About Me

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Trichy, Tamil Nadu, India
Working as an Assistant in LIC of India, Rockfort BO, Trichy, TN. Having a strong belief that LIC's welfare is our welfare and always trying to work towards that. Also functioning as an office bearer of AIIEA Thanjavur Division.

Sunday, February 21, 2010

Ulip is a legitimate insurance product, very distinct from MF

Defending unit-linked insurance policies (Ulips) as a savings tool and not just investment, T S Vijayan, the 56-year-old chairman of Life Insurance Corporation of India (LIC), has said these are legitimate insurance products. Vijayan, who joined LIC as a direct recruit in 1977 and climbed the ranks to become the youngest chairman of the country’s largest financial institution, said in an interview with Sneha Shah and Rajendra M Palande that the public sector life insurer will end the year 2009-10 with over Rs 1,100,000 crore of assets. Excerpts:
You have hired Accenture to carry out a restructuring exercise for LIC. What will it predominantly involve?
We have been hiring consultants periodically to carry out different streamlining exercises. I do not have more to share at this moment. 
Is there some concern about the huge dependence on the agency force alone?
The 1.3 million agency force is our strength because these agents are present in every part of the country. They are the channel we would depend on in the future also.
Efforts are on to professionalise them more and to change any reporting structure that needs to be changed.
Are you also looking at an image makeover because LIC is perceived as a typical government organisation?
LIC is a brand in itself. It is government-owned and we don’t want to de-alienate from that tag. We certainly have to keep pace with the modern times and renew ourselves constantly. But we don’t want to change our brand image because LIC has been successful in standing tall against all the big names, and hence LIC will remain LIC.
LIC has been driving the growth for life insurance industry this year. What do you attribute this to?
That simply means LIC is the most preferred insurer. It is like this, once the organisation matures, maintaining a 100 per cent growth is not possible and hence, the private life insurers who, until now, have been growing at 100 per cent might not continue to see the same results. While we have been consistently increasing our productivity and hence, although we have fewer number of offices and agents compared with the rest of the industry put together, we have been able to clock good performance.
While you keep insuring more and more number of lives by selling more policies, higher lapsation has always been an area of concern for LIC. Lapsation is a worldwide phenomenon. Whenever a person has additional responsibilities and financial burden, the first axe falls on life insurance premium. People either discontinue the policy or reduce the premium. That can be seen as lapsations, but our conservation ratio is 96 per cent, which is excellent by industry standards.
Close to 7.3 million policies worth Rs 52,926 crore lapsed in 2008-09. What are you doing on that front to check on the high lapsations?
We have recently started two initiatives to get the lapsed policies renewed within five years of lapsation. We have allowed people to pay the arrears in easy instalments along with some interest. Our internal research shows that people find it difficult to pay the money in lumpsum and hence, allowing payments in parts will help.
Is misselling also a reason for higher lapsations?
The Irda has given an option to the customer to return a policy within 15 days of getting the policy document. If a customer thinks that the policy doesn’t meet the promised features, the policy can be returned and money can be reimbursed. In case where some serious misselling happens, we take stern action against the concerned agents. Most of our agents have been with LIC for generations and they will never sell something and make people surrender the policy and buy another policy after two-three years of a term. If an old policy is in lapsed condition, we allow a new policy only after lapsed policy is renewed.
What has been the total premium income this year?
We managed to mop up Rs 129,000 crore up to January. Our target is to collect around Rs 176,000 crore by the end of March this year.
What is the ratio of Ulips in new premium income?
Ulips are a recent phenomenon (for LIC). They account for 60 per cent of our new premium income. We offer a healthy mix of products to our customers. This has helped us tide over bad times of last year.
What is your take on the recent Sebi notices to all the life insurers for their Ulip products?
We have not got any such notice. But as far as Ulip goes, they are legitimateinsurance products as there is a risk cover in it. Ulips are being sold in allgeographies around the world as insurance products. Beyond that, I cannot really comment.
But is the line between MFs and Ulips really blurring?
Ulips that are approved by Irda have to go through many processes. There is ahuge solvency margin requirement that MFs don’t have. The sale process forUlips is also regulated. The literature is calibrated. There is a lock-in period ofthree years, which is not the case in MFs.
What have been LIC’s investments this year? The requirement for infrastructure is huge. What will be your investments in it be?
We have invested Rs 160,000 crore so far. The target is to touch Rs 200,000 crore as our income and premiums have been going up. Of the total, Rs 50,000 crore has been invested in equity markets. There are prudential norms that mandate minimum 15 per cent investment in infrastructure and we will invest within those guidelines.
What is your market outlook in terms of opportunity given that so many FPOs, IPOs and disinvestment options are available? Is there any concern on valuations?
There’s a huge opportunity and we will definitely invest. It makes sense for us to pick up stake in bulk than picking up in bits and pieces. Many of the companies are solid ones with strong fundamentals and hence complementary to our investment philosophy.
Courtesy: mydigitalfc.com

Thursday, February 18, 2010

LIC looks to mop up Rs 18,000 cr from new Ulip plan

The country’s largest life insurer, Life Insurance Corporation of India (LIC), is aiming to collect Rs 18,000 crore through its new close-ended unit linkedinsurance plan (Ulip) — its highest target since it launched the Jeevan Astha scheme in December 2008.
Hoping to cash in on the demand for tax-saving options ahead of the close of the financial year, LIC has launched Wealth Plus, a Ulip guaranteeing returns equal to the highest net asset value (NAV) during seven years, while the policy term is eight years. It is available in two premium payment options — a term of three years and single premium.
“This product is available for a limited period and we will close it after the target is met,” said LIC Managing Director DK Mehrotra.
The life insurer had set itself an ambitious target of Rs 25,000 crore for its close-ended scheme Jeevan Astha launched last year. However, collections fell short of expectations, as LIC only managed to collect Rs 10,000 crore.
Insurance companies do around 40 per cent of their total annual business in the last three months of a financial year. “We were waiting for the stock market to correct. Keeping in view the volatility in the market, we have launched this product which guarantees the highest NAV of seven years,” added Mehrotra.
Life insurance companies have revised their existing product structures and lowered charges from January 1, as mandated by the insurance regulator. They have also come up with NAV-guaranteed products in the current financial year.
“With LIC coming up with such a product, many insurance companies will see a decline in the estimated new business,” said a senior executive of a life insurance company.
Wealth Plus is a close-ended product with minimum age of entry being 10 years and the maximum 65 years. While the policy term is eight years, the premium paying term of the policy is three years. While the minimum premium is Rs 20,000, there is no cap on the maximum premium. Premium allocation charge for single premium up to Rs 4 lakh is 5 per cent, and above Rs 4 lakh, it is 4.5 per cent. For regular premium, allocation charges are 12 per cent for premium from Rs 20,000 to Rs 2 lakh, and thereafter it is 2.5 per cent. The fund management charge is 1 per cent, which is capped at 1.25 per cent by the regulator.
Courtesy: ET,14.2.2010

Tuesday, February 16, 2010

LIC investment crosses Rs 50k crore in FY10

Life Insurance Corporation of India’s (LIC) investments in equities during the current fiscal have already crossed Rs 50,000 crore which is more than its equity investments of around Rs 45,000 crore in the whole of 2008-09. According to LIC chairman TS Vijayan, the corporation is likely to end the year with a total investment in excess of Rs 2,00,000 crore.

The life insurance major, which was among the largest investors in NTPC’s  follow-on public offer (FPO), is looking forward to make additional investments in other PSU public issues. “We feel that we have got a very good deal in NTPC, because purchases of such a size we will never be able to make in the open market. Considering that we need to make investments for the long-term, such big deals are good opportunities for us.”

“When we are making investments of around Rs 50,000 crore, single deals of Rs 1,000 crore make sense,” said Mr Vijayan. He added that the corporation would be aiming for a good chunk of Rural Electrification Corporation’s (REC) offer as well. REC is looking at raising close to Rs 4,000 crore through an FPO later this month.

“Disinvestments and big-ticket IPOs are a good opportunity. In small IPOs, which are oversubscribed several times, we get a very small quantity of what we have bid for. If it is a large issue that’s oversubscribed once or twice, it’s good for us,” said Mr Vijayan.

“Our gross investments during the current year so far are close to Rs 1,64,000 crore. In the next two months, this number should go up to Rs 2-lakh crore,” said Mr Vijayan. Of the investments made during the year so far, the corporation has pumped in Rs 51,000 crore in equities and an additional Rs 52,000 crore in central government securities.

The remaining funds were invested in state government, infrastructure and other securities.”
According to Mr Vijayan, if the corporation made investments of such a scale through the market, it would result in distortion of prices. “The increase in investments is a sign of our business growing. Our total premium till January this year has gone up 18% to Rs 1,29,000 crore. Of this, the new business premium (first year premium) is around Rs 33,000 crore,” said Mr Vijayan.

Mr Vijayan said that with a large chunk of premium coming into unit-linked plans, the corporation had no choice but to invest in the market. Last year, the corporation got a good opportunity to invest in the days that followed the global financial crisis. The market value of these investments has soared substantially since then.

The market value of LIC’s investments has crossed Rs 11,00,000 crore in end-January compared to Rs 10,76,000 in December ‘09. At the beginning of the fiscal, it was around Rs 8,98,000 crore. According to Mr Vijayan, the increase in the size of its equity portfolio also gives the corporation more headroom to invest in sectors and individual companies. 
Courtesy: ET

Wednesday, February 10, 2010

Our NAVs vs Pvt., Sensex comparison PPT

Here is a presentation that compares our NAVs 
with Pvt. NAVs, Sensex 
expected growth based on several parameters

EMAIL: voradhirajm@yahoo.co.in 


LIC vs Pvt. Comparison

LIC vs Private 
Comparisons on Profitability, Market Share, Ulip performance and Claims ratio.
(Some data are older than the data we already supplied here.  But a good collection!)

Courtesy : GS,AIIEA, SZ.

Wealth Plus Presentation

 A presentation for Wealth Plus Created by one of our friends!
Forwarded by : Meenakshisundaram, Srirangam, Trichy. 

Tuesday, February 2, 2010

Dis-Honour Role of Private Life Insurance Cos.

Ranking list of Pvt. Life Ins. Cos.
on the basis of Accumulated losses
compiled by Arivukkadal
  from Annual Report of IRDA, 2008-09
and Annual Report of LIC 2008-09
Download pdf version here.