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Friday, June 23, 2017

As market soars, biggest investor LIC stays away

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Life Insurance Corporation (LIC), the biggest equity investor in India, is staying away from the stock markets at a time when the markets are almost hitting life-time high.

The insurer, a dominant player in the market, pruned its investments 38% to Rs 39,705 crore for the nine month period ended December 31, 2016, against Rs 64,000 crore last year. It sold Rs 38,000 crore worth of equities during the period.

V K Sharma, chairman and managing director, LIC said, “We have deliberately taken this decision because of the way the markets are moving, LIC is a contrarian player in the market.”

He said equity usually forms 12% of the total investible assets.

LIC said its equity market investments will remain subdued but may hit a level of Rs 50,000 crore by the end of the financial year.

During this period the corporation also invested about Rs 1.98 lakh crore into the debt market, bulk of which — Rs1.83 lakh crore – was into the government bonds

The state-owned insurer reported a 78% rise in its net profit at Rs 16,000 for the nine-month period ended December 31, 2016, over the same period last year.

LIC said its core business of individual premiums is robust and not impacted by demonetization by prudent sale of insurance products by focusing on annuity and pension products. The sale of its Jeevan Akshay policy also helped pump up the profits.

It reported a 40% rise in new business premium for the nine-month period to touch Rs 31,000 crore, expecting to touch Rs 35,000 crore by the end of March 2017. During the period, the total assets of the corporation rose 12.81% to Rs 24,41,946 crore.

With 50% of the individual collections being in cash, demonetization-led to sharp fall in collections in the first few days and then it picked with 75% of the payments being in electronic form.

“Immediately after demonetization was announced on November 8, we shut all our 40,000 collections centres, saw to it that all the money was deposited in the banks before opening it for fresh collections. ‘This way we ensured there were no disruptions and the operations ran smoothly,” Sharma said.

During the period, LIC reported a rise in non-performing assets to 6.29% to Rs 18,220 crore, higher than the Rs 16,000 crore, or the 5.60% that the corporation reported during the same period last year.

LIC, which is a major shareholder in Infosys and also Tata group companies, said that it will not interfere in the internal matter of companies and has not voiced any concerns on the on-going board room battle of the respective boards of the companies.

Asked about the falling standards of corporate governance in some of India’s top companies LIC chairman said its first quarterly result press conference, “We will not interfere in the internal matters of companies unless it impacts the interests of our investors. We have no business to run the companies.”

According to stock market data, LIC to pared its stakes in various Tata companies 6.4% between October and December. However, in Infosys, LIC has a shareholding of 7.02%, which it increased 2% over a two-year period.

Keki Mistry says HDFC Life-Max Life merger is a structural change

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MUMBAI: Mortgage lender HDFC today said it has informed insurance regulator Irdai that the proposed merger of Max Life Insurance Company with HDFC Life is structural in nature.

Irdai had expressed reservations about the deal structure in the proposed merger of the two entities. An application was filed on September 21, 2016, by Max Life and HDFC Life, seeking in-principle nod for the amalgamation scheme.

“The structure that we proposed in the transaction is that a non-listed Max Life will first get merged with Max Financial Services which is a listed entity and then the combined entity will be finally merged with HDFC Life,” Keki Mistry, vice-chairman and chief executive of HDFC told reporters here.

“Once the merger takes place, we will keep the non-insurance business of Max Financial Services out of the insurance venture. It is in fact a structural change rather than an actual merger,” Mistry said on sidelines of a CII event.

He said HDFC’s lawyers have informed Irdai that the “whole structure is fine as there is no actual merger of the two entities. Now, Irdai says it will seek the advice of the Attorney General on the issue”.

Commenting on the interest rate scenario, he said, “there is scope for rates to fall by 25 basis points or more. But, I can’t tell you by when it will happen.”

On corporate governance, he said independent directors should be entitled to Esop for them to take genuine interest in the corporate governance of the boards they sit on.

On the ongoing issue at Infosys, Mistry said, “salaries of chief executive is the major issue. What I personally believe is that it shouldn’t be any problem as long as the shareholders are happy with it”.

Expanding aura of Hungary’s Non life Insurance Market

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Ken research announced recent publication on, “Non-Life Insurance in Hungary, Key Trends and Opportunities to 2020“. The report provides a detailed outlook by product category for the Hungarian non-life insurance segment, and a comparison of the Hungarian insurance industry with its regional counterparts. It provides values for key performance indicators such as written premium, incurred loss, loss ratio, commissions and expenses, combined ratio, total assets and total investment income during the review period (2011-2015) and forecast period (2015-2020). The report also analyses distribution channels operating in the segment, gives a comprehensive overview of the Hungarian economy and demographics, explains the various types of natural hazards and their impact on the Hungarian insurance industry, and provides detailed information on the competitive landscape in the country. The report brings research, modelling and analysis expertise, giving insurers’ access to information on segment dynamics and competitive advantages, and profiles of insurers operating in the country. The report also includes details of insurance regulations, and recent changes in the regulatory structure.

The Hungarian non-life segment accounted for 44.1% of the insurance industry’s overall gross written premium in 2015. The Hungarian non-life insurance segment expanded during the review period at a review-period CAGR of 2.1%. The Insurance Companies and Insurance Activities Act was introduced in December 2014, and came into force on January 1, 2016. Property insurance was the largest category, accounting for 46.9% of the segment’s gross written premium. Agencies are a highly preferred channel because of their detailed understanding of risks and products related to their field and region. The Hungarian non-life insurance segment is highly concentrated, with the 10 leading companies accounting for 91.8% of its gross written premium in 2015.

If compared to its regional counterparts, in Europe the trend of non-life premium revenues, the impact of the economic crisis was felt later, typically through a general decline in demand; consequently, a significant decrease in the premium revenues was seen in 2009 for the first time with a slight delay while 2008 still saw a moderate expansion. The CEE-10 countries performed better, with the changes resulting from the price changes in the premium revenues filtered. The market dynamics in the member states showed a significant dispersion in 2009: in the Baltic States, for instance.

The domestic market under performed in both years in comparison with the regional average. It may considerably stem from the fact that the crisis affected the Hungarian economy more than the regional average. Examination of the distribution of the premium revenues among business lines, it can be established that the greatest weight in the European market is that of the accident and health insurance branch. This is approximately level with the motor insurance branches in terms of premium revenues, followed by insurance against fire, natural disasters and other property insurance as the third most significant branch. The CCE-10 group is characterised by a product mix considerably different from the foregoing, mostly due to the underdevelopment of the health insurance segment. Hungary’s market characterizes another major feature-the high ratio of home insurances.

In spite of Europe’s economic slowdown, the Hungarian non life insurance sector continues to strengthen as more and more of the population seek greater protection. During the financial crisis, Hungary’s insurance sector proved itself crisis-resistant. In another sign of its robustness, the market has shown impressive annual growth over the last three years: according to the Hungarian Insurers’ Association, in 2015 the number of total written premiums had increased. Non-life insurance written premiums were the strongest basis of this growth, having increased tremendously. Revenue expansion in non-life insurance can be attributed to the fact that after a long period of time, the fierce premium competition in the field of compulsory third party liability motor insurance did not continue. This in turn has caused the written premiums of this line of business to increase in 2015. Nonetheless, average insurance premiums are still far below the premium level of neighbouring countries. Therefore, although the market continues to show signs of stability, there is scope for considerable growth. Following negotiations, the Insurance Act has been amended in several stages: as of this year, the act now centrally regulates the minimum levels of investment and surrender values while limiting the commission rate payable for life insurance. To further strengthen insurance rules, it has also become mandatory to involve depositaries, and from next January, only those units that have been invested by the insurance company may be shown.

An even more ambitious change is that, uniquely in Hungary, the total expense ratio (TER) – which was introduced in 2010 remains applicable as a legislative provision. Regarding our short-term plans, we understand current economic trends are more beneficial for the development of non-life insurances. We are witnessing organic market development in this field, where both written premiums and penetration are increasing, therefore we are investing significant professional resources into it. Although a stronger regulatory environment does not favour life insurance policies, we can find niche markets in terms of product portfolio and sales channels, in which our company may gain significant advantages. Likewise, we benefit from our flexibility, which enables us to provide services that harmonise with the increasingly rapid pace of life and the habit of planning for the shorter term. Our overall aim is to have people consider Post Insurance – after a year or two, as well as after 10 years – as an easily accessible, reliable and useful partner in many occupations, just as more than three million Hungarian customers have considered us for almost 1.5 decades.

Road Accidents Support Demand for Publicly Funded Health Insurance in Hungary

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Ken research announced recent publication on, “Personal Accident and Health Insurance in Hungary, Key Trends and Opportunities to 2020”. The report provides a detailed outlook by product category for the Hungarian personal accident and health insurance segment, and a comparison of the Hungarian insurance industry with its regional counterparts. It provides key performance indicators such as written premium, incurred loss, loss ratio, commissions and expenses, combined ratio, total assets and total investment income during the review period (2011-2015) and forecast period (2015-2020). The report also gives a comprehensive overview of the Hungarian economy and demographics and provides detailed information on the competitive landscape in the country. The report brings togethers research, modelling and analysis expertise, giving insurers’ access to information on segment dynamics and competitive advantages, and profiles of insurers operating in the country. The report also includes details of insurance regulations, and recent changes in the regulatory structure.

Hungary provides publicly funded health insurance, meaning that health insurance is free for all its citizens. Its health insurance coverage extends to include those non-Hungarian citizens who are insured under the National Health Insurance Fund. The Hungarian personal accident and health insurance segment accounted for 3.9% of the industry’s gross written premium in 2015. The Insurance Companies and Insurance Activities Act was introduced in December 2014, and came into force on January 1, 2016. Personal accident insurance accounted for 66.7% of the segment’s gross written premium in 2015. Health insurance was the second-largest category, accounting for 27.5% of the segment’s gross written premium in 2015.

Factors such as a rise in road accidents, awareness of health insurance benefits and expansion of the tourism industry are expected to lead the segment’s growth over the forecast period. Hungary provides full medical coverage for residents. Foreigners who are resident and working or studying in Hungary, as well as refugees and their dependants, are considered insured and the National Health Insurance (OEP) issues them with a national health insurance card (TAJ kártya) and a health insurance number (TAJ szám). There are also private insurance companies in Hungary, which many people use for additional health insurance, and private hospitals are available. Most state-employed doctors and specialists also have private practices, which many Hungarians choose in order to receive a better and more comfortable treatment, especially in the case of dental treatment, gynaecology and childbirth. Doctors very often treat their private patients in the state hospitals where they practise. The healthcare system in Hungary is mainly provided to residents of the country by the government. However the healthcare industry has decentralized substantially since the fall of the Soviet Union (of which Hungary was a part), and private healthcare in the country is increasingly being chosen as the way that many Hungarians receive their medical services. In the modern world, the Hungarian healthcare system is heavily influenced by ideas from both Germany and France with social insurance playing a large role in the way that patients pay for their treatments. The Health Insurance Fund (or HIF) is in place to guarantee Hungarian nationals free access to all medically necessary treatments, and therefore there is a high usage of these facilities throughout the country. The HIF collects its revenue directly through the national tax system and spends approximately US$ 600 per capita annually, and is one of the key reasons that the Hungarian public sector deficit is running at approximately down at 4% in 2008.

While the Hungarian healthcare insurance and private accident system is able to provide a relatively high standard of care to its patients there have been some major criticisms of the services. One of the major concerns is the fact that Hungarians have the lowest average life expectancy in Europe. One of the major factors contributing to this is that there are large gaps in healthcare coverage throughout the country. Despite the so-called ‘free provision’ patients are required to pay out-of-pocket for dental treatments, pharmaceuticals, and provide ‘gratitude’ payments to any physician that they visit. In addition to this, specific ethnic groups throughout the country (namely individuals of Romanian origin) are provided services inferior to ethnic Magyars, leading to their having an average life expectancy 10 years lower than the rest of the nation.
Essentially Hungary is still recovering from its time as a member of the Soviet Union and during that period, the healthcare system became a slow, bureaucratic beast. This is a legacy that continues to this day, and patients will often have to wait for long periods and fill out copious amounts of paperwork before they are provided the treatment that they need. This is a contributing factor to many Hungarians becoming disillusioned with the service and simply choosing not to seek medical treatment at all. It is not all doom and gloom in Hungary however; the country is able to provide some extremely high quality health insurance services, mainly at the nation’s top private hospitals. These medical facilities however, are much more expensive than the average Hungarian citizen can afford, and as such, their use is mainly the province of wealthier citizens and foreign nationals.

Comparatively the top private hospitals in the country will charge treatment costs similar to those in the USA and other top tier European nations, making out-of-pocket payment seem a risky proposition indeed without a Hungary health insurance plan. The other option is to use the public health system, and despite the governments attempt to reform this service, the long waiting times and crowded facilities coupled with poorly trained staff lead to grim out look of this system. The only way to truly protect yourself and your loved ones, anywhere in the world, is with a quality international health insurance plan. International health insurance plans are typically globally portable and guaranteed renewable for life, giving you the assurance that no matter what happens you will always have access to the treatment that you deserve. Plans will typically afford you a number of additional coverage options including benefits for dental, maternity, outpatient treatment, specialist consultations, alternative therapies, complimentary medicines, and emergency evacuations. This sector is expected to grow manifold by 2020.

Mozambique Insurance Industry Indicate Signs to Flourish

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Ken Research has announced publication titled, “The Insurance Industry in Mozambique, Key Trends and Opportunities to 2020” which provides an in-depth market analysis, information and insights into the Mozambican insurance industry. The report furnishes major performance indicators such as written premium, incurred loss, loss ratio, commissions and expenses, total assets, total investment income and retentions during the review (2011-2015) and forecast periods (2015-2020).

It grants a comprehensive overview of the Mozambican economy and demographics, and provides detailed information on the competitive landscape in the country. It also includes analysis of the impact of natural hazards on the insurance industry.

It offers a detailed analysis of the key segments in the Mozambican insurance industry, with market forecasts to 2020 and profiles the top insurance companies in Mozambique, and highlights recent developments. Report ascertains growth opportunities and market dynamics in key segments and assesses the competitive dynamics in the Mozambican insurance industry.

Key Market Dynamics

  • In 2014, only 24% of adults in urban areas had an access to the formal financial services and gradually this percentage was expected to rise in the coming years with innovation and improvements.
  • According to the International Monetary Fund (IMF), Mozambique has maintained its rank among the fastest-growing economies in the world partly due to export of coal which placed it on the list of global exporters of mineral resources and partly because of the discovery of offshore natural gas that garnered international interest and investment. As a result, the insurance industry benefited and registered a CAGR of 28.6% during the review period.
  • The life segment reckoned for 18% of the industry’s gross written premium whereas the personal accident and health segment accounted for 10.3% of the industry’s gross written premium in 2015.
  • In 2015, there were mainly 18 operational insurance companies, which included 4 composite, 3 life and 11 non-life insurers.
  • The insurance sector in Mozambique has evolved magnificently in the recent years and the country at present has 18 insurance companies and more than 64 brokers, as told by the president of the Mozambican Insurance Supervision Institute.
  • The numbers of operators, policy holders and the amounts of premium paid have grown significantly but at the same time Otilia Santos has supported the insurance market in Mozambique currently.
  • The amelioration viewed in the insurance business is because of the efforts made by operators since, along with signing contracts; they educate and aware the general public too. This growth is eventually forecasted to occur in the future years as well where more and more public is aware and wants to get insured for merely everything that can prove to be a risky venture.
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