PSU Insurers Keen on Strategic Sale

Move is aimed at arriving at a valuation before going for IPOs

Finance minister Arun Jaitley may have cleared the way for public listing of state owned general insurers, but National Insurance and New India Assurance may first go for strategic stake sale to arrive at a valuation before their initial public offerings.

K Sanath Kumar, chairman and managing director at National Insurance Company , said the firm is ready for listing and is awaiting formal instructions from the government.“There are three ways of doing it -first is strategic stake sale, second is listing to evaluate valuation and third is to raise additional capital,“ he said.

A senior executive of New India Assurance said, “We have not decided on the quantum but we want to explore the idea of strategic stake sale.“

The official, who requested not to be named, said the company is waiting for directions from the government on how to go ahead with listing. “We would like to be the open many more branches and for which we need capital.“

The finance minister had in his budget speech last month proposed to list New India Assurance, National Insurance, United India and Oriental Insurance and reinsurance company General Insurance Corporation.

The Insurance Laws (Amendment) Act 2015 enables the government to dilute equity stakes in PSU insurance companies by up to 51% to raise capital, keeping in view the need for expansion of the business.

Disinvestment is expected to bring in underwriting discipline in the general insurance sector. Today, companies only generate investment profit. The public sector insurers’ losses increased by 22.57% to Rs 6,592 crore in 2014-15 from Rs 5,379 crore in 2013-14.


Source:-The Economic Times (Mumbai)

Date:-29th March,2016

EFFECTIVE FOR 2016-17 – Third-party motor cover to cost up to 40% more

Car insurance has become costlier with the insurance regulator IRDAI hiking thirdparty premium rates by as much as 40% for 2016-17. Even for highend cars, which are generally considered safer, more eco-friendly and fuel-efficient, premium rates have been increased by 25% to Rs 6,164.

TOI had reported about the impending hike in its March 8 edition. Every year, the IRDAI revises the premium rates, taking into account the number of claims made and loss ratios for insurers. Motor thirdparty insurance is mandatory for all vehicles and covers liability arising from third-party claims due to accidents.

For cars below 1,000cc (like Alto, Nano and Kwid) the premium has risen by 40% to Rs 2,055, while for compact or B segment cars (1,000-1,500cc) the increase is 40% to Rs 2,237. For sedans, the regulator has increased it by 25%.

Premium for two-wheeler insurance for bikes below 75cc and between 75-150cc has been increased on average by 9.6% and 15% to Rs 569 and Rs 619, respectively .For premium bike models between 150-350cc, the IRDAI has hiked rates by 25%. Surprisingly , for super bikes that are above 350cc, the regulator has slashed premium rates by 10%.

The only other vehicle category for which premium rates have been lowered is goods-carrying private vehicle carriers below 7,500kg -by 10% to Rs 7,849. For private autos, excluding e-carts, rates have gone up by only 3.2% to Rs 4,200. IRDAI has not increased premium rates only for public goods-carrying vehicles below 7,500kg and those between 7,500-12,000kg and has maintained premiums at Rs 14,390 and Rs 15,365, respectively.

Source:-The Economic Times

Date:-29th March,2016

Being an employee is good for your health too!

As talent pools in India start to shrink, the employee, regardless of the industry, has become the most valued asset for any organization. As the landscape gets more competitive than ever, this premium attached to an employee is only likely to increase, especially in light of the flourishing start up ecosystem in India. Employers are getting increasingly innovative in the ways they choose to attract and retain new talent. In this setting, offering a competitive salary package is only one part of the employee retention puzzle. The bar is being set at a new level when it comes to employee benefits, and health has become one of the biggest areas of change.

For progressive companies, health benefits are no longer just about healthcare in the form of health insurance and health covers that extend to the employees immediate family. Companies today, have started sweetening the deal by going above and beyond the plain vanilla health cover offering and are more focused on the wellness of their employees. This change would become even more important as the annual salary increment for employees in India falls in line with other emerging economies.More inclined towards a preventative and wellness approach to health; employers are beginning to offer innovative wellness programs such as cashless OPD covers, Onsite Health camps & Clinics, Tele Doctor Service including Health Coaches and even Emergency Assistance programs.

Corporate healthcare benefits are no longer just limited to Annual and Executive Health checkups. Today, corporates want to offer care and disease management programs for their employees and their immediate families in order to alleviate any health concerns that might crop up as a result of hectic work and changing lifestyles in the urban space.

Some corporates have even gone as far as including doctor consultations on site at their workplaces and also holding quarterly or bi-monthly health talks that not only raises awareness for their employees for making better life choices for their employees but provides them with the convenience of getting a regular health check up within their work hours.

In fact a recent study conducted by Zinnov Research firm corroborates this growing trend. As per the ‘Employee Benefits Study 2015’ conducted by the firm across 40 companies in India, as many as 70% of the R & D centers in India conduct medical check-ups, 60% provide gym reimbursement, 45% have an in-house doctor and 42% conduct wellness talks.

Apart from the some of the above mentioned health related perks, employees today have the opportunity to enjoy down time while at work too, adding to their overall well being. It is not all uncommon to spot workplaces with fully stocked libraries, grocery ordering facilities, gaming spaces and even relaxation, yoga and meditation zones within their campuses. The list of perks geared towards an employee’s well being is truly an exhaustive one today. And it’s not just the physical health, but also their mental and emotional well being that has started gaining more traction. Corporates now realize that a happy employee is likely to be more productive too, and it’s not far from the truth. It has been found in various industry studies that the indirect costs of poor health, such as an absence from work and reduced work productivity, can result in two or three times the amount of direct medical costs for the corporates as well as increase the out of pocket expenditures of the employees themselves.

Corporates offering counseling programs, social fitness challenges & programs, nutritionist consultations & healthy eating incentives and even in house gyms or discounted gym memberships is not at all uncommon in today’s work environment. In fact, for employees with families many companies now regularly offer extend benefits, which include childcare facilities, paternity and extended or flexible maternity leaves, to make life easier for them to manage as they climb the ladder of success at their work place and manage a family all at the same time.

All these added benefits not only ensure a happy employee with increased productivity and output, but one that is healthy too, ultimately safeguarding and pushing down health costs for any organization. It is indeed a great time to be an employee as companies not only look after the health of their balance sheets but also of the people who contribute to their growth! It is no wonder then that the role of primary care service providers and aggregates has extended and morphed in order to augment this growing trend in the healthcare space. And it is a sector that is only likely to grow in the years to come. Not only for the better health of employees in corporates but also for every individual too! 

Source: ETHealthworld

Date: 27th March, 2016.

First vaccine against Rota virus launched in India

Aiming to slash the prevalence of violence-borne diarrhoea, the health ministry on Saturday launched the RotaVirus vaccine here, which will be available free of cost at public healthcare facilities, initially in four states.

Terming the occasion historic in the Indian health system, Health Minister J.P. Nadda said: “This is not a routine programme. This Rota virus launch sets the goal in the field of Indian health system. By launching this, we aim to immunise 27 million children across the country to prevent diseases caused by Rota virus.”

Rota is a highly contagious virus that infects majority of children before their first birthday. It is the most common cause of severe diarrhoea among children, leading to hospitalisation and death.

Nadda said that the government was aggressively working for the eradication of a slew of other diseases, including leprosy and TB.

“It is our duty to see that every child born in the country born is immunised against dreaded diseases,” he said.

The National Technical Advisory Group on vaccines had recommended the phased introduction of Rota virus vaccine in the country’s Universal Immunisation Programme.

In the first phase, Rota virus vaccine will be introduced in four States — Odisha, Himachal Pradesh, Haryana and Andhra Pradesh. It will be provided at government health facilities to children from six weeks of age.

The vaccine was launched in Odisha as the state records high diarrhoea cases among children and deaths due to improper treatment.

“We are making appropriate investment, and this has been possible because we have an effective healthcare system with more and more facilities capable of providing the vaccine to the needy children,” said Health Ministry Additional Secretary C.K. Mishra.

Currently, 9.2 percent of Odisha’s total disease burdens consists of diarrhoea patients.

The infant mortality rate in Odisha is 51 per 1,000 live births, while the mortality rate of children under five years is 68 per 1,000 births, both far higher than in the other states where the Rota virus vaccine was launched in the first phase on Saturday.

The diarrhoea burden due to Rota virus in Andhra Pradesh stands at eight percent while the figure in Haryana and Himachal Pradesh is 8.5 percent and 5.5 percent respectively.

Globally there are 453,000 child deaths due to Rota virus every year.


Source: ETHealthworld

Date: 27th March, 2016.

Baba Ramdev’s Patanjali may soon overtake FMCG biggies like Dabur, Marico and Godrej Consumer

Patanjali Ayurved has narrowed its gap with consumer product companies including Dabur, Marico and Godrej Consumer as the Baba Ramdev-led firm more than doubled its sales in the past ten months.

The Haridwar-based company has posted sales of Rs 3,267 crore in the ten months to January 2016, a 106% jump compared to Rs 1,587 crore a year ago, according to rating agency Brickwork, which said it sourced provisional data from Patanjali Ayurved. “PAL has expanded its basket of products tremendously over the last year. Sustaining this with profitable growth requires continuous R&D, enlargement of contract manufacturing and quality control,” the agency said in a report.

Brickwork has a ‘stable’ rating on Patanjali Ayurved’s Rs 300 crore long-term credit. With its sales performance, the company has closed in on established players. For instance, Marico posted revenue of Rs 3,903 crore for the nine months ended December 2015 while Godrej Consumer reported sales of Rs 3,585 crore.

The country’s largest ayurveda company Dabur had standalone sales of Rs 4,233 crore during this period. In a tough consumer market that barely grew 8%, most of these companies increased their local sales 8-12%. Patanjali sells about 500 products, ranging from ayurvedic medicinal products and staples to cosmetics but its biggest seller is ghee, which contributes 30-35% to its revenue, followed by healthcare at 20%.

“Even after excluding ghee which is a commodity product, PAL will likely overtake these mid-sized companies in term of sales by FY17 as it has been expanding reach rapidly and adding capacity to support it,” said Edelweiss Securities’ associate director Abneesh Roy. For a company that started as a small pharmacy in 1997, Patanjali expanded its reach from 200 outlets in 2014 to 5,000 franchise stores at present and launched more than two dozen mainstream FMCG products as none of the existing herbal players catered to categories such as noodles, oats and detergents.

Its products are 15-20% cheaper on average than those of its peers and many of its peers have been running offers and promotions to compete with the company. “What we have done is consistently focused on quality and pricing. Ask consumers about our product quality. Why are repeat purchases coming? It’s because of the quality we are offering consumers,” SK Tijarawala, spokesperson of Patanjali Ayurved told ET last week.

“As far as pricing is concerned, we are trying to give consumers the best possible prices. There is no incremental pricing,” he said. The company’s turnover grew 69% to Rs 2,007 crore during 2014-15, compared to Rs 1,187 crore in the previous year. Profit after tax nearly doubled to Rs 309 crore during the year, from Rs 155 crore in 2013-14.

Source: ETHealthworld

Date: 22nd March, 2016.


Banks keen to tie up with multiple insurers

According to corporate agency rules, banks can tie up with up to three life, three non-life and three standalone health insurers to sell their insurance products

Around 40 banks have evinced interest to open up their branch network to more than one insurance company in the life, non-life and health segments. From April 1, new norms for corporate agency channels will come into place. Nilesh Sathe, member (life) at the Insurance Regulatory and Development Authority of India (Irdai), said even those banks that are promoters of insurance companies have expressed interest to follow an open architecture.

This means those without bank partners or promoters can tie up with these banks. This would help them reach customers throughout the country through these bank branches.

According to corporate agency rules, banks can tie up with up to three life, three non-life and three standalone health insurers to sell their insurance products. However, with banks being given the ultimate liability on any product they sell, experts say the opening up might not yield any results in the near term. Corporate agency network by banks was earlier called ‘bancassurance’, which used to follow a model wherein one bank could tie up with only one life, one non-life and one health insurance company.

After the insurance sector was thrown open to the private sector in 2000, the early entrants rushed in and established tie ups with banks.

Some were also promoted by banks – ICICI Prudential Life Insurance, SBI Life, IDBI Federal Life etc. IRDAI has said that from FY17 onwards, bank boards will be required to give a clear plan as to how and by when would they open up their branch network to more than one insurer in each category — life, non-life and health insurance.

This is because even after IRDAI opened up the bancassurance network to more insurers, no bank approached the regulator for additional tie-ups.

Source: Business Standard

Date: 23/03/2016




PSU general insurers may see up to 10% stake sale


New India Assurance may be first off the block for IPO in FY 17

The finance ministry is considering up to 10 per cent stake sale in at least one insurance company in 2016-17, beginning with the listing of New India Assurance in the primary market. The department of financial services is in the process of working out valuations for possible stake sale. The listing of other general insurance companies such as United India Insurance, National Insurance and The Oriental Insurance through initial public offerings (IPOs) is also being considered.

“To ensure transparency, we are looking at public listing of up to 10 per cent stake sale in general insurance companies in 2016-17. This is in line with the Budget announcement. The valuations are being worked out. It will also depend on market appetite,” said a government official.

The New India Assurance and National Insurance reported double-digit net profit growth in 2014-15, at 31.4 per cent and 17.9 per cent, respectively. New India Assurance reported a net profit of Rs 1,431 crore in FY15. The Oriental Insurance and United India Insurance posted a decline of 14.8 per cent and 43 per cent in net profit, respectively, in 2014-15 year-on-year.

No insurance company is currently listed on the stock market.

Insurance sector observers, however, said arriving at the right valuations for public-sector general insurance companies might be a tricky affair in view of huge underwriting losses and claims being substantially higher than premia collected in some key segments, like motor insurance.

G Srinivasan, chairman & managing director, New India Assurance, had said after the Budget announcement that the company was ready for disinvestment as its financials were healthy with the market share expanding in both domestic and international markets. He had told Business Standard at its Insurance Round Table, “While we have to go through the process, all four public sector insurers are in a position to list, though it could take six to nine months. New India Assurance will be one of the first companies to be listed.”

Finance Minister Arun Jaitley in his Budget speech on February 29 had said, “Public shareholding in the government-owned companies is a way to ensure higher transparency and accountability. To promote this objective, the general insurance companies owned by the government will be listed in the stock exchanges.”

The government needs resources as it is targeting to narrow the fiscal deficit to 3.5 per cent of the gross domestic product in 2016-17, from 3.9 per cent in 2015-16. Towards recapitalisation of state-run banks, the government has allocated Rs 25,000 crore for FY17, and has said that it will consider increasing allocation, if needed. Public sector banks are suffering from rising stressed assets and bad debts.

The government also needs resources to support greater capital spending to revive economic growth.

The disinvestment target for FY17 stands at Rs 56,500 crore, 19 per cent lower than the initial target of Rs 69,500 crore in FY16. As much as Rs 36,000 crore is estimated to come from minority stake sale and Rs 20,500 crore from strategic stake sale.

The Insurance Laws (Amendment) Act, 2015, allowed the four public sector general insurance companies to raise capital, enabling the government to lower stake to 51 per cent, from 100 per cent at present, for expansion of the business, and achieving enhanced competitiveness.

The subsidiaries of the General Insurance Corporation (GIC) of India were restructured as independent companies in 2000 and, at the same time, GIC was converted into a national reinsurer.

In 2012, the Insurance Regulatory and Development Authority of India issued IPO guidelines for general insurers, where it stated that the regulator would take into account the insurer’s financial position, its capital structure and regulatory record before permitting them to come out with the share sale.


*           1973: The general insurance business was nationalised on January 1, 1973. One hundred and seven insurers were amalgamated into four companies – National Insurance, New India Assurance, Oriental Insurance and United India Insurance. The General Insurance Corporation (GIC) of India was incorporated in 1971 and commenced business on January 1, 1973, with the four above-mentioned companies as subsidiaries

*           2000: The subsidiaries of GIC were restructured as independent companies and at the same time GIC was converted into a national reinsurer

*           2002: Parliament passed a Bill delinking the four subsidiaries from GIC in July 2002

*           2005: Parliament passes Bill to raise foreign investment stake in insurance companies to 49 per cent. Beyond 26 per cent, they required Foreign Investment Promotion Board nod

*           2016: Up to 49 per cent foreign investment made automatic

*Today, there are 28 general insurance companies, including the Export Credit Guarantee Corporation of India and Agriculture Insurance Company of India


Source: Business Standard


Date: 23/03/2016