LIC forays into credit cards business

MUMBAI: State-owned Life Insurance Corporation of India on Monday forayed into the credit cards business with the launch of its white-labelled cards and said it would first target its existing policy-holders. 

The insurance giant, that launched its white-labelled credit cards, has tied-up with Karnataka-based Corporation Bank which would be the card-issuer. 

"We have launched our credit card today. The card would be like other credit cards but we will also offer value-added services like payment of premiums for our policy-holders," LIC Managing Director D K Mehrotra told PTI. 

"Initially, we will be offering cards to our policy- holders which will enable them to pay their premiums using the card," Mehrotra said. 

Policy-holders can pay their premiums from outstation also through the card which would reduce their bank charges, he said. 

LIC has formed a separate company - LIC Credit Cards Services - to manage its new business. 

The company would be headed by its Director and Chief Executive Hemant Bhargav.

Source:E-T

 

Chola MS Gen Insurance plans capital infusion of Rs 75 crore after a gap of six years

CHENNAI: Cholamandalam MS General Insurance Company (Chola MS) has announced it is planning to enhance its capital base by infusing Rs. 75 crore next month through a rights issue. 

It is a 74: 26 joint venture between the Murugappa Group and Mitsui Sumitomo Insurance Group, the second largest Insurance group in Japan. 

In a release, Chola MS said its will increase from Rs. 142 crore to Rs. 217 crore and authorised from Rs. 205 crore to Rs. 250 crore. With industry growth largely happening in motor and health segments, it is enhancing its capital base to support its growth plan in these two important segments. 

Company MD, S.S. Gopalarathnam said, "This capital infusion happening after 6 years will help us fuel our future growth plan for the next few years and also enhance the available solvency margin (ASM)".

Chola MS clocked 34% growth in gross written premium (GWP) at Rs. 644 crore for the period of April 2008 – February 2009 over the same period last year. The company has become one of the the fastest growing general insurance companies. The industry has grown by a modest 9% during the corresponding period.

Chola MS offers a rich portfolio of insurance products and services for both retail and commercial segments. The wide range of products offered includes accident and health, marine, casualty lines, property and engineering besides motor, travel and rural segments. 

Source:Economictimes

Insurance cos to cover exclusions too for extra cost

KOLKATA: For the first time, a general insurer has started covering ‘exclusions’ at a slightly higher premium after the Insurance Regulatory Development Authority (IRDA) allowed partial freedom of wordings. ‘Exclusions’, in insurance parlance, relate to developments where insurers will not come up with a compensation. These are explicitly mentioned in policy wordings of any insurance policy.

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.”

Source:Economictimes 

Insurers woo investors with crash-proof Ulips

MUMBAI: A guaranteed net asset value (NAV) may sound like an oxymoron, yet there are unit-linked insurance plan (Ulip) schemes which do just that. For Ulip investors singed by a more than a 50% drop in the Sensex from its peak level, insurance companies have floated schemes which guarantee the highest NAV of the fund on certain ‘reset’ days. In other words, Ulip holders will be shielded from any crash in the equity market.

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.

Source:E-T 

Alankit Insurance Ltd to open 30 offices in Kerala

KOCHI: Alankit Insurance Brokers Ltd has charted out an ambitious expansion plan for Kerala. The company will set up a network of 30 offices in the state in the next one year.

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

Hong Kong: Asian stocks were mixed on Friday as confidence about the state of the global economy was pegged back by profit-taking following another strong week on the trading floors.

Hong Kong was flat, while Sydney added 0.71% and Tokyo was 0.11% lower as investors made the most of big gains over the past five days. The advances since Monday follow a similar pattern that began at the start of March. There were also slight gains in Shanghai, while Taipei was flat and Seoul and Singapore ended lower.

Dealers have taken some heart over the past few weeks as small pieces of good news recently suggest the heat may be coming out of the global financial crisis that has wiped billions off shares since last year.

The market in Japan was initially strong after overnight gains on Wall Street, but it gradually trimmed those advances in the afternoon and turned negative as players locked in profits. The Nikkei has gained 8.6% in the trading week, and is up 22% from its lows earlier this month.

Gains trimmed: A 26 March picture of a share prices board in Tokyo. On Friday, the market was initially strong, but closed in negative territory. Yoshikazu Tsuno / AFP

Shippers led the losses, with Nippon Yusen Kabushiki Kaisha falling 3.9% to 414 yen (Rs219.42) after it cut its net profit outlook by 80% for the fiscal year to 31 March.

Honda Motor Co. Ltd rose 3.8% to 2,465 yen after US peers such as General Motors Co. gained sharply overnight on hopes for measures by Washington to rescue the auto industry.

The Hang Seng was up 10% over the week and 24% from its 9 March low of 11,344. Sino Land Co. Ltd rose 5.5% to $8.26 and Hang Lung Properties Ltd gained 3.6% to 18.56.

But Cheung Kong Holdings Ltd, the property flagship of Hong Kong’s richest man Li Ka-shing, fell 1.3% to $70.50 after it reported a 44% decline in 2008 net profit to $15.52 billion.

Fashion retailer Esprit Holding Ltd slumped 9.9% to $43.

Australian traders pulled back slightly from a bullish morning inspired by Wall Street gains, dealers said.

Mining and gold stocks drove the market higher, with Rio Tinto rallying strongly after its chief financial officer said there were alternate capital-raising avenues if a tie-up with China’s Aluminum Corp. of China failed.

Rio shares closed up 3.99% at 56.88, while rival BHP Billiton Ltd added 0.68% to 34.01.

Australia and New Zealand Banking Group was off 1.49% to 16.55 while Commonwealth found 0.72% to $35.

Qantas was 3.64% higher at 1.85.

The Shanghai Composite Index, which covers A and B shares, rose 12.73 points to 2,374.44. The market was led by new energy stocks after the finance ministry said it would offer subsidies to the solar energy sector, dealers said.

“The A-share market is on the way to becoming a bull market, but the process will be slow and volatile,” said Wu Feng, an analyst at TX Investment.

Baoding Tianwei Baobian Electric Co. rose by the 10% daily limit to 31.28 yuan (Rs236.79). Baoshan Iron and Steel Co. Ltd advanced 3.5% to 5.95 yuan.

The market in Teipei opened up 1.52% with buying ignited by Wall Street’s gains, dealers said, but profit-taking later eroded the advances.

A decision on Thursday by Taiwan’s central bank to keep its key interest rates steady—after seven reductions since September—also made investors more confident about economic prospects, they said.

Microchip designer MediaTek Inc. lost 2.85% to $324. Taiwan Semiconductor Manufacturing Co. Ltd rose 0.39% to 51.90. Taiwan Cement Corp. lost 1.20% to 28.80 and Far Eastern Textile Ltd fell 1.13% to 26.15.

Down 0.51%, the KOSPI ended down 6.29 points at 1,237.51. The fall ended a five-day winning streak for the market.

The main index gained 5.7% this week and is up 21.5% from a trough on 2 March.

Financial stocks saw a correction after recent sharp gains. Hana Financial Group Inc. declined 7.3% to 22,100. Daewoo Engineering and Construction Co. fell 4.2% to 9,580 won (Rs383.2).

Carmakers remained in the black throughout the session after the government on Thursday announced tax cuts to spur car sales during the slump. Hyundai Motor Co. rose 2.6% to 55,100 won. Samsung Electronics Co. Ltd climbed 2.5% to 584,000 won.

The blue-chip Straits Times Index fell 13.13 points to 1,745.66.

“It’s to be expected that the market would give back some of its strong recent gains,” AmFraser’s senior vice-president of equity sales Gabriel Gan said. “I think the pullback will be fairly mild and last maybe a couple of days, then I’m expecting the uptrend to resume.”

DBS Group Holdings Ltd fell 18 cents to $8.56 and United Overseas Bank Ltd dropped 36 cents to 10.18. Singapore Airlines Ltd slipped 12 cents to 10.18 and Singapore Telecommunications gained five cents to 2.62.

The Kuala Lumpur Composite index lost 0.04 points to 885.43. Genting Bhd fell 2.1% to 3.78 ringgit (Rs53.9) while Sime Darby Bhd gained 1.7% to 5.90.

Bankok’s SET gained 1.41 points to close at 440.81. Trade was light amid fresh domestic political turmoil as an anti-government rally continued into a second day.

Thailand’s biggest lender Bangkok Bank Pcl. edged up 0.50 baht (Re0.73) to close at 76.50 baht. Energy firm PTT Plc. lost 1.00 to 160.00 while top coal producer Banpu Public Co. Ltd added 2.00 to 224.00.

The Jakarta Composite Index jumped 42.77 points to 1,462.74.

“On the chart, it looks like the main index is moving in an uptrend line, with the closest resistance at 1,480,” a trader said.

The market was closed on Thursday due to a national holiday.

PT Telekomunikasi Indonesia jumped 7% to 7,600 rupiah (Rs30.4). PT Bank Danamon Indonesia Tbk rose 7.5% to 3,225 rupiah.

The composite index in Manila added 51.99 points to 2,040.25.

The index has rallied for eight straight days and has risen about 16% since the uptick began on 18 March.

“Markets are rebounding as (economic) figures from the US aren’t as bad as we expected. Markets are now discounting the worst,” Joseph Roxas of Eagle Equities said.

Philippine Long Distance Telephone Co. gained 5.54% to 2,190 pesos (Rs2,365.2), while Globe Telecom Inc. added 3.57% to 870 pesos.

New Zealand’s benchmark NZX-50 index rose 37.22 points to 2,653.48.

“It’s probably been the best week we have had for six months, on the back of Australia and the US market,” said ABN Amro Craigs equities advisor Martin Allison.

Contact Energy Ltd rose 36 cents to $6.15. Air New Zealand Ltd rose five cents to 94 cents and Telecom New Zealand Ltd fell two cents to $2.28.

Source:Livemint

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