Tag: LIC

LIC registers improved persistency ratio for individual business in FY21

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Life Insurance Corporation of India seems to have beaten the odds of the pandemic, with its 13th month persistency for individual business registering improvement in 2020-21.

For the quarter ended March 31, 2021, LIC reported a 13th month persistency of 63 per cent by number of policies and 74 per cent in terms of annualised premium for its individual regular business.

For the full fiscal 2020-21, its 13th month persistency for individual business was 67 per cent by number of policies and 79 per cent by annualised premium.

In contrast, LIC had reported a 13th month persistency of 61 per cent by number of policies and 72 per cent by annualised premium in 2019-20 for individual business.

The IPO bound life insurance behemoth also showed improved persistency ratios for the 61st month in the segment under review.

It was 48 per cent by number of policies and 59 per cent by annualised premium in 2020-21 as against 44 per cent and 54 per cent respectively in 2019-20.

Persistency ratio is an important benchmark for life insurers as it reflects the number of policyholders who paid their renewal premium. It is widely seen as an indicator of the quality of the sale as well as future growth.

This was especially important last fiscal when many insurers had initially announced a drop in persistency levels as customers faced job losses and salary cuts. However, by the end of the fiscal year, most life insurers reported a return in renewals and persistency levels.

Over the last year, LIC had also launched special measures to help customers amidst the pandemic, including a special campaign to revive lapsed individual life cover policies.

Meanwhile, in terms of first year premium this fiscal, LIC has seen better performance compared to last fiscal.

According to IRDAI data, it registered a drop of 12.38 per cent in May 2021 to ₹8,947.64 crore in May 2021, compared to a decline of 24.3 per cent in May 2020.

It registered flat growth in first year premium in the first two months of the fiscal 2021-22 at ₹13,804.40 crore compared to ₹13,793.18 crore in the same period last fiscal.

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LIC, SBI Life, Canara Bank pick up stakes in Indian Bank, BFSI News, ET BFSI

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NEW DELHI: Life Insurance Corporation (LIC), SBI Life and Canara Bank were among the top investors picking up stakes in Indian Bank under a QIP, according to a regulatory filing.

The country’s largest and the only state-owned life insurer, LIC, picked up 17.80 per cent of the shares issued under the qualified institutional placement (QIP), which closed on Thursday.

It was followed by SBI Life Insurance (11.87 per cent), SBI Mutual Fund and its various schemes (11.87 per cent), Societe Generale and its various schemes (9.74 per cent) and Canara Bank subscribing to 5.93 per cent of the shares offered in the issue, according to the regulatory filing by Indian Bank.

Indian Bank raised a total of Rs 1,650 crore in its QIP of shares, which were issued at Rs 142.15 apiece.

The state-owned lender said it allotted 11,60,74,569 new equity shares to the eligible qualified institutional buyers (QIBs) in the issue that opened on June 21 and closed on June 24.

In March this year, its board’s committee on capital raising had given approval for raising equity capital aggregating up to Rs 4,000 crore through QIP in one or more tranches.

Indian Bank’s shares closed at Rs 148.35 apiece on the BSE, up 0.64 per cent from the previous close.



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LIC, SBI Life, Canara Bank pick up stakes in Indian Bank under QIP

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Life Insurance Corporation (LIC), SBI Life and Canara Bank were among the top investors picking up stakes in Indian Bank under a QIP, according to a regulatory filing.

The country’s largest and the only state-owned life insurer, LIC, picked up 17.80 per cent of the shares issued under the qualified institutional placement (QIP), which closed on Thursday.

It was followed by SBI Life Insurance (11.87 per cent), SBI Mutual Fund and its various schemes (11.87 per cent), Societe Generale and its various schemes (9.74 per cent) and Canara Bank subscribing to 5.93 per cent of the shares offered in the issue, according to the regulatory filing by Indian Bank.

Indian Bank raised a total of ₹1,650 crore in its QIP of shares, which were issued at ₹142.15 apiece.

The state-owned lender said it allotted 11,60,74,569 new equity shares to the eligible qualified institutional buyers (QIBs) in the issue that opened on June 21 and closed on June 24.

In March this year, its board’s committee on capital raising had given approval for raising equity capital aggregating up to ₹4,000 crore through QIP in one or more tranches.

Indian Bank’s shares closed at ₹148.35 apiece on the BSE, up 0.64 per cent from the previous close.

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Govt kicks of IDBI Bank stake sale, but doesn’t disclose quantum, BFSI News, ET BFSI

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The government has invited bids from transaction advisors and legal firms for assisting in the strategic sale of IDBI Bank.

The Cabinet had in May given in-principle approval for IDBI Bank’s strategic disinvestment along with transfer of management control.

The central government and LIC together own more than 94 per cent equity of IDBI Bank. LIC, currently having management control, has 49.24 per cent stake, while the government holds 45.48 per cent. Non-promoter shareholding stands at 5.29 per cent.

The last date for submission of bids by both transaction advisor and legal advisors is July 13, the Department of Investment and Public Asset Management (DIPAM) said.

Transaction advisor

The transaction advisor would be required to advise and assist the government on modalities of disinvestment and the timing; recommend the need for other intermediaries required for the process of sale/disinvestment and also help in identification and selection of the same with proper Terms of Reference.

The transaction advisor will also assist in the preparation of all documents like Preliminary Information Memorandum (PIM), organise roadshows to generate interest among the prospective buyers and suggest measures to fetch the optimum value.

The advisor would also be supporting IDBI Bank in setting up an e-data room and assisting in the smooth conduct of the due diligence process.

The extent of shareholding to be divested by the central government and LIC shall be decided at the time of structuring of transaction in consultation with the RBI, the government had earlier said.

Insurance giant LIC had acquired a controlling stake in IDBI Bank in January 2019.

Finance Minister Nirmala Sitharaman in her Budget for 2021-22 had said the process of privatisation of IDBI Bank would be completed in the current fiscal.

The government aims to mop up Rs 1.75 lakh crore in the current fiscal from minority stake sale and privatisation.

Of the Rs 1.75 lakh crore, Rs 1 lakh crore is to come from selling government stake in public sector banks and financial institutions, and Rs 75,000 crore through CPSE disinvestment receipts.

Under PCA

Under the PCA imposed by RBI in 2017, the bank’s balance-sheet shrank as it could not extend loans to corporates and was not allowed to open branches.

It used the four years of PCA to restructure its business, cut exposure to large loans and bulk deposits and create verticals for various lending businesses to speed up turnaround time.

The bank has worked for the last four years on various parameters, done recoveries and raised its provision coverage ratio to 97%.

The lender was looking at Rs 4,000 crore of recoveries in this fiscal.

Retail loans

The share of corporate loans, which was about 67% four years back when it went under PCR, has shrunk to 40% now with 60% loans being retail. The bank is now targeting 55% loan book as retail and rest corporate. It wants to maintain low costs retail deposits at 48% of total deposits.

As a result, the institution has transformed from a project financier to a retail lender.

The company is looking to target the mid-corporate segment and will now avoid overexposure to certain industries and grow the business in a calibrated manner.

It sees over 12% growth in retail loans and an 8-10% rise in corporate loans.



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EoI for sale of IDBI Bank likely by September

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Absence of meaningful investor interest resulted in the government ultimately having to sell its majority stake in IDBI Bank to LIC.

The department of investment and public asset management (DIPAM) in the finance ministry on Tuesday floated a Request For Proposal (RFP), inviting transaction and legal advisers for strategic disinvestment of IDBI Bank. Once these advisers are appointed, the department would promptly invite expressions of interest (EoIs) for purchase of the stakes on offer and this would likely be by September, a senior official told FE. According to the RFQ, the applications can be filed till July 13.

Once these advisers are appointed, the department will promptly invite expressions of interest (EoIs) for purchase of the stakes on offer and this would likely be by September, the official added.

As per the plan, the government will exit the bank by divesting its entire 45.48% stake worth about Rs 19,000 crore at the current market prices and promoter Life Insurance Corporation will offer to sell a portion of its 49.24% stake with an intent to relinquish management control.

After a failed attempt a few years ago, the government diluted its stake in IDBI Bank in January 2019 in favour of LIC, which then became the promoter in the bank with 51% stake. Under a special dispensation, the Insurance Regulatory and Development Authority has allowed LIC to hold 51%, against the norm of 15%. The insurer will, however, have to pare its stake to 15% in due course.

Absence of meaningful investor interest resulted in the government ultimately having to sell its majority stake in IDBI Bank to LIC. That was barely privatisation. “However, this could change in 2021 if both government and LIC are able to divest a majority stake in the bank to an external investor, as it may be indicative of broader investor appetite in state-owned banks with adequate loan-loss reserves,” Fitch Ratings said in a note on June 7.

After a gap of five years, IDBI Bank was back in the black with a net profit of Rs 1,359 crore for FY21. Following improvement in asset quality, the bank exited the prompt corrective action (PCA) framework on March 10. It can resume corporate lending which was stopped after it came under PCA.

The improvement in the health of the bank is also reflected in its share price. IDBI Bank share price has risen 46% to Rs 38.60 as on Tuesday on the BSE, compared with Rs 26.35 on January 27.

Of the Rs 1.75-lakh-crore disinvestment target for FY22, the government has budgeted Rs 1 lakh crore from disinvestment of government stake in public sector financial institutions and banks such as LIC (IPO) and IDBI Bank strategic sale.

 

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LIC Chairman’s tenure extended to March 2022

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The Appointments Committee of the Cabinet (ACC) has extended the term of Life Insurance Corporation (LIC) Chairman MR Kumar till March 13, 2022, the date he completes three years as the chief of the insurance behemoth.

Mega IPO

His currently notified term was to end on June 30 this year. The extension was widely expected, given that LIC is readying itself for a mega initial public offering (IPO), which is expected to help the government mop up close to ₹1-lakh crore in 2021-22.

It maybe recalled that Kumar was appointed as LIC Chairman on March 13, 2019. Kumar had joined LIC in 1983 as a direct recruit officer. In a career spanning nearly four decades, Kumar has headed three zones of LIC – Southern Zone, North Central Zone and Northern Zone.

The government had recently amended rules to specify that only Managing Directors of LIC will be eligible to appear for interviews to the post of LIC Chairman.

The Centre owns 100 per cent of LIC. It is looking to divest up to 10 per cent stake in the proposed IPO. Once listed, LIC will become the country’s largest company by market capitalisation, say capital market observers.

Bigger than Reliance Ind

LIC could get a value of $261 billion when listed, based on its assets under management and using private sector insurers, analysts at Jeffries India, led by Prakhar Sharma, had written in a note in February. That could make it bigger than Reliance Industries, which is India’s largest listed entity.

The government is widely expected to invite merchant bankers for the share-sale this month.

The government has already introduced amendments to the LIC Act to make it IPO-ready. Besides increasing the authorised capital of LIC to ₹25,000 crore from ₹100 crore to facilitate listing, there has been changes in the law to reserve a portion of IPO to existing policyholders.

In the just-concluded financial year FY21, LIC had recorded new business premium of ₹1.84-lakh crore, the highest ever in the history of the corporation.

LIC has been steadily losing market share to private players even as it had built a strong brand over the years. It has been reporting low shareholder profits as most of the profit is redistributed to policyholders and dividend payouts to the government are also high.

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LIC Chairman’s term extended to March 13, 2022

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The government has extended the term of Life Insurance Corporation of India Chairman, M.R. Kumar, by nine months until March next year. Kumar’s term was set to end on June 30.

“The Appointments Committee of the Cabinet has approved the proposal of the Department of Financial Services for extension of the term of MR Kumar as Chairman LIC beyond his currently notified term, which expires on June 30, 2021, till March 13, 2022, that is the date he completes three years as the Chairman, or until further orders, whichever is earlier,” said an order of the Appointments Committee of Cabinet.

Kumar’s extension comes amidst the government planning to launch LIC’s initial public offering this fiscal.

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How to choose riders in a guaranteed insurance plan

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With increased awareness about insurance products and prevailing low bank deposits rates, many insurers have launched assured return products to catch the attention of investors. These types of plans offer guaranteed regular income i.e. a pre-defined percentage of sum assured (SA) is paid out as per a schedule.

In addition to offering life cover (up to policy term) and savings, such policies offer multiple riders i.e. additional benefits to the policyholder for an extra cost, to enhance the benefits of the policyholders. While all the riders at first glance appear to benefit you, it is important you choose the ones that fit your requirements.

Options galore

Almost all guaranteed return insurance policies, including those of Bajaj Allianz Life, Aditya Birla Sun Life, HDFC Life and Future Generali Life, come with rider options. Life insurance riders are contingent additional benefits over a primary/base policy. They come into play in case of a specific eventuality. Riders offer financial cover (rider SA) over and above basic sum assured in the life insurance policy.

Some of the common riders include accidental death benefit, where the policy (rider as well as base policy) pays rider/maturity benefit to the nominee. There is accidental permanent total/partial disability benefit where policyholder receives a lump sum payment (from the rider policy) in case of any specified disability.

Some insurers offer critical illness benefit rider where if the policyholder is diagnosed with any of the listed critical illnesses, the rider policy will pay the benefit and terminate. Even with the occurrence of the said event, the life cover remains intact which means you remain eligible for the death benefit on the life insurance plan.

In case of a waiver of premium rider, all future premiums for the term cover are waived if the policyholder is unable to pay because of permanent disability due to an accident or on being diagnosed with a critical/terminal illness.

A few insurers offer other riders as well. For instance, Bajaj Allianz Life offers family income benefit rider where 1 per cent of SA is paid monthly to the nominee/policyholder upon death or permanent disability or the first occurrence of one of the listed critical illnesses. Similarly, Aditya Birla Sun Life insurance offers, among other riders, surgical care benefit and hospital care benefit riders as well.

Factors to keep in mind

Do note the savings plans offered by life insurers generally cost more than a pure protection plan. Also, you may have to shell out more in terms of premium if you opt for riders. Consider Bajaj Allianz’s Flexi Income Goal plan which provides guaranteed income. For a 30-year old opting for an SA of ₹5.04 lakh and a guaranteed monthly income of ₹3,500 over a policy term of 17 years (premium payment term is 5 years), the total outgo works out to ₹1,23,892 (excluding tax). Now if a rider is added to this, say, a critical illness benefit rider, then the total premium cost works to ₹1,25,585 (excluding tax and discounts).

Before signing up for any rider, keep in mind two crucial things.

First, check whether the rider you want is available with that particular policy. For instance, in case of Future Generali Lifetime Partner Plan, there are no riders available but its Triple Plan Advantage plan comes with accidental benefit rider. Similarly, HDFC Life’s Sanchay Par Advantage offers two riders accidental disability rider and critical illness plus rider.

Second, assess whether you really need rider(s) with a savings product. According to Bikash Choudhary, Appointed Actuary & Chief Risk Officer, Future Generali India Life, “While all the riders play an important role in enhancing protection for the policyholders, the selection of riders depends on the need of the individual in terms of finance, lifestyle etc. For example, waiver of premium rider comes in handy in case of an insurance plan bought for a child. If the parents are not around, the rider helps in continuation of the policy until maturity to get full benefits, thereby protecting the child’s future financially.”

It is generally recommended to keep insurance and savings separate, instead of combining the two. This is because you may neither get sufficient life cover nor good returns from the product when you mix them. But certain investors such as high networth individuals, who have very low risk appetite, can consider such products. While these products do offer multiple riders or options, it may not make sense to sign for all of the riders available. So, make an intelligent choice to save on premium.

Check whether the rider is available with particular policy

Find out if you really need rider with a savings product

Savings plans cost more than term plans

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Insurance claims for loss of loved ones now made easy

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The loss of a loved one is irreplaceable and is difficult for the family to cope with, but life insurance helps soften the financial blow. In the unfortunate event of the death of a policyholder, the nomineeis required to carry out certain procedures to receive the claim amount. Here is how one needs to go about the process.

Making death claims

Every claim from a life policy starts with claim initiation, then processing and settlement. Considering the restrictions on movement due to Covid-19, many insurers, including SBI Life, Tata AIA Life, ICICI Pru Life and Exide Life, have made the entire process online.

If you are a nominee, then you can raise the claim request to the respective insurer through any one of the modes — email, Whatsapp or Chatbot. You can call the customer service or your agent for the same. Insurers like PNB Met Life and SBI Life have set up dedicated helpdesks to handle Covid-19 death claims requests.

Once you have notified the insurer, the next step is to submit the documents.

There are a few basic documents that are to be submitted irrespective of the type of claims — maturity, accidental or death. These include original policy document, bank account statement or cancelled cheque leaf, nominee’s or life assured’s ( in case of maturity or accident claim) identification proof such as PAN card or Aadhaar.

In case of death claim, in addition to the documents mentioned, the claim form (available with the insurer online), death certificate from competent authority (usually Government officials), doctor’s certificate, medical records or test results should be signed and submitted.

Given the current pandemic situation, many insurers like SBI Life and ICICI Pru Life have made this process digital. Policyholders/nominees can upload claim-related documents through WhatsApp, Mobile App, Chatbots (LiGo in case of ICICI Pru Life) and company website.

Ease of documentation

A few insurers have eased the documentation requirements due to restrictions in place across the country on account of Covid. For instance where death has occurred in a hospital, instead of requiring death certificate mandatorily from municipal authority, LIC has allowed alternate proofs of death such as death summary containing clear date and time of death issued by Government/ESI/Armed Forces/Corporate Hospitals and counter-signed by LIC’s class I officers or Development Officers along with Cremation/Burial certificate.

Similarly, SBI Life and Tata AIA have also waived the requirement of submission of a death certificate from civic authorities in cases where death has happened in a hospital, and the hospital issued (medical cause) death certificate or death discharge summary can be provided as proof of death.

Claim settlement

As per insurance regulator IRDAI, life insurers must settle death claims within 30 days of claim intimation. But if a claim warrants an investigation, then the insurer should conduct such investigation within 90 days from the date of receipt of the claim intimation and the claim should be settled within 30 days thereafter. That said, many insurers settle claims within seven working days or less.

For instance, Tata AIA Life and Exide Life settle the claim within two days (48 hours) upon receipt of the mandatory documents, while ICICI Pru Life claims to settle death claims within a day. PNB Met Life has a three-hour turnaround time for approval of death claims upon receipt of required documents.

Other claims

Norms have been eased up for other claims with life insurers too.

In the case of pension policies (annuities), the insured or the annuitant has to produce life certificate.

Normally, it would require their physical presence as proof of life. Given the current Covid situation, many insurers accept digital life certificate. LIC, for instance, has waived of production of life certificate for annuities with return of capital options due up to October 31, 2021.

Besides accepting life certificates sent through email, in other cases, LIC has also introduced life certificate procurement through video call process.

Private insurers such as SBI Life and Bajaj Allianz Life too, have started accepting digital life certificate and have made the entire process online.

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BBB recommends two names for forthcoming two LIC MD posts

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The Banks Board Bureau (BBB), an apex body tasked to recommend candidates for the top management posts in public sector banks and state owned insurers, has recommended two names for the forthcoming two positions of Managing Director in insurance behemoth Life Insurance Corporation (LIC).

While Ipe Mini has been recommended for the first vacancy of Managing Director of LIC, the BBB has recommended B C Patnaik for the second vacancy of Managing Director in LIC.

Meanwhile, the Finance Ministry is yet to approach the Appointments Committee of the Cabinet (ACC) on the issue of recommending an extension in the tenure of the incumbent LIC Chairman M R Kumar. Although it is widely speculated that Government is bringing changes in the eligibility and experience criteria for appointment of LIC Chairman, no such formal proposal has been yet made by the Finance Ministry to the ACC as yet, it is learnt.

Currently, LIC has four Managing Directors –Vipin Anand, Mukesh Kumar Gupta, Raj Kumar and Siddhartha Mohanty. The Government is looking to take LIC public this fiscal through a mega initial public offering ( IPO) and raise about ₹ 1 lakh crore from the divestment.

Other BBB recommendations

The BBB has recommended the name of Inderjeet Singh for the position of Chairman and Managing Director of United India Insurance Company Ltd. Also, BBB has recommended Suchita Gupta for the position of CMD in National Insurance Co Ltd.

BBB had on May 7 interfaced with eight candidates for the forthcoming positions of Chairman-cum-Managing Directors in National Insurance Company Ltd and United India Insurance Company Ltd.

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