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2007-08, ICICI Prudential was the largest amongprivate firms in terms of fresh business. SBI Lifecame in third after Bajaj Allianz.A tight leash on costs is critical for a private lifeinsurer’s success, and the economy-wide escalationof operating exp-enses is expected to hurt thesefirms. Says KPMG’s Aggarwal: “It’s partly due tofaster scaling up. The actual growth in the industryhas been faster than originally planned, but not asprofitable as planned. The reason is that coststructures have gone up in the form of significantlyhigher-than-planned employee costs... Distributioncosts are also very high.”“Everything (increasing cost base and geographicalexpansion) is going to push up the capital cost andgestation period of running a life insurancecompany,” Aggarwal says.Not everyone believes there is a strong case for thedelay in the break-even point. Bhandari says someof the assumptions made in 2000 still hold good, butit would primarily depend on the strategy of aninsurer. “If you follow an aggressive policy, breakevenwill get shifted forward. With a more modestexpansion, keeping capital in mind, you can reachbreak-even in about seven-eight years,” he adds.So far, only SBI Life seems to have got the balanceright.Reliance Life plans new ULIP schemeReliance is Bringing a type of ‘loyalty bonus’ featureinto the ULIP space, Reliance Life Insurance plansto launch a plan, providing guaranteed additionalcontribution for policyholders during the policy term.Reliance Life Insurance’s ‘Super InvestAssurePlan’, which will hit the market later this week, isthe eighth unit-linked insurance product from thecompany, targeted at individuals.Under the additional guarantee contributions,Reliance Life would add 50 per cent of the first year’sbasic premium to the fund value on the 10th policyanniversary and every 5th policy anniversarythereafter so long as the policy is in force.By this, a policyholder could earn up to 250 per centof first year basic premium as guaranteed additionsduring the policy term (30 years).Reliance Life Insurance expects the ‘SuperInvestAssure Plan’ to emerge as its flagship productunder ULIPs and account for about 25 per cent ofthe new premium income for the current fiscal. In2007-08, the company’s new premium collectionsstood at Rs 2,754 crore.Life insurance industry sees 7% drop in <strong>news</strong>alesInsurance buyers are keeping away from unit-linkedinsurance plans (Ulips) due to the continous volatilityin the stock market.The life insurance industry, which was growing over100 per cent last year, registered a negative growthfor the month of April this year, reporting a declineof 6.77 per cent. It gathered a new business premiumof Rs 2,780.11 crore in April this year as against Rs2,982.28 crore in April 2007. Life InsuranceCorporation of India continues to witness reduceddemand from single premium Ulips. It collected anew business premium of Rs 1,247.89 crore in Aprilthis year as against Rs 2,134 crore in thecorresponding period last year, a fall of 41.5 per centin new sales. LIC lost a substantial market share inApril. The public sector behemoth had a share of44.88 per cent during the month, while the privateplayers increased their market share to 55.11 percent. However, the 17 private players have registered80.69 per cent growth in new business premium forthe month of April at Rs 1532.22 crore as against afresh premium of Rs 847.96 crore in April 2007. ACEO of an insurance company, said, “Due to thevolatility in the stock market, pension products, healthinsurance and traditional products will sell more.”R-Adag targets captive customers with new coFirm will focus on marketing life and non-lifeinsurance and other consumer finance productsMumbai: Anil Ambani, the billionaire chairman ofReliance-Anil Dhirubhai Ambani Group (R-Adag),has formed a new company to sell financial productsto the more than 170 million customers his group hasacross the power, telecom, entertainment andfinancial services businesses.Reliance Capital Services Ltd, as the new companyis called, will focus on marketing life and non-lifeinsurance and other consumer finance products togroup customers, according to an R-Adag official.18
It’s the first move by R-Adag, whose stable includesthe non-banking financial services firm RelianceCapital Ltd, to tap its internal customer base forselling such products.The group recently set up Reliance HR Services Ltd,a human resources firm that’s targeting therecruitment of half-a-million people for R-Adag inthe next four years.“We already have an existing relationship with over170 million customers through our various groupcompanies. We intend to leverage this relationshipand offer specialized products to these set ofcustomers through this new company, whereverpossible,” said Sam Ghosh, group chief executive ofReliance Capital.Reliance Capital also has two insurance firms underits fold—Reliance General Insurance Co. Ltdand Reliance Life Insurance Co. Ltd. Anothergroup arm, Reliance Capital Asset ManagementLtd, had Rs98,431 crore worth of assets undermanagement as on 31 May, about 16% of the totalat India’s mutual fund industry.Its broking arm, Reliance Money, also distributesfinancial products and Reliance Consumer Finance,another division, has advanced more than Rs7,000crore as home loans, car loans and personal loans.The new firm would initially start with a staff of 200that will be scaled up aggressively. Reliance CapitalServices will have a pan-India footprint and look atservicing internal customers of the group acrossregions.R-Adag has about 50 million customers in thetelecom business, controlled by RelianceCommunications Ltd and 20 million customersacross financial services. Reliance InfrastructureLtd has more than 30 million customers, whileReliance Entertainment Ltd boasts of 70 millioncustomers.“We plan to complement the marketing anddistribution efforts of individual firms that are focusedon selling their individual products. This initiative addsto their already aggressive growth momentum,”Ghosh said.LIC plays it safe in volatile marketsMumbai June 19, 2008Stability in the stock markets will hold the key toLife Insurance Corporation’s investment strategy inthe coming months. The insurer is India’s largestdomestic institutional investor. While LIC’s appetitefor equity stays, the public sector insurer, which hopesto invest around Rs 45,000 crore in the stock marketsthis year, may shift a few thousand crores to thedebt market if Dalal Street remains volatile. Whileit’s still early days, LIC Managing Director ThomasMathew T told Business Standard that he expectsthe stock markets to stay volatile till October-November. “The debt market is attractive at themoment and we may look at a higher exposure. Ourprimary job is to ensure safety of our policyholderswho have entrusted us with their money,” he said.LIC’s investible corpus was estimated at Rs 1,50,000crore last year and is expected to exceed Rs 1,75,000crore. The investment in debt will rise from Rs 30,000crore in 2007-08 to Rs 45,000 crore this year. Forthe moment, however, LIC is betting big on equityand a lot of it has to do with investor preference.According to the business plan, LIC hopes to mopup around Rs 57,000 crore through the sale of newpolicies compared with Rs 43,000 crore last year.Of this, 70 per cent, or nearly Rs 40,000 crore, isexpected to come from the sale of Ulips. In addition,LIC is expected to earn over Rs 100,000 crore aspremium from policies sold earlier. Of this, Mathewsaid, 8-10 per cent will be earmarked for equities.“If the market conditions improve, we may look toscale it up a little in the fourth quarter,” Mathewsaid. While the stock market boom in recent yearshas meant that the share of profits from equities inthe company’s investment income has moved up from25 per cent a couple of years ago to around 33 percent. Mathew said that the volatility in the stockmarkets may mean that the profits from the segmentstay around last year’s level of Rs 9,800 crore. In2007-08, LIC’s investment income was around Rs40,000 crore. The market value of its equity portfoliorose to Rs 7,51,000 crore at the end of March thisyear compared with around Rs 6,00,000 crore at theend of March 2007. “LIC’s total income been rising15-20 per cent every year. The total investmentincome for the current year will be Rs 40,000 to45,000 crore depending on stock market conditions,”Mathew said. During the first two-and-a-half months19
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