Tuesday, March 31, 2009
LIC forays into credit cards business
Chola MS Gen Insurance plans capital infusion of Rs 75 crore after a gap of six years
Monday, March 30, 2009
Insurance cos to cover exclusions too for extra cost
For instance, till sometime ago, if there was a fire in a factory, insurers did not pay claims for the equipment that caused it. The policy only paid for damages caused to other equipment and premises as a result of the fire. From now on, the equipment that caused the fire is also being covered at a little extra premium.
In insurance parlance, the event of not covering the equipment which sparks off the fire is called the dynamo clause. “We are doing away with the dynamo clause in any industrial policy at an extra premium. These are exclusions that have been part of the standard wordings for quite sometime. However, they did not make much sense. Hence, we have decided to cover these too,” said Richard Wulff, chief underwriting officer, HDFC Ergo General Insurance Co.
“Industrial clients were losing out as a result of the dynamo clause, since, despite having an insurance policy, they had to shell out a sum to replace the equipment that caused the fire. There have been several cases in different industries where insurers have not paid for replacing the equipment causing trouble,” said a senior insurance analyst.
Similarly, if a machine rotating at high speed, like a mixer, broke and damaged other equipment in the vicinity, the rotating machine would not have been eligible for claims earlier. Mr Wulff added: “If a fire is the result of a turbine in an industrial workshop, the affected equipment around it would qualify for payment of claims but not the turbine.”
Saturday, March 28, 2009
Insurers woo investors with crash-proof Ulips
This is how the scheme works: Assume your investment in the fund is Rs 100 after deduction of allocation charges and fees. Of this Rs 100, the fund manager allocates a certain amount of money into debt in such a manner that the value of the investment on maturity is equal to Rs 100. For example, Rs 60 invested in debt instruments, generating a 5.5% return will result in Rs 100 after 10 years. The remaining money, i.e. Rs 40 in the above case, is invested in equities.
If at some point in the 10-year period equities double and at the same time the value of the bond portfolio moves from Rs 60 to Rs 70, the total value of the portfolio becomes Rs 150. The unit price becomes Rs 15. At this stage, the fund manager will rework the amount required to be invested in debt to ensure there is Rs 150 at maturity of the policy. He will then accordingly transfer some of the equity investment into debt. This strategy ensures that NAV of Rs 15 is assured upon maturity. There is also the upside of the small investment that continues to be in equity.
After this even if the equity markets crash by 50% the NAV on the reset date (Rs 15) is protected, thanks to the investment in debt.
This may appear to be a great strategy, but investors need to bear in mind that there are no free lunches. “The best situation for an investor in such a product is a steep bull run in the initial years and then the range-bound equity market, as he is protected from the downfall,” said a wealth advisor with a foreign private banking setup. However, given the structure of the scheme, the portfolio manager cannot hike his exposure to equities post a massive fall in markets when the equities are dirt cheap. The structure thus limits the participation in the upside.
There are some other points that one must bear in mind before putting money into it. Most of the schemes offer higher fund value and the sum assured if the insured dies before maturity. In other words, if the insured dies at a time when the sum assured is less than the fund value, then he is entitled only for the fund value.
Alankit Insurance Ltd to open 30 offices in Kerala
The insurance broking company has started operations in the state in February 2009. At present it has five branches in the state. Thiruvananthapuram, Trissur, Pathanamthitta, Kottayam and Ernakulam are the five branches of the company.
Mr Abraham K George, director, Alankit Insurance Brokers said that the company has earned Rs 30 lakh premium income in the two-month period of February and March, 2009.
He said that the company is planning to appoint 300 dedicated officers in the state. "We hope to generate Rs 1 crore premium income per office per month", Mr Abraham K George said. The company would focus on the retail business in the state like health insurance.
According to him, 20 % of all insurance business in the country is being sold through brokers. More business will shift to brokers as the 600 odd brokers in the country would be able to service the clients better.
Markets in Asia steady as hopes of global recovery rise
Friday, March 27, 2009
Irda may mandate ring-fencing in M&As
Insurance companies will have to set aside assets to cover the liabilities of acquired entities.
The Insurance Regulatory & Development Authority, which is finalising the mergers and acquisitions (M&A) guidelines, is expected to mandate that a company acquiring another insurance player will have to ring-fence the assets of the acquired entity to ensure that the interests of the policyholders are protected.
According to sources close to the development, in the guidelines that are expected to be released next month, an acquirer is likely to be asked to set aside the assets of the acquired entity and not trade them to avoid any asset-liability mismatch at the time of maturity of a policy.
In addition, Irda is also expected to mandate that after the acquisition, a separate actuarial assessment of both the entities be carried out annually to ensure that the liabilities are adequately backed by assets.
In case of the life insurance business, the regulator will prescribe special rules for the pension business which is a long-term liability, Irda sources say.
While companies are not looking at the acquisition route to expand their business, the rules are expected to come into play when the consolidation process started a few years down the line.
The regulator is, however, unlikely to step into valuation-related issues. It, however, intends to seek greater transparency on the exercise, an Irda official says. To strengthen corporate governance, the regulator will also ask for transparency in decisions taken by the newly-appointed board.
Valuations in the life insurance industry depends on the embedded value. This involves the calculation of the present value of surplus, as distributed to shareholders. For life insurers, business is tied to solvency and the long-term nature of the products sold.
So, the regulator wants acquirer to carefully assess the liabilities of the company to be acquired and then analyse them according to the assets backing them. A bulk of the liabilities pertain to policyholders.
For an insurer, the assets would include the investment in various securities. In addition, the capital, which is a liability as it came from promoters, provided additional comfort as the solvency margin is prescribed at 1.5 times the business underwritten.
For non-life insurers, the valuation will depend on the projection of expected future profits and calculation of present value, the sources say.
“The assumption of liabilities has to be acceptable to both parties, and the company which is going to acquire will have to examine the values in the broader context,” a senior Irda executive said.
Irda had set up a committee few months ago to work on the M&A guidelines.
“Mid- and small-sized companies would look at the acquisition route to grow their business. Also, there was no exit route for insurers. It will help the companies if the consolidation is a win-win situation,” said Reliance Life Managing Director and CEO P Nandgopal.
“About 90 per cent of the insurers will see their valuations decline after the asset and liabilities disclosures are made mandatory under the M&A guidelines. It will help in drawing a comparison between companies. The ultimate beneficiary would be the shareholders and promoters of the company,” said Bajaj Allianz Managing Director and CEO Kamesh Goyal.
Source:Business-standard
Companies push high-value policies
Life insurers are pushing big-ticket insurance policies not just to meet the year-end rush, but also to take advantage of the last few days remaining before Insurance Regulatory & Development Authority’s (Irda) new guidelines on unit-linked insurance plans (Ulips) come into force.
According to the revised norms, which were issued two weeks ago, the premium in the second and the third years have to be at least 75 per cent of the premium paid when an Ulip is purchased. In case the premium was lower than 75 per cent, insurance companies cannot pay commission to their agents.
What has also added to the rush is the fall in the sale of big-ticket, single-premium covers and Ulips in the current financial year as individuals are holding on to big-ticket purchases, especially where the returns are linked to the equity markets. For insurers, big-ticket policies mean lower lapse rate and it translates into higher commission for agents.
“These policies do not lapse very easily, we send our agents with proper inputs to high net-worth individuals. If it is a regular plan, premium comes in even in the next few years. These people hardly default in premium payment,” said Life Insurance Corporation of India (LIC) Managing Director D K Mehrotra.
But companies said that there was higher appetite for big-ticket term plans, or the traditional covers where the premium is paid over a period of 15-20 years. While a part of the reason is insuring potential risks, increasing awareness is also helping insurance companies.
According to industry estimates, the average size of the term covers has increased to Rs 15-20 lakh in 2008-09 from Rs 3-5 lakh in 2005-06. For new entrants such as Aegon Religare, the business is split into 25:75 from term and unit linked plans (Ulips). For most insurers till last year, about 80-85 per cent of the sales came from Ulips.
“So far, the number of high value policies sale may have fallen but industry has seen a rise of 15-20 per cent in the value of sum assured,” said Max New York Life Executive Vice President Prashant Tripathy.
“People continue to reduce their exposure to equity market. Off-late customers have realised the need for decent and cheap cover available under term plans. Since premium in term plan is linked only to mortality, it becomes the cheapest,” said Aegon Religare CEO Rajiv Jamkhedkar.
Source:Business-Standard
LIC new premium income falls 21% in February
Life Insurance Corporation of India (LIC), the country’s largest life insurer, posted a 21 per cent on year fall in new premium income in February at Rs 4,030 crore.
This decline follows a whopping 73 per cent growth in new premium income in January on the back of single-premium, close-ended term policy Jeevan Aastha, which garnered Rs 9,300 crore in December and January combined.
Also, the fall shrunk LIC’s market share in terms of new premium income to 60 per cent in February from 79.7 per cent in the previous month.
According to the latest data from the Insurance Regulatory and Development Authority, private sector insurers fared equally worse with new premium income dropping 29 per cent to Rs 2,655 crore in February.
The entire sector’s total first year premium stood at Rs 6,680 crore in February, down 24.5 per cent on year. First year premium income is an indicator of new business generated by insurance companies.
In April-February, the entire sector clocked a marginal growth of 0.06 per cent. The state-run insurer’s first year premium fell 4.2 per cent to Rs 43,883 crore, while private sector players registered a 6.71 per cent rise to Rs 28,133 crore.
ICICI Prudential Life Insurance, the largest private sector life insurance company, saw a 12.4 per cent drop in first year premium at Rs 5,925 crore. On the other hand, second largest private sector player, SBI Life Insurance, witnessed a 22.53 per cent rise in new premium income at Rs 4,348 crore.
Bajaj Alliance saw de-growth of 28.3 per cent during the first nine months, while HDFC Standard Life managed to register a 6.8 per cent increase. In the first nine months, private sector players captured close to 40 per cent of the first year premium income market.
India opened up the insurance sector for private and foreign investment in 2000. The cap on foreign direct investment in India is at 49 per cent.
Source:business-standard
ICICI Pru, PNB tie up
LIC Madurai division digitalisation to be completed soon’
Madurai, March 25 The Madurai division of LIC of India will be completing the digitalisation process of all its 25 branches along with 11 satellite offices by May-end. Two more satellite offices, one each at Vadipatti and Rameswaram – will be coming up soon, according to Mr S. Chandrasekar, Senior Divisional Manager, Madurai.
Referring to the market, the close-ended single premium product, Jeevan Astha, with guaranteed additions has helped to sustain the performance of the division, with a sale of 20,121 policies to the tune of Rs 73 crore in 45 days in the otherwise depressing market scenario, he told Business Line.
The sale of unit-linked insurance plans (ULIPs) has not picked up. “Even though the right time to enter the market is said to be on a lower NAV (net asset value), people are not going in for purchase of ULIP products. The recession has had its impact in the market,” he said. As against 88,745 policies of Market Plus sold last year, only 44,201 Market Plus1 policies have been sold.
Even, the new close-ended product, Jeevan Varsha, a money-back plan with guaranteed returns introduced on February 16, has not had the expected response.
So far, only 2,983 policies to the tune of Rs 1.98 crore have been sold, he said.
As elsewhere, the division is also experiencing a tough time. The growth is relatively low compared to last year, 13 per cent lower in terms of policies and 38 per cent in terms of premium.
To reach out to people, new initiatives have been taken. Agents have been empowered to collect premium and authorised to issue receipts in their own offices. Chief Life Insurance Advisors have been appointed who in turn have been permitted to appoint supervisory agents under them, he said.
Source:Businessline
Tuesday, March 24, 2009
SBI Life Insurance mulls entry into health insurance
"We plan to enter health insurance and have lined up a few products," SBI Life's Managing Director & CEO U S Roy told reporters on the sidelines of a seminar here today.
He, however, did not divulge any details. On life insurance premium collections, Roy said that the company was targeting a 20-30 per cent growth in FY'10.
"More products will be launched going forward," Roy said, adding that these would comprise both ULIPs and traditional products.
At present, the ratio between ULIPs and traditional products stands at 65:35, he said.
"We plan to consolidate our operations this year. We will be conservative in our expansion plans," he said.
Wants insurers to set up asset, liability panel
The Insurance Regulatory and Development Authority (Irda) is planning to “insist” on the setting up of an asset and liability committee (ALCO) similar to the one existing in the banking sector after two major insurers reported a combined exposure of Rs 2,300 crore in the beleaguered Satyam Computer Services.
The regulator has said that the companies’ assets would have to be measured and managed properly and “we would closely monitor” the firms’ investment portfolios to ensure transparency and timely disclosures to policy holders. Irda member R Kannan said the asset-liability management may be a hurdle to insurers if there aren’t many long-term and safe investment avenues available.
He said that the regulator would take be extremely cautious, but would not get into micro management of the insurance companies. It would look into all functions of the companies, including their investment patterns and ensure that there was no asset-liability mismatch.
“The asset management side of the companies needs urgent and more attention, perhaps we would require someone to physically verify all the assets and sign off that the regulations prescribed have been followed and it has to be submitted to the board of directors and would be responsible for compliance,” Kannan added.
The committee would consider product pricing, the desired maturity profile of the incremental assets and liabilities in addition to monitoring the risk levels. It will have to articulate current interest rates and based on the decisions would help future business strategies.
ALCO, the top-most panel that would oversee the implementation of Asset Liability Management (ALM) system, would be headed by a chairman and managing director or an executive director. It would comprise of CEO, CFO, directors and an appointed actuary.
Source:BuxinessStandard
Nano insurance to cost more than M800
Aegon Religare target
approach paper on cheques clearing soon
Monday, March 23, 2009
LIC’s investable corpus at Rs 2 lakh cr
Life Insurance Corporation of India is expected to have a corpus of Rs 2 lakh crore available for investment in the next fiscal. The corporation will have an investable corpus of close to Rs 2 lakh crore in the financial year 2009-10, an increase of around Rs 40,000 crore from the Rs 1,60, 000 crore in the current fiscal, said Mr Thomas Mathew, Managing Director, LIC. Of the Rs 1,60,000 crore, around Rs 40,000 crore was invested in the equities market, Mr Thomas said. He w as speaking at the sideline of a seminar organised by Crisil and NSE here recently. The investable corpus would be invested in a mixture of government securities, equity markets, infrastructure bonds and corporate debt papers as per the guidelines of IRDA.The corporation, which collected Rs 43,000 crore in new business premium in 2007-08, is confident of collecting the same amount in this fiscal as well. The response to LIC’s two traditional products — Jeevan Aastha and Jeevan Varsha — has been good and could help prop up premium collections, he said.
Source:BusinessLine
ICICI Prudential premium payment
Life insurers well-placed to navigate turbulence
The volatility in the global and domestic economy has led to considerable anxiety about the future. Such unprecedented flux across geographies and industries has left both customers and companies uncertain of what lies ahead. The alarm triggered by the vulnerability of the financial sector has had a domino effect. It has resulted in concern spilling over to life insurance as well. Customers are concerned whether life insurers will fulfil their long-term commitments to clie nts. This fear, while justifiable, is largely unwarranted.
In India the life insurance industry is built upon five sturdy pillars that make it resilient and reduce its susceptibility to short-term economic and market upheavals.
One of the fundamentals of the insurance industry is its emphasis on building a strong capital base. Insurance companies maintain large reserves and, therefore, are typically relatively stable entities. This translates into more security for those customers that are insured. Besides, the industry is strongly regulated by the Insurance Regulatory and Development Authority (IRDA).
As per these regulations, capital requirements or solvency margins are fixed for insurers, keeping in view the size and degree of risk undertaken. Solvency margin is the capital that an insurance company holds to ensure that it can always pay its claims and policyholder benefits. The specified methodology for solvency margin prescribes a conservative basis for estimating capital. Additionally, the regulator has mandated a 150 per cent solvency margin, even though the statutory minimum is a 100 per cent.
Insurance companies, by the nature of their business, tend to focus on long-term time horizons. Companies often take 8-10 years to break even after start-up; insurance policies run for decades; and business economics require policies to stay on the books of the insurer for many years. Such a long -term perspective allows insurers to work patiently towards their goals. Insurers usually look for safety in investments rather than extraordinary returns.
Regulations prescribe the types of investments that insurance companies can invest in as a way to help ensure insurers focus on their ability to pay claims and meet their commitments to consumers. Rather than a quick haul in trading, insurance companies typically lean towards maturity. This makes insurers less vulnerable to interest rate and other interim fluctuations.
Traditional insurance funds are consolidated and are often primarily invested into safer, long-term instruments such as government bonds and treasury bills, which carry a lower level of risk but deliver fair returns at maturity. In unit-linked portfolios, investors can opt to reach for potential higher returns by investing in equities, which present more risks. However, while these products do have an investment risk, insurers are required to use certain prudent measures to diversify these portfolios.
At a fundamental level, life insurance is about pooling of risk. Claims for early death of an individual are funded by others who live longer. Defining, dissecting and understanding risk is at the heart of life insurance. We understand how to manage mortality as well as investment risks. Our business sustainability is not contingent upon just investment returns.
Insurers in India are typically audited by internal teams, two external auditors, auditors of the promoter companies and IRDA. Such high level of scrutiny and inspection helps ensure that risks are being monitored, diversified and the business is taking steps to be secure.
A life insurer’s promise to its customer is that if he were to die an early death, his family’s financial needs will be aided by the insurance coverage he purchased. This fundamental need of death protection is the highest priority for life insurance and is equally applicable whether the Sensex is at 20,000 or 10,000. In fact, economic downturns force insurers to refocus on the fundamental death protection need. Thus, even if the economy of our country were to slow down, insurance needs will remain completely necessary and relevant.
Around the world, insurance companies often have decades of experience. It is not uncommon to find 100-year-old companies within this industry that are protecting lives all over the world. This is very different from many sectors where leaders have emerged over the past few years.
This experience translates into a distilled wisdom and commonsense that helps these institutions take volatility in their stride. There is typically a strong mindset within the management of an insurance company that the organisation is being nurtured and preserved to pass on to the next generation — and to always meet future commitments.
One of the fallouts of turbulent times is the high intensity of rumours, speculation and churn in personal financial portfolios. These are often precisely the wrong responses to these times.
More than ever before, these are the times for customers to remain steadfast and look within to identify their most fundamental need — financial security for their families.
It is also time to look to the advice of financial professionals who will assess families’ risks, long-term goals and evaluate their current plans. Life insurance addresses these requirements comprehensively and securely.
Dept of Post fails to achieve targets in postal, rural life insurance: CAG
New Delhi, March 21 The Comptroller and Auditor General of India has said that the Department of Post failed to achieve the yearly target set for procurement of business both in Postal Life Insurance (PLI) and Rural Life Insurance during 2002-03 and 2006-07.
The latest CAG report states that in case of PLI, the shortfall in target went up from 17 per cent in 2002-03 to 41 per cent in 2006-07. Similarly, in RPLI, the shortfall has reached 27 per cent from 16 per cent during the corresponding period.
The Government audit report points out that the annual growth in the number of Postal Life Insurance polices ranged between four per cent and eight per cent during 2002-07. “Except for Santosh, other schemes have not been very popular and the number of new policies procured under Suraksha, Suvidha, Sumangal and Children Policy has declined consistently during the last five years,” the report adds.
In comparison, there has been a significant growth in the business of RPLI during the last five years although the percentage growth in the number of policies has come down from 58.43 per cent in 2002-03 to 11.56 per cent in 2006-07.
“Sectoral analysis of PLI indicate that the scheme was largely concentrated in civil departments, defence, post and telecommunications and PSUs, and has not gained enough popularity among the Railways and PSU bank employees,” the report states.
The report adds that Rs 148.24 crore remained unadjusted in the books of accounts of eight circles due to non-posting of schedules in the premium ledger accounts/non-receipt of schedules of receipt from the field offices till March 2007.
CAG has pointed out that a sum of Rs 3.41 crore was paid in excess of the actual bonus admissible during April 2002 and April 2006 in 10 select circles due to non-regulation of interim bonus paid at higher rate.
In addition, in seven circles, service tax of Rs 6.23 crore was short/non-recovered from insurants during a 29-month period ending March 2007.
Source:BusinessLine
Saturday, March 21, 2009
India's net int'l liabilities soar to $10.2 bn
'Insurers more worried about managing sales than slump'
Friday, March 20, 2009
LIC invests Rs 40,000 crore in equities in FY '09
The country's largest insurer, Life Insurance Corporation of India (LIC), has invested Rs 40,000 crore in equity so far this fiscal,
exceeding its total equity exposure of the last financial year.
"For the eleven months ended February 2009, we have invested Rs 40,000 crore in equities. Equity investments in FY '09 have exceeded the total equity investments made last fiscal," a top LIC official told reporters here.
LIC's investment in stock markets every year is around 8-9 per cent of its total premium collection, the official said, adding, "(The) banking sector remains appealing to us."
The state-run insurer recently invested in three large companies, including State Bank of India, taking into account "an attractive valuation and good investment prospects".
The insurance giant picked up a 2.11 per cent stake in SBI for Rs 1,484.12 crore, taking is total shareholding in India's largest bank to 9.16 per cent (4.94 crore shares).
It acquired a 2.86 per cent stake in Indian Overseas Bank (IOB), also a government lender, for Rs 57.65 crore and a 2.18 per cent in private firm Cummins India for Rs 72.22 crore.
LIC increased its stake in IOB to 9.96 per cent by purchasing additional shares worth Rs 57.65 crore between February 19 and March 3.
It also purchased 43.22 lakh shares Rs 72.22 crore in engine manufacturer Cummins India. With this, LIC now has a total of 7.6 per cent stake in the company.
The insurer had also bought an additional 2.27 crore shares in ICICI Bank, increasing its total holding in the bank to 9.38 per cent (10.44 crore shares).
LIC has also upped its stake in various other state-run banks in recent times.
These banks are Union Bank of India (2.18 per cent), Oriental Bank of Commerce (2.60 per cent), Bank of India (1.63 per cent), Canara Bank (1.21 per cent) and Punjab National Bank (0.38 per cent).
Source:http:mydigitalfc
Life insurance sector may see consolidation
Thursday, March 19, 2009
AIG CEO asks staff to return bonusesUnder intense pressure from the Obama administration and Congress, the head of bailed-out insurance giant AIG decl
Under intense pressure from the Obama administration and Congress, the head of bailed-out insurance giant AIG declared on Wednesday that some of the firm's executives have begun returning all or part of bonuses totaling $165 million. Edward Liddy offered no details, and lawmakers were in no mood to wait.
He was still fielding their questions when House Democratic leaders announced plans for a vote Thursday on legislation to tax away 90 per cent of the extra pay for executives at AIG and many other bailed-out firms.
Liddy, brought in last year to oversee a company that has received $182 billion in federal bailout money, said he, too, was angry about the bonuses. But he did not respond directly when advised in pungent terms to pay to the Treasury all the money handed out last weekend in "retention payments."
"Eat it now. Take it out of your profits down the road. It's a lot sweeter now than it's gonna be later," said Rep. Gary Ackerman, D-N.Y.
Liddy slid into the witness chair at a congressional hearing as President Barack Obama sought anew to quell a furor that has bedeviled his administration since word of the bonuses surfaced over the weekend.
Obama, who took office just under two months ago, told reporters his administration was not responsible for a lack of federal supervision of AIG that preceded the company's demise, nor for the decision made last year to pay what he called "outrageous bonuses."
Still, he said, "The buck stops with me." He said that "my goal is to make sure that we never put ourselves in this kind of position again," and he disclosed the administration was consulting with Congress on the possibility of creating a new agency to govern the meltdown of large financial institutions such as AIG.
He also gave a strong vote of confidence to Treasury Secretary Tim Geithner, who has been the target of growing Republican criticism.
Later, at a town hall meeting in Costa Mesa, Calif., Obama said that while his administration was addressing the AIG bonuses specifically, he said he wanted to "make sure we dont find ourselves in this situation again, where taxpayers are on the hook for losses in bad times and all the wealth generated in good times goes to those at the very top."
Obama spoke as congressional Democrats worked on legislation designed to recoup most or all of the $165 million by exposing it to new taxes.
Rep. Charles Rangel, D-N.Y., chairman of the tax-writing House Ways and Means Committee, said the new 90 per cent tax would apply to bonus money paid to employees earning more than $250,000 at firms that have received more than $5 billion in federal bailout funds. Mortgage giants Fannie Mae and Freddie Mac are covered under the proposal.
Liddy said that on Tuesday, he had "asked those who have received retention payments in excess of $100,000 or more to return at least half of those payments." Some have "already stepped forward and returned 100 per cent," he added.
Majority Leader Steny Hoyer, D-Md., said the House bill would be voted on under rules requiring a two-thirds majority for passage. Democrats are in comfortable control of the House but do not control two-thirds of the seats, meaning the outcome of the vote would probably be determined by tax-averse Republicans.
Republicans raised pointed questions about the extent of Geithner's advance knowledge of the bonuses, and stressed they had been locked out of discussions earlier this year when Democrats decided to jettison a provision from legislation that could have revoked the payments.
"The fact is that the bill the president signed, which protected the AIG bonuses and others, was written behind closed doors by Democratic leaders of the House and Senate. There was no transparency," said Sen. Charles Grassley, R-Iowa, the senior Republican on the Senate Finance Committee.
On Wednesday, Sen. Christopher Dodd, D-Conn., the chairman of the Senate Banking Committee, acknowledged that his staff agreed to dilute an executive compensation provision that would have applied retroactively to recipients of federal aid. Dodd told CNN the request came from officials at the Treasury Department whom he did not identify.
While the House and Senate reconciled their stimulus bills last month, the Treasury Department expressed concern with a Senate restriction on bonuses, noting that if it applied to existing compensation contracts it could face a legal challenge.
"The alternative was losing, in my view, the entire section on executive excessive compensation," Dodd told CNN. "Given a choice — this is not an uncommon occurrence here — I agreed to a modification in the legislation, reluctantly."
The legislation does include a provision that allows the Treasury Department to examine past compensation payments to determine whether they were "contrary to the public interest." Geithner on Tuesday said he was using that provision to review AIG's bonuses.
Liddy's presence in a congressional hearing room was evidence of a bipartisan opposition to the bonuses, although his status as a $1-a-year CEO called out of retirement last year to try and untangle AIG's financial mess made him a less-than-easy target for expressions of outrage.
"No one knows better than I that AIG has been the recipient of generous amounts of government financial aid," he said. "We have been the beneficiary of the American people's forbearance and patience," he added, acknowledging the patience was wearing thin.
Asked by Rep. Barney Frank, D-Mass., whether he would turn over the names of individuals who received the bonuses, as well as the amounts, Liddy said he would do so only if assured the information not be made public.
When Frank said he might seek a subpoena, Liddy said he was concerned about the safety of the employees and their families, and read aloud from a death threat received by one of them.
Frank said he would be guided in part by security considerations, but Ackerman later noted that Andrew Cuomo, the New York attorney general, was already seeking the names with a subpoena.
Liddy said he had not yet complied, sidestepped several times when asked whether he would, and finally said "it would be our intent" to do so.
Cuomo swiftly issued a statement saying Liddy's pledge was "simply too little, too late. ... Rather than take half-measures, AIG should immediately turn over the list, which we have subpoenaed, of who got what and when."
Separately, a New York state judge ordered Bank of America Corp. to disclose information about bonuses given to employees at Merrill Lynch & Co. just before the bank bought the brokerage company. Cuomo, who has been sparring with the bank over release of the information, said the decision "will now lift the shroud of secrecy surrounding the $3.6 billion in premature bonuses Merrill Lynch rushed out in early December."
"AIG should take heed and immediately turn over the list of bonus recipients we have subpoenaed," he said. "The deadline for responding to our subpoena is tomorrow. "
AIG spokesman Mark Herr said he could not say how many executives had turned back the money. "Bear in mind, these bonuses were only just paid," he said.
In Wilton, Conn., headquarters of AIG Financial Products Corp., police chief Edward Kulhawik said his department had not received any reports from the company of threats to employees but was in contact with the company and keeping "a special eye on that whole office complex."
Liddy said the Federal Reserve knew long in advance of the bonus payments and acquiesced in them, noting that officials from the independent agency attend key company meetings. But he said the same was not true of Geithner, adding, "We do our work with the Federal Reserve."
Liddy gave skeptical committee members what amounted to a tutorial in the practice of paying retention bonuses — he did not call them that — to executives.
He said the money was offered to executives in AIG's financial products section, where risky investments finally became the entire company's undoing. He said each executive was offered money to dispose of his "business book," meaning the transactions he had been in charge of handling, and thus far, the company's financial derivatives had been reduced from $2.7 trillion to $1.6 trillion.
He had decided it was worth paying the money to retain the services of executives who knew the business best, he said. And he had received legal advice that there were valid contracts requiring the payments.
"I know 165 million is a very large number. It's a very large number. In the context of 1.6 trillion ... we thought it was a good trade," he said.
Liddy added there was still a risk of financial catastrophe if the remaining $1.6 trillion in financial instruments were not disposed of properly.
But Rep. Stephen Lynch, D-Mass., angrily told the witness the contract read like "the captain and the crew of the ship reserving the lifeboats."
Liddy replied that he was not at the firm when the contracts were negotiated, and said, as he has before, that he would not have approved them.
Lynch said the terms had been put in place in December, after Liddy arrived at AIG.
But Liddy disputed that. "I take offense, Sir," he said.
"Well you take it rightly. Offense was intended," shot back Lynch
Source:NDTV
LIC hikes stake in 11 firms for Rs 6,450 cr
New DelhiCashing in on the current lower value of different stocks, the Life Insurance Corporation has increased its stake in as many as 11 firms, including SBI and ICICI Bank, so far this year through open market transactions worth a little more than Rs 6,400 crore.
The country's largest financial institution has hiked its stake in seven companies to nearly 10 per cent, while it has raised its holding in another four in the range of 3-7 per cent. The value of the transactions is totalling to Rs 6,450 crore based on the current market prices.
Analysts said with the market plunging from its peak level barely a year ago, domestic institutional investors are evincing interest in buying as they are attractive at existing levels.
"During January-March period, insurance companies have cash surplus. As the premiums for different schemes keep coming in, there is no dearth of long-term funds," Ashika Stock Brokers Research Head Paras Bothra said.
LIC has been shopping heavily in state-run entities and at present its stake in the largest public sector lender SBI stands at 9.16 per cent against 4.58 per cent in December quarter.
"Banking stocks were hammered in the market meltdown. LIC is on a stake hike spree knowing well that values would be attractive in future when the market recovers," SMC Global Vice President Rajesh Jain said.
Source:http:financialexpress
Life insurers try to retain truant policyholders
ICICI Insurance garners rs 9,918 cr premium
The company registered 28 per cent growth during the period and company's renewal premium showed a growth of 75 per cent and stood at Rs.5,427 crore, Mahesh told reporters here today.
Kerala continues to remain one of the major contributors for company's growth and currently state's share was over eight per cent to ICCI Prudential Life's overall business, he said. The company mobilised business of over Rs.405 crore for the period between April 1, 2008 and February 28, 2009, he added.
A large number of vehicle-owners are choosing to drive around without the mandatory motor insurance cover.
According to figures compiled by the General Insurance Council (GIC), over half of the vehicles on Indian roads do not have a proper insurance cover. Out of the 8.5 crore vehicles that at present are running on the roads, only 4 crore are insured. That means nearly 53 per cent of the vehicles are running without any insurance cover.
“There are an increasing number of vehicles running on road that do not have a proper insurance cover,” S L Mohan, chairman, GIC told Financial Chronicle.
Most vehicle-owners do not renew their insurance policies while many settle for a limited cover involving third party liability when the policy is renewed. Officials of the Insurance Regulatory and Development Authority (IRDA) told Financial Chronicle that they rely on the data from the insurance council on this front.
Industry officials also agreed that delinquency rate on the part of vehicle-owners is very high. “The average renewal rate for the motor insurance industry is around 60 per cent. There is also a tendency among consumers to change the insurer after the first year of buying the insurance cover,” a senior official of Oriental Insurance Company said on conditions of anonymity. The scenario gets worse when it comes to older vehicles. Both public and private sector insurers said that almost 80 per cent of the vehicle-owners purposely allow the insurance policy to lapse after owning a vehicle for four to five years.
Two-wheeler owners contribute their bit to the problem in a big way, too. “The absence of an insurance cover among two-wheelers is more rampant. Almost eighty per cent of the two-wheelers running on the road do not go for insurance cover beyond the first year,” S L Mohan said.
Private insurers HDFC Ergo General Life Insurance agrees. “Renewal rate in two-wheelers is very poor,” Ritesh Kumar, managing director and CEO, HDFC Ergo General Life Insurance, told Financial Chronicle.
According to Anuj Gulati, director- services and business development, ICICI Lombard General Insurance, consumers save on premium amount by compromising on the insurance cover.
Experts point out that the lack of enforcement of laws is also one of the major reasons for vehicle-owners choosing to drive around without proper insurance cover.
Deepak Kapoor, transport commissioner, Maharashtra state, said, “In the absence of an insurance cover, the driver can be arrested under section 196 of the Indian Motor Vehicles Act. Around 1.49 lakh drivers in Maharashtra during March 2008 to January 2009 have been given memo for non-production of insurance papers or expired insurance.” Kapoor said drivers are asked to produce documents within three days of issuance of memo.
According to the annual report by Insurance Regulatory and Development Authority (IRDA), the premium underwritten in the motor segment in the first quarter of the financial year was Rs 3,624.23 crore, constituting 41.29 per cent of the total premium underwritten. The contribution from the public and private life insurers in the total motor premium was Rs 2,151.19 crore (59.36 per cent) and Rs 1,473.04 crore (40.64 per cent) respectively