LIC Board Approves IDBI Bank Acquisition

Transaction may be via preferential shares, likely to be valued at about ₹12,000 crore

The board of the Life Insurance Corp. of India (LIC) approved a proposal to acquire 51% of state-run IDBI Bank, possibly through preferential shares, in a plan aimed at changing the lender’s fortunes. The government-owned insurer currently holds a 7.98% stake in the bank that’s laden with bad debt.

“Most likely (preferential shares) would be the way—the bank needs capital. They will issue preferential shares, that should be the method,” said economic affairs secretary SC Garg, who is also on the board of the state-run insurer. “The other (option) is that they can buy from the government but that does not provide capital to IDBI Bank and, therefore, that is the preferable mode to do it,” he said after the LIC board meeting in Delhi.

The government has been keen to convert IDBI Bank from a staid, state-owned entity burdened with rotten assets into a lender with the dynamic character of a private sector lender like Axis Bank. Arun Jaitley had said in his FY17 budget speech that IDBI Bank’s transformation had already begun and that the government would also consider the option of reducing its stake to below 50%.

The strategy hasn’t been without its opponents, including the unions of both LIC and IDBI Bank. The Congress and the Left parties have also criticised the plan, saying that the people’s savings with LIC would be used to bail out IDBI Bank.

IDBI Bank will soon hold a board meeting to approve the transaction that’s likely to be valued at about ₹12,000 crore, according to a government official.

LIC may Get 4 Board Seats

LIC could get four seats on the IDBI Bank board following the acquisition, the official said.

LIC will approach RBI and Sebi for approval. The Insurance Regulatory and Development Authority of India (IRDAI) has already given its nod for the acquisition by LIC. The deal is also expected to go to the Union Cabinet for approval. The government holds an 85.96% stake in the bank as of now.

Garg also indicated that LIC may not have to make an open offer as per Sebi takeover regulations because the public holding in the bank is very limited.

“Open offer may or may not come about,” Garg said. “The public shareholding is very small — it is only about 5%. And the pricing formula, etcetera, may not be attractive. But they will go through that process and if necessary they will make that open offer, but it is not a very material issue in this context.”

IDBI closed at ₹56.45 on the Bombay Stock Exchange (BSE), down 1.48% on a day the banking sector barometer Bankex shed 0.98%. IDBI Bank’s gross nonperforming assets or bad loans grew to ₹55,588 crore in March from ₹44,753 crore a year earlier.

BENEFITS FOR LIC

The government is of the view that LIC will eventually emerge as a beneficiary as it will get 2,000 branches of the bank through which it can sell its products. In addition, the bank also has real estate assets and non-core assets of ₹14,000 crore that can be monetised, said the official cited above.

The government had first announced its makeover intent in 2015. In early 2016, when Jayant Sinha was junior finance minister, some talks were held to sell the government stake to multilateral institutions. It was reported at the time that International Finance Corporation (IFC), an arm of the World Bank, was keen to acquire a stake. The other contenders were said to be GIC of Singapore, the Asian Development Bank and Commonwealth Development Corporation.

While none of the aforementioned confirmed that any talks were held, government sources said the discussions didn’t take formal shape because of differences over valuation. Sinha left the finance ministry later that year and the interest of private players fizzled out.

A senior government official told ET that there was no point in selling its stake in the bank at a low valuation that would have later been questioned in the courts and would have also drawn vigilance complaints.

“IDBI had real estate, non-core assets, but this was not being captured in the valuation process, and that is why the government’s plan keep getting delayed,” he said.

UNION VIEWS

While the LIC unions have opposed the deal on the grounds that it will hurt the interest of policyholders, the IDBI union said the government had given an assurance that IDBI Bank would not be turned into a private lender.

“This is a clear attack on the autonomy of the LIC board. The government has cornered the insurer to opt for this acquisition which is a very bad deal for us,” said Federation of LIC Class-Officers Association general secretary S Rajkumar, adding that it will join hands with all other insurance unions and take a call by the end of this week on their action plan.

The IDBI union has approached lawmakers to take up their cause in the upcoming session.

“By the end of this week we will announce the strike action. We have already approached a few parliament members to raise our concerns on the floor of both the houses,” said All India IDBI Officers’ Association general secretary Vithal Koteswara Rao. The government had given a solemn assurance on the floor of parliament that it wouldn’t allow its stake to drop below 51%, he said.

Source: Economic Times

Date: 17th July 2018

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India needs to catch up with global peers in insurance sales Insurance premium’s share in India’s GDP has been stagnant for almost four years

Yet again, the annual Swiss Re sigma report presents a bleak picture of India’s insurance sector. While the insurance premium’s share in the country’s gross domestic product may have seen an increase, India is nowhere close to the global averages when it comes to distribution of insurance.

 

Insurance premiums as a percentage of gross domestic product, referred to as penetration, has stayed below 4 percent since FY12. The Jan Suraksha Bima Yojana, that included a personal accident scheme and a term life insurance scheme, led to some boost, but the figures have more or less stayed flat.

 

In FY18, insurance penetration stood at 3.69 percent in India. In Asia, it was at 5.62 percent with Taiwan topping the list at 21.32 percent. India ranked 41st globally with Taiwan, Cayman Islands and Hong Kong being the top three in the world.

 

Similarly, the premium per person or insurance density stood at $73 in India for FY18 while it was $850 globally. Among its Asian peers where the average was $360, Hong Kong topped the list at $8,313 which was the second highest globally. Cayman Islands topped the list with density of $12,122 in 2017.

While there was a slump from FY10 to FY15, India saw an increase in its penetration only by a few basis points every year. The non-life insurance premium, which includes the mandatory motor third-party insurance policies, has not even touched 1 percent of GDP.

 

One often repeated comment is that the country’s GDP has been growing at a faster pace and the insurance sector has not been able to catch up. But considering the mega insurance schemes, including the Fasal Bima Yojana, atleast a 100 basis point increase should have been the end result. But we are nowhere close to that.

 

Weak distribution as well as low awareness have been the twin issues plaguing the industry. Unless it is mandatory or pushed by a relative, Indians simply do not seem to realise the importance of insurance purchases. A product that requires a superior financial knowledge and hence not an over-the-counter sale, insurance requires well-trained agents to explain policies.

 

Need of the hour

 

Need-based selling to ensure that a customer gets what he requires is the need of the hour. That will require agents to be more financially savvy as well as be adequately compensated for it. Banks could be high volume generators, but an insurance agent does the job best.

 

Similarly, ensuring that customers realise the need for insurance in their financial portfolio has been another challenge. It is usually the agent who ‘suggests’ a policy and the customer ends up buying it. Later, when they realise they were sold a wrong product, they let it lapse. All these factors also reflect in the penetration numbers.

 

At a time when a country’s insurance penetration and density is the first data point referred by both domestic and international agencies for preparing sector-wise reports, brushing off these numbers may not be a good idea. Doing a deep dive and smoothening the rough edges by simplification would be the first big step necessary. Rather than celebrating over the few basis point increase, the industry has to come together and analyse the factors leading to stagnant numbers and take actions immediately.

 

Source-Money Control

Date-10-07-2018

Hiring Activity sees 9% rise in June 2018 as compared to June 2017: Naukri Job Spe

The Naukri JobSpeak Index for June 2018, at 2,047, marked a 9% increase in hiring activity from June 2017 (1,885). The Real Estate and Auto industries recorded notable increases in hiring activity, growing by 19% and 26% respectively. The Telecom industry, which has been steadily regaining hiring momentum in 2018, continued to grow with an increase of 23%. Hiring was positive across the metropolitan cities, increasing by 8% in Delhi and 9% in Chennai.

Commenting on the report, V. Suresh, Chief Sales Officer, Naukri.com said, “The Job speak index has shown a healthy 9% YOY growth in June after an impressive 11% growth in May and 21% in April respectively. Non-IT sectors viz Auto, Auto Ancillary, Real estate, Construction & BFSI continue to lead the growth. We can expect the job market to be cautiously optimistic and move further north in the months to come.”

Key Highlights of the report

Hiring Trends – Industry Wise

The industries with some of the biggest increases in hiring in June were Auto/Ancillary (26%), Telecom (23%), Industrial Products/ Heavy Machinery (22%) and the BPO industry (19%). There has been increased spending on infrastructure by both public and private players, boosting the Construction/ Engineering sector. Hiring activity increased by 20% in this industry. The Banking/ Financial Services industry has also been expanding, becoming more accessible to all populations and looking to grow in rural areas. Recruitment activity increased by 12%. Hiring in the FMCG industry increased by 9%, Oil & Gas by 5% and IT-Software by 2%.

The Real Estate industry was revived by the softening of real estate prices, the implementation of RERA, and recent judicial intervention in the field. This recovery has led to an increase in hiring activity, with Real Estate clocking in a rise of 19% in recruitment. This improvement can also be seen in the month on month hiring comparisons for 2018.

Hiring trends- Skill Wise

Skill-based hiring was concentrated in the fields of HR & Administration (22%), Production/Maintenance (17%) and Banking/Insurance (9%). Leadership skills (40%) were also in high demand.

( The graph indicates month-on-month hiring comparison From June 2017 to June 2018 for key Functional Areas)

Hiring Trends – Experience Wise

The demand for young talent remained high as job creation for freshers (0-3 years) saw an increase of 12%. In line with the skill-wise hiring trends, hiring for top level management (16+ years) increased by 11%, a big change from June 2017 and May 2018. Hiring for mid-level management roles (4-7 years) rose by 8%, sub-senior roles (8-12 years) grew by 6% and senior management roles (13-16 years) saw a growth of 5% in hiring.

Hiring Trends – City Wise

All metropolitan cities showed a positive hiring sentiment.  Hyderabad, Chennai and Delhi led with 10%, 9% and 8% growth respectively. Mumbai followed with an increase of 4%. Bangalore, which had slowed down last month, picked up hiring with an increase of 2% year-on-year. Kolkata, operating on a low base, showed robust momentum, growing by 29%.The emerging cities beyond the top ten cities across the country also showed increased hiring activity.

Methodology

The index has been calculated based on job listings added to the site month on month. July 2008 has been taken as the base month with a score of 1,000 and the subsequent monthly index is compared with data for July 2008.

Source-People Matters

Date-10-07-2018

Mumbai rains wreak havoc: How insurance covers can come to your rescue

For residents of Mumbai’s Llyod’s Estate that was affected by heavyrains, car insurance can help but not home insurance as the structure of the building wasn’t damaged

 

Earlier this week, heavy monsoon showers caused substantial damage in Mumbai, with roads caving in some parts of the city. According to media reports, around 15 cars got damaged when the compound wall and internal road of Lloyd’s Estate, a housing society in Wadala, caved in. Residents were also asked to evacuate the society temporarily for authorities to inspect the building. Though the temporary evacuation is sure to upset the residents’ lifestyle for a while, they have some recourse in insurance for the losses they might have suffered as far as damages to vehicles are concerned. Others can gear up to bear the brunt of monsoon showers by buying the right car and home insurance policies.

Damage to your car

Floods are bad news for vehicle owners. If water gets inside the car, it can damage the interiors or worse the car engine. “The own damage cover of a car insurance policy will pay for any damage to upholstery or built-in electronics of the car like the stereo system, but if there are add-ons like the policyholder has installed a high-end stereo instead of a built-in stereo, it will have to be declared and insured by paying extra premium,”said Sanjay Datta, chief underwriting and claims, ICICI Lombard General Insurance Co. Ltd.

For affected Mumbai residents, though, car damage also occurred due to landslide and roads caving in but they can make a claim. “Damage to vehicles in this case is accidental and hence insured. The policyholder needs to inform the insurer as soon as possible. The car will have to be pulled out of the debris, towed to the workshop which will then assess the repair cost,” said Sasikumar Adidamu, chief technical officer, Bajaj Allianz General Insurance Co. Ltd.

“In case the repair cost is more than the insured declared value (IDV), it will be seen as total loss and the entire IDV will be paid to the customer,” he added. The value of your car depreciates each year and IDV is the sum insured that’s calculated based on the invoice of your car minus depreciation. However, there are certain items that the insurer will not pay for.

It gets tricky when driving on a flooded road damages the car engine. If the vehicle is flooded and you continue to drive or start the engine, the water gets sucked into the engine and damages it. So, when you see water levels reach the middle of the wheel, don’t attempt to start or drive your car. If you do, any damage to the engine will not be considered accidental but consequential damage which isn’t paid by the insurer.

To cover consequential loss to engine add-on covers engine protect or engine secure can help. But the insurer will deduct depreciation while paying the claim. A zero-depreciation add-on cover will work here.

Damage to your house

Heavy rains and floods can also cause considerable damage to your house and home insurance helps as it covers the structure as well as the contents of the house. “Home insurance packs in fire insurance and insurance against burglary. Fire insurance covers the building and the contents against 12 perils, including storm, tempest, inundation and flood. So if your house is damaged due to a landslide caused by floods you can claim insurance,” said Kapil Mehta, co-founder, SecureNow Insurance Brokers Pvt. Ltd.

It also packs in covers against mechanical or electrical breakdown. Other covers include public liability cover (compensates a thirdparty for losses caused by you), personal accident cover (offers insurance on account of accidental death or total permanent and partial disability due to an accident) and alternate rent cover that pays rentals for the period your house is under repairs due to damages.

However for the residents of Lloyd’s Estate, home insurance will be of little use as there is no damage to the building. “The fire brigade evacuated the residents to ensure their safety. Even if the residents had taken alternate rent cover under the fire insurance policy, since there is no damage to the building from an insured cause, the rent incurred by shifted residents will not be payable by policies,” said K.G. Krishnamoorthy Rao, managing director and chief executive officer, Future Generali India Insurance Co. Ltd.

But in the case of an actual damage, home insurance helps and so it’s important to understand the basics. Go for a policy on a reinstatement basis and make sure you don’t under insure yourself. If you live in a building then you could also look at policies that work on the concept of “agreed value” basis. In the event of a loss, you get the agreed value and the ownership of your house is transferred to the insurer.

Source: www.livemint.com

Date: 28th June 2018

“IndiaFirst Life Insurance ties up with Oxigen to widen reach”

The partnership will begin as a pilot project for three to six months, first in Bihar and Odisha, and then in Uttar Pradesh, to understand ground challenges

IndiaFirst Life Insurance has partnered payment solutions provider Oxigen to utilise its point of sale (POS) network for distributing insurance policies in a bid to reach the underbanked population.

“We are taking insurance to the last mile, both in rural and urban areas. This is for people who are either not saving or not opting for insurance because of paperwork issues,” said Pramod Saxena, chairman and managing director (MD), Oxigen Services India.

The partnership is aimed at enabling customers to buy IndiaFirst’s insurance product across Oxigen’s 240,000 common service centres (CSCs) within minutes and eliminating paperwork. The life insurance company has designed ‘Khata’, its new product, keeping in mind the needs of customers in underbanked locations. Khata is a non-life, non-participating term assurance with return of premium plan. It provides individuals with the flexibility of paying premiums in parts, as and when possible.

“Khata is primarily targeted towards self-employed customers who do not have regular income. For these people, it is difficult to commit to a certain product that requires regular outflow,” said RM Vishakha, MD and chief executive officer of IndiaFirst Life.

The partnership will begin as a pilot project for three to six months, first in Bihar and Odisha, and then in Uttar Pradesh, to understand ground challenges. “The idea is to focus on most eastern and central regions, which are largely underbanked. That is where our last-mile banking services are focused, and that’s where we’d like to overlay insurance,” said Saxena.

While Oxigen has attempted selling other insurance products before, Saxena said none of them have worked. He believes the simplicity of Khata, however, would help sell itself, and calls the product a ‘micro sachet’ of insurance.

Vishakha said, “Unlike the top-up system in the telecom industry, insurance is the one thing that is not getting commoditised and it is so required.”

While the product’s claims and top-ups for the insurance product can all be initiated online or through an app, most of the customers will require assistance of the retailer.

 

Source: Business Standard

Date: 22nd June, 2018

Current trends within the HR World

Witnessing dramatic changes in how talent is identified, onboard and supported, HR industry has now shifted to more evidence-driven from a traditional HR model. The increasing adoption of HR software has aided to streamline the data analytics process and expedite “Social connections”.

Today teams are the major building blocks of an organization. Henceforth, the focus of HR is shifting from individuals to teams. As most of the HR professionals aspire to become the strategic business partners, HR operations have also seen an upgrade that will continue with an inclination towards High Service Orientation.Also, redesigning the performance management cycle by more frequent feedback, from multiple sources; has become one of the major trends of the HR world.The focus of the performance consulting is to provide a concrete actionable feedback on ‘how to improve performance’. They look for personality, cultural fit and that can create capabilities.

Moreover, we see more and more clever HR tech solutions that have lived to the employee’s promises, but recently we see a trend to a shift back to a more employee-centric approach; which means, HR is returning to its roots and focuses more on employee experience.

How leadership contributes to a Company’s success, how to balance crisis situation?

Starting a business or being hired in a supervisory role doesn’t automatically denote leadership. Strong leadership requires several elements working in harmony to steer the ship. The right kind of guiding hand can maximize output and reach goals while setting new ones. The wrong type of leadership can sink the whole company.A lot of people believe that the true leadership capacity of a person is tested during times of crisis. We believe the most important thing to do during a crisis is to maintain an example for your employees by keeping cool, calm, and collected, which will allow you to think about the curveballs being thrown your way.

When crisis strikes, it is essential to manage many relationships among many people,the ability, through inspiring others, managing conflicts, fostering teamwork, and other competencies, to moving people in the direction you desire. Each of these competencies requires self-awareness, self-control, and social awareness.

What are tools of employee retention?

Successful organizations realize employee retention is integral to sustaining their leadership and growth in the marketplace. Those that fail to make employee retention a priority is at risk of losing their top talented people to the competition.

Teams with reduced employee turnover develop a deep familiarity with the goals and objectives of the organization. They often become personally invested in the success of the team and company. By focusing on the skills and practices that maximize hiring efficiency and minimize employee turnover, managers promote employee retention and build stronger teams.Rewards have emerged as a powerful tool for employee attraction and retention. Armed with detailed knowledge about their employees’ wants and needs, today employers need to create programs that touch the employees’ needs and wants while being aligned to an organization’s financial realities, business goals and talent requirements.

How to balance employer and employee demands. What is the role of a CHRO as a leader in a company’s success? What are the steps taken for talent development by companies today?

The ultimate challenge to attain the smooth gears and balance the employer and employee demands is The Skills Gap, a mega trend that could take up its own long-term feature. It is at a grassroots level, and employers already have the approach they need to take. Employers need to connect with the potential future employees, teach in-demand skills. Moreover, as a leader in company’s success, CHRO will need to focus on building a culture of progress, chiefly if employees want to be prepared for the unrelenting renovations taking place in how people work. And when it comes to overcoming the skills gap, one of the biggest improvements could be a contingent workforce that brings the whole new set of challenges for HR leaders to contend with. It will turn out to be an exciting time where HR will help facilitate the understanding and development of the employee experience; and as it’s said, “Regardless of the success factors, the leader that sees the benefits of inclusions, paves its way to the top of the list”.

Source- bwpeople.businessworld.

Date- 6th June 2018

It will take five years to wipe out losses in life insurance: Sam Ghosh, MD, Bharti Enterprises

Bharti AXA expects both its businesses — life and general insurance — to be among the top 5 in the coming years. In an interview with ET, Sam Ghosh, MD of the financial services arm of Bharti Enterprises, talks about the challenges while charting a profitable growth path. Edited excerpts:

You have moved up from 15th to 13th in terms of ranking. How soon do you think you can get to top 10? How do you scale up from there?
We ended the year at 13th and we look to get to the top 10 in a couple of years. This year, life business is likely to grow by over 50% and non-life at 45%. Ultimately, the aim is to boost the business with focus on profitability and how to be among the top players. In life insurance, we added 25,000 agents. This year we will ramp up even further. We added 50 branches and add another 100 this year. We had some third-party partners, but we want to add some more. We want to add banks. We think a bank is missing on the life insurance side.

On the general insurance side, we have added HDFC BankNSE -0.25 % last year. We have tieups with HSBC and StanChart Bank. We don’t have a bank partner and that is our downside. We have to build our agency and proprietary channel. To break into top 3, we have to invest in inorganic growth. We are looking at options whenever the matter comes up. If it is at reasonable price, both shareholders will look at it. It should be the right price.

What would you consider reasonable valuation?
Some of the deals in the market in the mid-tier range are commanding the same valuations as the listed ones. If you look at the trading multiples of listed companies, if a company is at number 7-8 in the pecking order, you have to give them some discount.

Have both the businesses turned profitable now?
The life insurance company has broken even after 13 years. Non-life company is showing profit. We brought our IT system back to India. It was in Hong Kong. From a profitability and growth perspective, it is going to happen. We have booked a profit of Rs 5 crore for life insurance and it is the first year of break-even. In general insurance, we have reported loss this year. We have brought down our loss in general insurance to Rs 93 crore from Rs 150 crore a year ago. I have put aside money for third party. Reserving for third party was low. We have fixed that. We have changed the product mix. We have increased the share of motor insurance to 60%. We have started health and the commercial line. It will take us 4-5 years to wipe out losses in life insurance. Our EV is growing. This year, we will break even in our general insurance business and start showing profit from next year.

You had cut down the number of branches when you took over. What is the strategy now?
We changed the mix. We added much more front line. Earlier, the cost structure in life was 20% in head office and operations. Now 90% is on front line and only 10% is head office and operations. We have realigned. We moved more people to sales. In non-life, we moved the company from Bengaluru to Mumbai. Lot of people left in the process. We added new partners and channels, So we needed people to service them.

There are almost a dozen new general insurance companies. How is competition panning out? What are the challenges ahead in this space?
If you grow distribution, there is no competition. Some of the mid-sized players have stagnated. In general insurance, the commercial lines business has shrunk. The good thing is that retail is growing; so you have health and motor continuing to grow at a significant rate. The challenge of pricing and claims handling will remain. Life insurance is more face to face. This year our focus is to digitize back office. We are looking to work with Airtel customers as well. We are talking about how to make it completely digital.

Now, Bharti runs the show while Axa has taken the back seat. What has changed?
Axa wants to be in India. It has gone up to 49% from 26% in both general insurance and life insurance. It has given the Indian promoter a lot of freedom. AXA bought XL; so there will be a large chunk of corporate clients we could have access to. Last year, we closed a corporate book of Rs 150 crore and we plan to grow the book. We have added people for commercial lines.

Why is your attrition higher?
When your investment is growing, your attrition is higher. When you are stabilising, you control attrition. In Life insurance, agency contributed 55% of the business last year. There is a direct sales team of 800. We added 400 in the last one year. Our agency sales force has gone up from 10,000 to 25,000 this year. We plan to take it to 40,000 this year. We are planning to set up a TPA for government health scheme. We are looking to hire an agency for health. We do motor with motor dealers and through our separate agency force. We have separate SME agency clients. We also have a separate team for agri.

In case of inorganic growth, will you look at merger or acquisition?
It is based on opportunities. It depends. If it is a big bank, then they may want a shareholding; so it will be a merger. First choice is 100% buyout and the second will be merger to get bank assurance.

Premium for motor insurance fell after the new MISP guidelines capping commission came in. How is the motor insurance business affected?
Our business has slowed down due to MISP. Lot of people are flouting these guidelines. The concept is good. It helped bring down the pricing. In the last two months, payouts have gone up. Not everyone but few companies are being opportunistic. Largely discipline is coming in. To be fair, IRDAI is auditing the insurance companies to see there is no violation of the guidelines.

Has the focus of the industry moved from topline to profitability with private equity investors coming in?
These investors are looking at a minimum five-year horizon. They are looking at growth. They are not looking at short-term dividend. It is a game of market share. Market is growing fast; so the multiple is higher. In the industry, all big players are focusing on profitability.

Source- Economic Times

Date- 5th June 2018