be cases where the income of spouse or minor child of the taxpayer may be liable to be clubbed with the income of the taxpayer as per provisions of tax laws. In such a scenario, it is pertinent that the correct Form of return is used to file the return of income.

4. Be cautious while calculating surcharge and education cess

It is common to make a mistake while calculating the amount of surcharge and education cess on the amount of tax payable. It needs to be noted that surcharge of 10% is not required to be added to the tax if the total income does not exceed Rs 10 lakh. However, education cess should be added to the amount of tax at the rate of 3% even if the total income is less than Rs 10 lakh. The correct method is to first add surcharge of 10% to the tax, if it is applicable, and thereafter, add education cess at the rate of 3% on such aggregate of tax and surcharge.

5. Safely file all relevant documents for future needs

Though the requirement to attach various certificates, documents, etc., along with the return has been dispensed with, one should not commit the mistake of trashing away such documents on the premise that these would not be required in the future. The tax authorities might require any document to be furnished by the taxpayer in case a scrutiny proceeding is initiated for verifying the claims made in the return.

6. Double check all key information like PAN No., bank account details, communication address etc

Some taxpayers may commit error in quoting the correct Permanent Account Number (“PAN”). The correct 10 digit PAN should be filled in legibly. Appropriate care is required while filling in the address as all the notices and other communication from the tax authorities is posted to this address.

In case of a refund, the bank account number needs to be filled in accurately. In case the refund is opted to be received via ECS direct into the bank account, adequate care should be taken to correctly fill in the MICR code. Any mistake may lead to problems in credit of tax refund and consequent inconvenience.

PRECAUTIONS WHILE FILING THE RETURN

1. File the return in time

Taxpayers often tend to wait too close till the last day to file the return. This often leads to a lot of inconvenience. And even if, in order to avoid the long queues at the counters receiving the paper returns, a taxpayer plans to file the return online, filing very close to the last day is not advisable given the fact that peak load on the servers of the e-filing website during the last few days may make the whole online filing experience quiet frustrating. If the clock on the last day ticks beyond 12 at midnight, any return filed thereafter would be treated as having been filed on the next day.

Filing return after the due date may prove to be a costly mistake for a taxpayer who has incurred losses which he wants to carry-forward to future years (e.g., house property loss, short-term capital loss, long-term capital loss, etc.). Under the tax laws, such losses are not allowed to be carried forward for being set-off against the income of future years unless the return has been filed by the due date even though all the taxes have been pre-paid. Mostly, the taxpayers filing a loss return for the first time commit this mistake.

2. Online filing of returns

Many taxpayers, opting to file their return online, are of the perception that having filed the return online without a digital signature, submission of Form ITR-V is a mere formality which can be completed anytime. This is a misconception. If the return is filed online and the taxpayer does not have a digital signature, he should take two printouts of Form ITR-V, verify them and submit to the tax authorities within 15 days of filing the return online. The taxpayer would be returned one copy of Form ITR-V by the receiving official after affixing the stamp and seal, which he should preserve carefully. If Form ITR-V is filed beyond 15 days, it would be deemed as if the return was not filed online in the first place and it might be too late by then.

Similarly, if a paper return is filed, the acknowledgement slip should be preserved carefully.

Thus, a little extra precaution on the part of taxpayers can help them avoid committing mistakes while filing of the tax return and keep them away from taxman.

(The author is a senior tax professional with Ernst & Young)

Source:Economictimes 

Lic's Jeevan Varsha

Powerd By eCRMagic 

 

SBI’s low loan rates no threat to HDFC: analysts

New Delhi: State Bank of India’s special concessional home loan rate of eight per cent may not prove a real threat to housing loan market leader HDFC, which still offers borrowers a lower overall interest cost, analysts believe.

Analysing the cost benefits offered by the public sector lender’s special home loan rate for the borrowers and the competition it poses to HDFC, equity analysts at brokerage firm Edelweiss Securities in a report said that the scheme would not be “a material threat to HDFC.”

While short-term interest savings offered by SBI is “more or less offset by HDFC’s competitive edge” on factors like ease and quality of service and process time, the average interest rate for the full tenure of the loan also works out to be lower in case of HDFC, they noted.

Under SBI’s special scheme, the rate would be fixed at 8% for the first year, while it would increase to 10.25% from the second year for loans up to Rs30 lakh and to 10.75% for loans bigger than Rs30 lakh.

This would give an average rate of 9.92% for loans up to Rs30 lakh with a repayment period of 20 years, as against HDFC’s prevailing lending rate of 9.97% for a similar loan, Edelweiss said.

When contacted by PTI, SBI officials did not respond to the queries on issues raised in the report.

Source:Livemint

Does your mediclaim pass the fitness test?

If health is wealth, the reverse also holds true. Yet 70% of the Indian population who don't plan their health care expense through insurance. As a result almost 3/4th of the medically uncovered population are forced to sell assets to fund their hospitalisation expenses.

As Binay Kumar Agarwala, senior V-P, health business, ICICI Prudential asks, "Why do you want to risk other goals like buying a house to meet your medical expenses? There is a systematic way to save for your unplanned medical expenditure at a nominal cost."

There are two kinds of policies available in India. The first is the indemnity policy which covers the cost of hospitalisation. The claims are settled by the insurer either on a cashless basis through a tie-up with hospitals or by reimbursing bills. Alternatively there are defined benefit plans which include critical illness policies and payment of a lump sum on the diagnosis of any of the named critical illnesses.

In a Critical illness cover you will be reimbursed the amount spent if within the limit of the cover. However the critical illnesses be it cance, stroke, renal failure ir major organ transplants are not standardised and may vary from insurer to insurer.

However, the insurers will not cover any of these illnesses if they get diagonsed within 90 days from the effective date of the policy. Similarly you can top up to your existing mediclaim if you want to increase the sum assured. For example, most insurers offer mediclaim covers of Rs 5 lakh. If you want a cover of Rs 10 lakh then you can have a basic cover and a top up than splitting it into two policies.

Both general insurance and life insurance companies are present in the health space today. The defined benefit plan could be a handicap for an individual who has signed up for a less sum assured. Customers often complain of part payment of claims in mediclaim.

At such times, a fixed benefit plan may be a good option as you know how much you will earn from your cover in advance. But mediclaim gives you a wider coverage and includes not-so-critical diseases such as accidental insurance coverage, expenses incurred on cataract operation etc experts say.

‘With the growing cost of health care in urban India and a rise in the incidence of lifestyle diseases, consumers feel the need for insurance coverage. Organizations usually opt for a group health cover for their employees. On the retail front, the standard family floater plan on indemnity basis is most popular," says Sanjay Datta, Head, Customer Service-Health and Accident of ICICI Lombard.

Firstly you should look at the annual limit of your policy. According to experts if you hail from a small or mid-sized town you should look at a cover of Rs 2-3 lakh. If you reside in a metro then you should not look at covers less than Rs 4-5 lakh. Ensure your mediclaim offers long term coverage. The general insurance covers require renewals each year, while the policies issued by life insurance companies are valid till the term expires.

‘Policies differ widely in coverage and cost. Contact the insurance company's call centre, or ask your agent to show you policies from several insurers so you can compare them," Mr Datta adds. Now you even have insurance aggregators online who offer comparative quotes from different insurance companies.

The mediclaim premiums can approximately fall in a range of Rs 7000 to 8000 for a 35 year old individual for a sum assured Your checklist The hospital should be listed with the TPA Ensure you undergo a treatment at any of the hospitals listed with your insurer.

Once you are discharged from the hospital you have to forward the concerned medical reports and documents along with the medical bills to the TPA. Then in return TPA pays of the hospital dues by issuing a letter which guarantees payment of dues for the treatment undergone by you.

Insurers have introduced sub limits in mediclaim policies to tackle the rise in health care costs. The most common sub-limits are room rents, doctors' fees and diagnostics. If you have a sum insured of Rs 1 lakh and the insurer has capped your room rent at 1-1.5% of the sum insured then your room rent cannot exceed Rs 1000. If it exceeds then you have to pay out the balance from your pocket.

Similarly insurers also impose a sub limit on doctors' fee at 25-30% of the bill amount. Check to see that the policy states the date the policy will begin paying (some have a waiting period before coverage begins) and what is covered or excluded from coverage. Moreover it makes sense to have an additional mediclaim even if you are covered under your employer's mediclaim scheme.

The need for this cover will be felt especially in case of a job loss or a job transition as the employer's cover would lapse. Last year’s Union Budget gave an additional incentive to sign up for a mediclaim by announcing an additional deduction of Rs 15,000 per annum under Section 80 D if you foot the premium charges for your parents.

As per the earlier stipulations, you could avail of deduction up to Rs 15,000 per annum on the premium payment for dependent parents, spouse or children. Now as per the Union Budget 2008-09 the additional exemption under Section 80 D is applicable on policy holder's parents alone.

Most insurance companies offer family floater plans, which cover an individual, spouse and children. Often parents are left out of such plans and the individual has to go for another health plan for his/her parents. In such cases the exemption limit of Rs 15,000 was inadequate given the rise in medical costs, the insurers feel. However, the premium payment has to be via cheque to be eligible for tax rebate.

Source:Economictimes  

Promoters, MFs shady deals in focus

MUMBAI: The abrupt resignations of senior investment officials at a couple of asset management companies recently could turn the spotlight on some of the ‘deals of convenience’ struck between promoters and fund managers during the latest boom. 

Such transactions, mostly involving mid-sized companies, helped promoters boost valuations of their firms while the fund house gained by way of inflows into its equity schemes. 

According to dealers at institutional broking houses, a few fund houses, including some of the big names in the industry, are now left with at least half a dozen such ‘lemons’ in their portfolios. 

In some cases, the promoters had verbally committed to buy back the shares later at a pre-decided price, but are now unable to do so because of liquidity problems. The fund houses are stuck with these shares, because there are no takers in the market for these ‘high fliers-turned-fallen angels.’ “The holdings in such companies are not huge compared to the size of the portfolio,” says a broker. 

“But looking at the fundamentals, or rather the lack of them, it is intriguing how these stocks made it to the portfolios of mutual funds. When the market was booming, nobody objected, because the returns were too good to resist. But if the downturn persists, some uncomfortable questions are bound to be raised.” 

In one instance, a mid-sized textile group invested around Rs 300 crore in equity schemes of three fund houses with an understanding that at least 50% of that money should be used to buy shares of the flagship firm through the open market. The fund houses obliged and the stock price surged as a result of open-market purchases. 

In this case, mutual funds were sensible enough to exit the stock in time. But investors trying to piggy back on the fund houses ended up burning their fingers. The stock is now down 75% from its peak level seen last year. And while the promoter may have used company funds to ramp up the stock price, it will reflect in the balance sheet, alongside the entry ‘investment in mutual funds’. 

“If highly-rated fund managers are willing to back a little-known company, it automatically results in the re-rating of the stock,” says a dealer at an institutional broking house. “Little wonder then that promoters are willing to pay a ‘premium’ to get a fund house on board,” he says. 

In such transactions, fund houses buy the shares directly from the promoter, instead of doing it through the open market. Promoters of mid-cap companies usually hold 4-5% stake through unofficial channels, which are not reflected in the shareholding pattern as disclosed to stock exchanges. 

The shares, held through entities indirectly controlled by promoters, are offered to fund houses. For instance, if the stock price is around Rs 100, the deal may be struck at Rs 80. And while the trade will be entered on the screen at Rs 100, the difference will be returned to the fund house in cash, or by way of some quid pro quo deal.

Source:Economictimes

DLF Pramerica Life Insurance launches unit linked pension plan

New Delhi: DLF Pramerica Life Insurance, the joint venture of realty major DLF and US-based Prudential International Insurance, on Monday launched unit linked pension plan DLF Pramerica Golden Age.

“The security provided by DLF Pramerica Golden Age is particularly relevant in these uncertain times. This product offers several advantages and flexibilities to help take care of our customers retirement-related financial worries,” DLF Pramerica Life Insurance managing director and CEO Kapil Mehta said in a release.

It also supports their retirement planning and wealth creation goals for saving regularly towards their policies, by crediting up to 200% of regular premium to their funds over the term of the policy, he added.

DLF Pramerica Life Insurance commenced operations in India on 1 September 2008.

Other than DLF Pramerica Golden Age, its existing product portfolio comprises two other insurance products, DLF Pramerica Family Income Plan, which offers customers regular monthly income to their families in the event of their untimely death.

The other product is DLF Pramerica Wealth+, a mix of investment opportunity and death protection coverage, giving a family the benefit of security along with the potential for above average investment returns.

Source:Livemint

Cos pep up unit-linked insurance schemes

CHENNAI: The tough market conditions for unit-linked insurance plans (ULIPs) may have taken a toll on insurers, but hasn’t discouraged product 

innovations. 

Companies like Tata AIG and ICICI Prudential Life are betting on reviving the ULIP market by offering lower risks and higher return potential. New business premium for private sector players fell more steeply in November and December partially due to the marked slowdown in ULIP sales. 

While Tata AIG has launched a ULIP that enables policy holder to enjoy returns based on the highest net asset value (NAV) declared over 100 months, ICICI Pru has designed a return guarantee fund (RGF), which provides guarantee on the customer’s first premium investment by shielding it from equity market volatilities. 

Tata AIG’s InvestAssure Apex offers a unique feature called the ‘guaranteed maturity unit price’ (GMUP). Company officials say GMUP captures the highest unit price of the ‘apex return lock-in’ fund recorded on the 100 reset dates. 

Experts say this means that on a pre-decided date in each calendar month, the NAV of the apex return lockin fund will be recorded for 100 months and the highest NAV among the 100 NAVs will be guaranteed to the investor, if the policy remains in force till maturity. 

“The product guarantees the upside for the customer. The flexibility encourages participation and the guarantee will provide customers confidence in this volatile market. We expect a very enthusiastic response from customers to this truly innovative solution for its limited period of availability,’’ Trevor Bull, MD, Tata AIG, said.

Source:Economictimes 

PF withdrawals rise in shaky job market

The fallout from the economic slowdown is now being felt in the corridors of provident fund (PF) offices. As businesses cut back on spending and reduce manpower, an increasing number of the unemployed is falling back on PF to tide over their misfortune. 

This had led to the regional PF office in Mumbai receiving 15,000-20,000 withdrawal applications in excess of the normal count over the past couple of months. 

“Over the past two to three months, we have seen a 7.5-10% increase in PF withdrawal applications,” said Ramesh Soni, a labour law consultant based in Mumbai. Even employees who switch jobs are considering PF money withdrawal rather than transferring the funds into the PF account of their new employers. 

The increase in withdrawal applications has lead to increased fund requirements by the PF office.

This has raised concerns among PF consultants about fund sufficiency at the PF office. However, brushing off such concerns, PM Mathew, regional provident fund commissioner, (Mumbai – I region) said, “We receive funds every month from the companies (fulfilling their PF obligations) which are more than sufficient to service any withdrawal requests.” 

In FY08, the Mumbai office received Rs 2,615 crore from companies and disbursed Rs 1,266 crore in payments towards PF withdrawal. As a result of the increased workload at the PF office, the processing of applications has suffered. 

Mr Mathew acknowledged that the additional workload has stretched the PF office staff, who have increased the scrutiny of applications. According to consultants working in the field, the number of rejected applications has, therefore, increased. 

“The PF office now scrutinises applications in a more detailed manner. A small discrepancy in filling the form, which was ignored earlier, is now treated as the ground of rejection of the application,” said G Krishnamurthy, general manager (legal) Talent Maximus, a company that provides staffing solutions. 

Amit Kadam (name changed), who filed an application for withdrawal of PF after quitting his job four months ago, is still awaiting his PF disbursal despite repeated follow-ups. “Of late, the consultant, as well as, the HR person have stopped answering my calls,” said a disgruntled Mr Kadam. People, who have applied for PF withdrawal after turning jobless, might be in for aslight delay before they get their PF dues.

Source:Economictimes  

Enhance incentives to raise health insurance coverage: ICRIER

NEW DELHI: In order to encourage penetration of health insurance in the country, a Delhi-based think tank ICRIER said that regulator IRDA should encourage companies to pay higher incentives to agents selling health insurance products. 

"The monetary reward as well as other incentives for selling health insurance must be attractive enough to ensure that there are sufficient incentives for insurance agents to promote the sale of such products," ICRIER said in a working paper on 'Private Health Insurance Coverage' in India. 

The regulator should also ask the insurer to devise incentive scheme for selling health products to low income households, it said, adding, apart from this, participation of non-profit entities like self help groups should also be encouraged for the same. 

The paper done by Sukumar Vellakkal said that health insurance schemes are a less profit but high-risk oriented business for them as compared to other forms of insurance schemes including life insurance schemes. 

"We found that insurance agents are a significant entity in the Indian health insurance market, which is characterised by a low level of public awareness about various aspects of the insurance market and the partner-agent model of health insurance" it said

Source:Economictimes

Double Oscar joy for music maestro A R Rahman

HOLLYWOOD: A R Rahman was celebrating a double Oscars triumph here on Sunday after winning two Academy Awards for his work in the hit film "Slumdog Millionaire." 

The talented music maestro picked up the best original score statuette before scooping the best song Oscar moments later after a medley performance featuring all three nominated tunes. 

"I just want to thank again, the whole crew of 'Slumdog Millionaire' especially Danny Boyle for giving me such a great opportunity," said the delighted Rahman. 

He hailed "all the people from Mumbai and the essence of the film, which is about optimism and the power of hope and our lives. All my life I've had a choice of hate and love. I chose love, and I'm here. God bless." 

The awards took "Slumdog's" tally to 7 for the evening, with Danny Boyle winning the best director Oscar

Pvt banks offer card cover to woo users

CHENNAI: Many travellers have faced the dilemma of losing their wallet which carried all the credit and debit cards, cash and even the passport.  Cashless and anxious, the situation could be terrible especially when you are travelling abroad with family and have to foot bills such as hotel expenses or even travel. To add to your woes, such lost/stolen cards are often subject to fraud which compound problems when you finally get back home. Recognising these needs, private banks such as Kotak Mahindra, Citibank, Standard Chartered and HSBC are offering card protection to their customers at less than Rs 3 per day. 

Card protection, which is a new phenomenon in India, but prevalent in developed countries, allows customers the option to block all cardsall financial and non-financial cards including credit, debit, loyalty and membership cards—with fraud protection up to Rs 20 lakh, emergency hotel and travel assistance of Rs 1.2 lakh and emergency cash assistance of another Rs 60,000. 

In collaboration with CPP Assistance Services, these banks are offering card protection for theft and loss that may have occurred anywhere in the world. There is no cap on the number of cards that can be protected under a membership, valid for one year and renewed thereafter. According to a study by AC Nielsen, there are 26 million credit card users in India, with an average person’s wallet containing at least one debit and one credit card. 

“If one loses a card while travelling , both abroad and within India, all they need to do is call CPP 24X7 helpline. CPP will report the loss to all the card issuing banks that the customer has reported it as lost. We will also arrange to advance payment on behalf of the customer immediately to the hotel in this moment of distress as well as arrange for ticket replacement so that the member can get back home safe and pay back on return (in 28 days). Also built into the plan is an insurance cover that protects the member from fraudulent use arising out of a card loss,” Gagan Maini of CPP said. The card protection begins seven days prior to the loss report and extends to any period after it. 

Card protection also provides for valuable document registration which holds the details for times when the original documents are not at hand. The niche protection plan immediately found takers and Kotak Credit Cards was amongst the first to offer the service to customers. While card insurance products are currently available in the market, Subrat Pani of Kotak Mahindra Bank feels dedicated card protection plans are more helpful. 

“There are insurance plans available that help the customers in case of card fraud but each card company has its own insurance plan. As such, for a multiple cardholder, there are numerous policies to keep track of and numerous numbers to remember to block cards in case of a mishap,” Pani, who heads Kotak Credit Cards said. The initial responses from cardholders have been very encouraging as it frees them from the hassles of managing multiple cards in case they are lost or stolen, he added. 

Source:Economictimes