Foreign firms not hiking stakes in Indian JVs; Here’s why

Milliman, which is among the world’s largest providers of actuarial and related products, believes foreign players are not hiking their stakes only because of high valuations.

Even after Insurance Laws (Amendment) Act which was passed in February 2015, which allows foreign players to increase their stakes in insurance firms from 26% to 49%, several foreign insurers have not hiked their stakes in their Indian joint ventures. Milliman, which is among the world’s largest providers of actuarial and related products, believes foreign players are not hiking their stakes only because of high valuations.

Milliman, in its third annual discussion forum on the Indian life insurance sector, also stated that, the life insurance sector will grow in the range of 15-20% over the next few years. “One of the key reasons foreign players are not hiking their stakes in Indian joint ventures is rich valuations. If we do the proper discounted cash flow calculations, there is no way we can justify such valuations of Indian companies,”said Sanket Kawatkar, principal and consulting actuary at Milliman.

He also added that several Indian companies are trading at 3-3.5 times the embedded value  with low margins, compared to several life insurance companies in south east Asian countries which are trading at 1-1.5 times the EV with very high margins.

Since the insurance Act was amended, very few foreign promoters have started increasing their stakes in the insurance joint ventures, after regulator Insurance Regulatory and Development Authority of India clarified the issue of ‘management control’.

In the last few months, ICICI Prudential Life Insurance was listed on the stock exchange, while HDFC Life and Max Life Insurance have proposed their merger. Milliman also believes that players with strong bancassurance (banca) will continue to do better compared to non-banca players. Milliman also says the sudden reduction in the interest rates can be expected to have adverse impact on life insurance companies operating in the market.

“A significant portion of life insurers participating funds are invested in fixed income securities, which would be expected to yield less. In line with the internal bonus management frameworks, companies are required to actively manage the bonuses to be declared on participating business. With a possible expectation of lower investment returns in future, companies may need to deuce the future bonus rates in order to control the future build-up of guarantees. Simultaneously, companies would be required to manage the expectations of their policyholders about the level of future bonuses,” Milliman said in a release.

 

Source : The Financial Express

Date : 01-12-2016

PSUs Line up at IITs

Cos may offer crore-plus pay package on Mumbai, Kharagpur, Guwahati, Roorkee campuses

As the final placements at the Indian Institutes of Technology (IITs) kick off on Thursday, students are set to land their first crore-plus salary offers from Microsoft and Oracle.

The two US technology companies are putting forward such international salary packages in at least four campuses -Mumbai, Kharagpur, Guwahati and Roorkee, according to people privy to the matter at leading IITs. While the offers will be made in the early hours of Thursday, their total number could not be ascertained.

While both companies are said to be offering higher pay packages this year, Redmondheadquartered Microsoft is a notch above Oracle in base salaries for international roles. The former is likely to `72.5 offer about $106,000 (.lakh) and Oracle is said to be paying marginally less.

With the addition of variables such as employee stock option plan, joining bonus and relocation costs, the salaries for international roles at the higher end are about `. 1.2 crore, according to placement cell officials in at least three IITs. The final placements at the IITs start on December 1, also known as Day 1, with companies queuing up to grab young engineers for both domestic and international positions. Most international offers are made in the first half on Day 1.

Microsoft did not divulge details about the offer. “With campus hiring being an important source of talent, IITs form a key part of our campus hiring strategy, delivering some of the brightest talent for our business,“ Rohit Thakur, senior director ­ HR, Microsoft India, said in response to an ET query. “Our pace of hiring from IITs has remained steady and this momentum will continue across IIT campuses this year as well.“ Oracle did not respond to a questionnaire sent by ET at the time of going to the press.

Traditionally , companies including Oracle, Microsoft, Google and Visa are known to make the highest salary offers at the IITs. Tech giant Google will be missing at most IITs this year as it plans to hire candidates directly , without involving the institutes.

Though crore-plus salaries are not uncommon at the IITs, they are handed out to only a fraction of the students. This year, PSUs are likely to make a large number of offers at the IITs after a ban on them hiring from campuses was lifted. In a first, many PSUs are already lined up at most of the IITs for the first phase of placements. Unlike last year, when startups hogged the limelight, this time most of them are missing.

Last year, many startups either revoked offers or deferred hires, leading IITs to impose a blanket ban on them for a year.

Source : Economic Times

Date : 01-12-2016

AIG May Shift European HQ Out of Britain

US insurer AIG may move its European headquarters from London to another European Union country because of Britain’s vote to leave the EU, the head of the AIG’s European and UK operations said at an industry conference on Tuesday.

AIG joins a growing list of finance companies that have said they may have to shift operations to continental Europe to maintain links to customers after Brexit. Speaking at the same conference, trade minister Mark Garnier said the government was listening to the financial industry’s concerns over Brexit. “We will aim to limit uncertainty surrounding business,“ Garnier said.

“The government fully understands the implications of Brexit for the financial services industry,“ Garnier told insurance trade body ABI’s annual conference.

Banks, insurers and asset managers in Britain fear losing access to the EU’s single market, and a damaging “cliff edge“ effect of leaving the bloc if there are no transitional arrangements ahead of any new trading terms agreed with the EU.

Anthony Baldwin, CEO of AIG’s European and UK arms, said the group might decide in the coming year to move its European head office from London to an EU country after Brexit, though it would still maintain a big London hub.

 

Source: Economic Times

Date: 23/11/2016

Emerging markets to sustain global insurance sector growth in 2017:Swiss Re

  • Moderate global economic growth is expected to support insurance sector growth over the next two years
  • Growth in global non-life insurance premiums are projected to be driven by the emerging markets
  • Pricing in commercial lines continues to deteriorate, but at a slower pace; demand for cyber risk solutions is increasing
  • Global life insurance premiums are forecast to grow by 4.8% in 2017 and 4.2% in 2018 in real terms
  • Emerging market life premiums will grow strongly, driven by demand for savings vehicles, particularly in emerging Asia

 

Zurich:

The global economy is expected to grow moderately over the next two years, supporting continued growth in insurance premium volumes, Swiss Re’s publication Global insurance review and outlook for 2017/18 shows.

Growth in global non-life premiums is forecast to fall slightly from 2.4% in 2016 in real terms to 2.2% in 2017, and accelerate to3.0% in 2018. In the life sector, global premiums are expected to grow by 4.8% in 2017 and 4.2% in 2018. The emerging markets, in particular emerging Asia, will be the main driver of premium growth in both the non-life and life sectors.

“The insurance industry faces headwinds, with moderate economic growth, and still ample capacity in the markets creating a challenging pricing environment,” says Kurt Karl, Swiss Re’s Chief Economist. “Nevertheless, premium volumes continue to grow, in both the advanced and emerging markets along with economic activity and an increase in the insurance penetration rate, particularly in emerging markets.”

Emerging markets to drive non-life sector growth

Non-life insurance sector premium volumes are expected to increase by 2.2% in real terms in 2017, after 2.4% in 2016, and by 3.0% in 2018. The emerging markets are expected to drive the improvement. Premium growth in the emerging markets is forecast to increase steadily from an estimated 5.3% in 2016 to 5.7% in 2017 and 6.7% in 2018.

The pricing environment in the global non-life sector remains challenging. Pricing in commercial lines continues to deteriorate across all regions, but at a slower pace. In contrast to many other commercial lines, however, rates in cyber insurance continue to harden but at a slowing pace and could level out soon. Increased awareness of the risks associated with cyber attacks and data breaches is boosting demand for related insurance solutions, and represents a significant growth opportunity for the non-life sector.

Demand for savings products in emerging markets to drive life premiums

In the life sector, premium growth is expected to be significantly stronger than in non-life. Global life premium volumes are forecast to grow by 5.4%, 4.8% and 4.2% in 2016, 2017 and 2018, respectively. Advanced market premiums are expected to grow by 2.1% in 2017 and 2018, but the major driver will again be the emerging markets, where stabilising economic growth, growing populations, urbanisation and a rising middle class underpin a positive outlook. Emerging market life premiums are forecast to grow by 14.9% in 2017 and by 10.9% in 2018, sustained by robust growth of savings products, particularly in emerging Asia. China will make a strong contribution with the government targeting an increase in insurance penetration to 5% by 2020, from 3% in 2014.

Source:  AIP News Bureau

Date: 22/11/2016

Soon, rail travel insurance may become mandatory

Railways is considering a proposal to make travel insurance mandatory by default for those booking tickets online, unless a passenger opts out of it.

The transporter was sitting over the proposal until it was hit by the Kanpur train tragedy on Sunday , which killed around 149 people and left hundreds injured.After massive response from insurance companies, Indian Railway Catering and Tourism Corporation (IRCTC), which has anchored the insurance scheme since its launch in September, has suggested to railways board to make the scheme mandatory , extend the coverage to the unreserved class and provide cover for valuables such as laptop and mobiles.If the IRCTC proposal is accepted, the insurance business in railways will be around Rs 3,500 crore, said an official. Of the 695 passengers on board the ill-fated Indore-Patna Express who booked on line tickets, only 128 had opted for the insurance, which costs just 92 paise. Of the 128 passengers, 78 were in the train at the time of the accident. IRCTC swung into action after the news of the accident and found that 8-10 insured passengers are safe while 7-8 are in hospital and were being provided cashless treatment from insurance companies.

Given that very few train passengers opt insurance, due to negligence or lack of awareness, railway authorities have given serious thought to the proposal. Under the scheme launched as a pilot project, the nominee of deceased will get Rs 10 lakh over and above other compensation announced. Those suffering permanent disability will get Rs 7.5 lakh each. Rs 2 lakh will be given for hospitalisation charges, Rs 10,000 for minor injury and Rs 5,000 for each luggage lostdamaged, for a maximum of two bags.

Source: The Times of India

Date: 23/11/2016

$50billion Could Flow from Insurers to ETFs

Insurers are expected to double their ETF wagers over the next 5 years, shows an analysis

The booming demand for hot exchange-traded funds has finally caught up with the staid, sleepy insurance industry.

US insurers are the latest group of investors to start buying ETFs en masse, with one of the fastest adoption rates among institutions. And they’re not done yet, according to JPMorgan Chase & Co’s Mark Snyder, who helps oversee funds for the industry. Insurance companies are holding an estimated $200 billion in cash and another $80 billion in equities that could be reallocated, he said, and by shifting some of their portfolios $25 billion to $50 billion could flow into ETFs.

“It’s pretty clear that it is an area of pretty dramatic growth,“ said Josh Penzner, head of BlackRock Inc’s iShares fixed-income and insurance sales. “Insurers, they’re not quick to change, however they’re really looking at their investment processes and looking at ways they can evolve.“

Insurance companies can invest premiums in funds while waiting to pay out claims. In recent years, they’ve suffered from low interest rates because their portfolios are mostly composed of bonds. In 2014, only 26% of the firms had their reserve assets in ETFs, according to a Greenwich Associates survey.

Now that’s changing, with insurers expected to double their ETF wagers over the next five years, according to an analysis by S&P Dow Jones Indices.

MULTIFACTOR DEMAND

The shift is another setback for traditional managers who have struggled to beat their benchmarks as ETF purveyors offer cheaper and more complex products. US insurers had $17.7 billion invested in hedge fund strategies at the end of 2015, and companies such as MetLife Inc have been scaling back.

They’re turning to ETF strategies like smart beta, which use computer models to augment passive holdings and promise to replicate everything a talented stock picker brings to the table except the emotions and fees. What’s more, demand for the newest smart beta product ­­ multifactor ETFs ­­ is strongest among insurers than any other investor class.

Source : Economic Times

Date : 21-11-2016

Indians outside can buy health, general insurance in forex

RBI said regulations under the Foreign Exchange Management (Insurance) Regulation, 2000, have been repealed after consultation with the government and superseded by the Foreign Exchange Management (Insurance) Regulations.

Indians living outside can buy health or general insurance in foreign currency irrespective of the currency for settlement claims, the Reserve Bank said today while laying down the revised general and health insurance manual. Though if the premium is paid in Indian rupee, the settlement will also be done in rupee terms, RBI said in a notification. RBI said regulations under the Foreign Exchange Management (Insurance) Regulation, 2000, have been repealed after consultation with the government and superseded by the Foreign Exchange Management (Insurance) Regulations. The revised notification has come into force with effect from December 29, 2015. A resident going abroad for taking up employment is also allowed to take health insurance policy by paying premium in the rupee. For these residents, claims will be settled under cashless international health insurance policies to hospitals providing treatment or through a third-party administrator (TPA). Besides, all general or health insurance policies are allowed to be placed in foreign exchange and no Reserve Bank permission will be required for issuance or renewal of any policy, it said. With regard to investments abroad, RBI has enabled such investment by insurers. Further, insurance companies will not be required to furnish quarterly report on settlement of claims of policies issued with permission of RBI.

 

Source-Money control

Date-18-11-2016