Ten years on, private life insurers need lifejackets

Source: FinancialChronicle

India’s private sector life insurance players remain in the red, even 10 years after breaking ground in the domestic insurance business, with sustained profitability eluding most companies. While life insurance companies do not disclose their embedded value, the actual measure of their profitability, several insurance officials said it was not even twice the capital infused for many players. None of them wanted to be identified by name for this report.

Embedded value (EV) is defined as the present value of the future profits expected out of the current block of insurance business. The Insurance Regulatory and Development Authority (Irda) requires the EV of a life insurance company to be at least twice its paid-up equity capital, if the insurer wants to access capital markets and dilute promoters’ holding.

“Very high level of capital has been infused by the insurance industry, but the corresponding level of profit is yet to be made,” said a senior executive of a private life insurance company.

“Only two or three players such as Kotak Life have been able to achieve an EV that is at least twice the capital infused. The recent Ulips and pensions have further reduced the margins for the insurers,” the executive added.

According to the unaudited data of Life Insurance Council, companies had infused Rs 33,550 crore in business till last February against Rs 31,360 crore till February 2011. ICICI Prudential Life insurance has infused Rs 4,790 crore, Bajaj Allianz Life Rs 1,211 crore and HDFC Life Rs 2,160 crore till this March. Cumulative losses of the life insurance industry stood at Rs 20,569 crore in 2010-11 (Rs 20,143 crore in 2009-10). Figures for 2011-12 are not yet available.

Though dozen-odd companies have been reporting accounting profits, it will still take a while for them to wipe off their accumulated losses. ICICI Prudential Life insurance reported 71 per cent increase in

Top pvt life insurers shut 1,500 branches in 2 years

Source: BusinessStandard

With “profitable growth” replacing “expansion drive” as the buzzword in the sector, the country’s top private life insurers have significantly reduced branches and employees over the last couple of years to cut costs and improve efficiency.

ICICI Prudential, the second largest private life insurer in the country, has reduced its branches by nearly a half from 1,923 to 1,000 in the last two years. The top six private insurers, barring SBI Life, reduced nearly 30 per cent of branches, while the headcount was scaled down 27 per cent in the same period. Interestingly, the profits of all these players doubled over the last two years.

Insurance companies have different takes on the matter, terming it “right sizing” or “smart usage of realty” or “efficient utilisation of space” but the move to rationalise branch networks was a direct fall-out of the stringent regulations introduced by the Insurance Regulatory and Development Authority (Irda) in September 2010. The Irda had raised the lock-in period and the insurance cover on the popular unit-linked products.

Top private life insurance players like Max New York Life, HDFC Life, Birla Sun Life, Aviva Life, Tata AIG Life and Bharti AXA Life all reduced their branch network between

18-250 in the last couple of years. However, in the same period, SBI Life, the second largest private life insurance player increased its branch network to around 714, from 494 as on March 31, 2010.

In terms of the number of employees, these top six insurers have reduced it by 26 per cent on average. ICICI Prudential Life reduced its headcount 34 per cent to around 13,200 in March 31, 2012 from 20,000 in March 31, 2010. Bajaj Allianz trimmed its employee count by more than 30 per cent.

“Our headcount has