Insurance Newsletter – July 08 to July 12, 2013

India Infoline News Service | Mumbai |

According to the amended guidelines, switching from one plan to another of the same insurer has been kept out of the portability definition.

Top Stories 

LIC to buy shares worth Rs. 400 billion in current fiscal

State-run life insurer, Life Insurance Corporation (LIC), will go shopping for 30% more shares this fiscal as compared to last year. India's largest insurer will buy shares worth Rs. 400 billion in the current financial year, said reports... Read more

IRDA amends health insurance standardisation rules

The Insurance Regulatory and Development Authority (IRDA) amended the guidelines on standardisation in health insurance on Wednesday.

According to the amended guidelines, switching from one plan to another of the same insurer has been kept out of the portability definition.


Deductible—a cost-sharing requirement under a health insurance policy—has been amended to provide that the insurer will not be liable for a specified amount in case of indemnity policies and for a specified number of days/hours in case of hospital cash policies. Also registered homeopathic practitioners will be classified as medical practitioners... Read more

IRDA asked to hold draft law on bancassurance

The Department of Financial Services (DFS) on Monday directed IRDA (Insurance Regulatory and Development Authority) to put on hold its proposed regulation on bancassurance which lays down rules for insurers to appoint banks as their corporate agents to sell policies.

The DFS has suggested to the insurance regulator to hold discussions with banks and insurers before framing the guidelines on bancassurance.

Bancassurance is the bank-insurance model. It is normally a tie-up between a bank and an insurance company whereby the insurer uses the bank sales channel to sell its insurance products... Read more

Special Stories 

IRDA cancels 15-bed rule for medical cover

The Insurance Regulatory and Development Authority (IRDA) on Friday said that the circular restricting medical insurance for patients treated at hospitals with less than 15 beds has been amended.

The IRDA was responding to a writ petition filed by the Association of Medical Consultants (AMC), challenging the circular titled 'Guidelines on Standardization in Health insurance' released in February 2013... Read more

Term insurance plans have highest lapsation rate: Survey

Term insurance policies in India have the highest lapsation rate, according to a report titled, ‘Life insurance thematic: Let’s not give up on life yet’, from Espirito Santo Securities.

The lapse rate in terms of premium was 19% for term insurance policies, 11% for unit-linked insurance policies (Ulips), 6% for par-whole life, par-endowment, 4% for non-par endowment, and around 2% for pension plans, the report added... Read more 

Earnings Preview

How will autos perform in Q1 FY14?

IFL expect EBITDA margins for M&M to improve sequentially on the back of higher share of tractor sales in Q1 FY14. "M&M will see improved margins on the back of sharp growth in volumes in the tractor segment, which generates higher margins when compared with its automotive segment." It sees 13% topline growth in Swaraj Engines on back of healthy tractor sales. For the sector as a whole, it sees operating margins for all players except commercial vehicle manufacturers to inch up sequentially. "Operational deleverage will be the key reason for the decline for CV manufacturers -- Tata Motors and Ashok Leyland." The brokerage sees Bajaj Auto gaining from the rupee depreciation while Maruti and Hero MotoCorp benefitting from a weaker yen...Read More

Expect extremely weak Q1 FY14 results from PSU banks: IIFL

IIFL expects extremely weak results from most public sector banks in Q1 FY14. It sees a material earnings decline in public sector banks on a year-on-year basis on the back of tepid loan growth, margin contraction, poor fee income growth and higher provisioning for non-performing loans. "The decline in margins is likely to be driven by adverse loan mix (higher share of priority sector lending), announced lending rate cuts, significant interest reversals from high slippages and stubborn deposits costs. Delinquencies for most banks is expected to be in the range of 2.5-3% with stress persisting in mid-corporate and SME segments," it stated. From the private banking space, it expects strong results from Yes Bank, IndusInd Bank, Axis Bank, HDFC Bank and LIC Housing Finance...Read More

IIFL sees Q1'14 $ rev growth of 3.4%, 2.8% for TCS, HCL Tech

IIFL sees divergence of performance in Q1 FY14 continuing with TCS and HCL Technologies posting growth in dollar revenues at 3.4% and 2.8% quarter-on-quarter, respectively. "The weak traction for Infosys and Wipro is expected to continue with less than 1% reported dollar revenue growth. From our mid-cap universe, Mindtree and KPIT are expected to lead the growth with 2.5-3% dollar revenue growth." On the guidance front, considering the fragile discretionary spending environment and cross currency impact, the brokerage expects Infosys to reduce its guidance to 5-8% from 6-10% earlier. "For Wipro, considering the management expectation of growth pick-up from Q2 FY14 and ramping up of recently won deals, we estimate the dollar revenue guidance to be in the rage of 1-3%."...Read More

How will earnings of oil and gas cos pan out in Q1 FY14?

Brokerage IIFL expects gross under recoveries of oil companies to decline sequentially to Rs. 266bn as crude oil prices declined 5.6% year-on-year and 8.8% quarter-on-quarter. "The rupee on the other hand depreciated 3.1% YoY and 2.6% QoQ." It sees oil marketing companies reporting weak set of Q1 FY14 numbers on the back of nil provisioning of under recoveries from the government. Decline in "Gross refining margins will have further negative impact on profitability. All three companies are expected to report losses at EBIDTA and PAT level."...Read More

See strong Q1 rev growth for Big Pharma sans Ranbaxy: IIFL

IIFL expects robust revenue growth for all largecap companies except Ranbaxy. "In the midcap space, outperformance would be led by IPCA Laboratories, Glenmark Pharmaceuticals and Aurobindo Pharma." The brokerage sees muted domestic formulation growth for most companies given the move to new pricing policy. It expects Sun Pharmaceutical to report a 20% year-on-year revenue growth in Q1 FY14. "We estimate adjusted PAT growth of 12% YoY to Rs. 10.6bn. The reported PAT would trend downward due to the settlement expenses of $442mn related to Pantoprazole." For Ranbaxy, it sees it delivering a 16.4% YoY decline in topline to Rs. 27bn. According to IIFL, Cipla is estimated to grow at 8.3% YoY to Rs. 21.8bn on a higher base of the corresponding quarter. "We expect the company to register operating profit margins of 21%." For Dr Reddy’s Laboratories, it sees a topline growth of 30.5% YoY driven by increase market share in new product launches in the US and currency benefit. "The company is expected to post an OPM of 21.1%, down from 21.9% in Q1 FY13. The company is expected to post a net profit growth of 30% to Rs. 4.4bn."...Read More

See around 4-7% QoQ rev growth for telcos in Q1 FY14: IIFL

Telecom operators are expected to report healthy Q1 topline growth in the range of around 4-7% quarter-on-quarter led by uptick in revenues per minute and moderate volume growth. "As revenues per minute inch higher, we believe the beneficial impact would be seen on EBIDTA margins which would improve by 60-136 bps QoQ."...Read More

See cement cos PAT falling 3-92% in Q1 FY14: IIFL

Brokerage IIFL expects the cement sector to report a weak set of numbers in Q1 FY14 on back of slackening demand, lower realisation, and rupee slide increasing international coal cost. "Cement companies are likely to report a 3-92% drop in PAT with the worst hit being India Cement." It sees ACC and Ambuja Cements realisation and volume taking a hit as cement demand softens due to excessive rainfall in north-eastern states...Read More

IIFL sees15% YoY revenue growth for FMCG cos in Q1 FY14

Brokerage IIFL expects FMCG companies to witness year-on-year revenue and earnings growth of 15% and around 17% respectively. "Operating margins are expected to expand by 20 bps to around 21%." It sees strong volume growth in the staples segment while discretionary categories are likely to witness a slowdown...Read More

See lackluster rev growth for infra space in Q1 FY14: IIFL

IIFL expects revenue growth in the infra space to continue to remain lackluster in Q1 FY14. "We see a continuous depletion in the order book coupled with multiple execution challenges on account of macro headwinds." It sees weak order inflows for companies on account of fragile outlook for industrial capex and power generation. "Significant drop in order inflows have resulted in slower growth in order backlog across the industry. As a result, we expect continued deceleration in revenue growth with longer execution cycles."...Read More

See weak Q1 FY14 earnings for metals space: IIFL

IIFL expects the metals sector to report a weak set of numbers as margins remain under pressure due to lower realisations and subdued volume growth. For the ferrous space, it sees lower EBIDTA per tonne for most players on a quarter-on-quarter basis due to lower volumes and increase in prices of imported coking coal. "EBIDTA per tonne for Tata Steel Europe would remain positive due to increase the lag of contract steel sales and lower raw material costs." In the non-ferrous space, it expects Hindustan Zinc to report strong operating numbers as mining output and refined metal output is expected to increase. "For the other non-ferrous companied margins are expected to decline on a sequential basis due to lower realisations and lower volumes."...Read More

Q1 FY14 preview: Will power cos earnings electrify?

For Tata Power, it sees weak standalone results led by lower plant load factor outside Mumbai. "We expect standalone PAT of Rs. 1.9bn, down 26% year-on-year." In the case of PowerGrid, the brokerage forecasts revenue growth of 19.1% YoY and 2% QoQ to Rs. 34.4bn. "We expect PowerGrid to report about Rs. 40bn worth of capitalisation in this quarter."...Read More

Q1 FY14 preview: Morgan Stanley sees another dreary quarter

IIFL Inst Equities sees Q1 FY14 FMCG sales growth of 13.5%

Weak auto volumes to hurt Q1 FY14 earnings: IIFL Inst Eq

See YoY, QoQ dip in Q1 FY14 cement earnings: IIFL Inst Eq


Domestic News

LIC targets 15% growth in 1st yr premium income in FY14

Life Insurance Corporation of India (LIC) plans to invest Rs. 2.47 trillion in both equity and bonds in the current financial year.

The country's largest insurer made an aggregate investment of Rs.2.25 trillion in FY13. The insurer would increase its aggregate investment by 10% this year.


However, the increase in exposure to equity market, secondary or primary, would depend on the market condition, LIC chairman SK Roy said... Read more

Reliance Life's new business premium zooms 100% in Q1 FY14

Reliance Life Insurance Company (RLIC), part of Reliance Capital Ltd, has registered 100% increase in its new business premium at Rs. 5.14 billion during Q1FY14, compared to Rs. 2.51 billion in the corresponding quarter in last fiscal.

The company registered 48% growth in new business (individual) premium at Rs. 2.67 billion in Q1FY14, as against Rs. 1.81 billion registered in Q1FY13, Reliance Life said in a press release on Wednesday... Read more

Uttarakhand floods: United India Ins receives 37 claims

United India Insurance Company on Saturday said that general insurance claims arising out of the devastating floods in Uttarakhand are around Rs. 30 billion.

United India Insurance CMD Milind Kharat said that its company itself has an exposure of Rs. 5 billion in the state. The insurer has received 37 claims till date. However, surveyors have still not been able to reach damaged sites, Kharat further said... Read more


United India Insurance to enter overseas market

United India Insurance on Monday said that it is in talks with Life Insurance Corporation of India to offer a combo product of life and general insurance, according to a media report.

United India also plans to enter the SAARC and the Gulf markets for general insurance during FY14. However, the insurer is not signing any tie-up with other public sector general insurers for the overseas foray, the report added... Read more


Temple insurance gains significance in India

In June 2013, the North Indian states of Uttarakhand and Himachal Pradesh, some regions of Western Nepal and their adjoining areas experienced heavy rainfall that triggered devastating floods and landslides.

Damage to bridges and roads left over 70,000 pilgrims and tourists trapped in various places, many of whom were rescued.

In June, Insurance and Regulatory Development Authority (IRDA) had asked life and general insurers to assess the possible claims arising out of the devastation caused by floods in Uttarakhand. According to insurers, the total claims could exceed Rs. 35 billion...
Read more

Learning

How to choose an appropriate car insurance plan

Car insurance indemnifies owners against any loss arising out of an unforeseen accident or event. With numerous car insurance policies available, how do you go about choosing the most appropriate one? Here is what you need to consider before making a choice... Read more

New Appointments

ARLI appoints Amit Kumar Roy as chief agency officer

Aegon Religare Life Insurance (ARLI) announced the appointment of Amit Kumar Roy as the chief agency officer.

Roy has a track record of developing distribution channels for life insurance companies across India... Read more

International News

ING to sell stake in ING-BOB Life to BNP Paribas Cardif

ING announced that it has agreed to sell its 50% stake in its Chinese insurance joint venture ING-BOB Life Insurance Company to BNP Paribas Cardif, the insurance arm of BNP Paribas.

The transaction, which is subject to regulatory approval, is not expected to have a material impact on ING Group results, the company said in a press release... Read more

Swiss Re expects $300mn claims from Europe floods

The high water levels experienced along the major central and eastern European river systems in recent weeks are expected to generate approximately $300 million in claims for Swiss Re, net of retrocession and before tax. The flooding affected large areas in the eastern part of Germany, the Czech Republic, Austria, Hungary and Slovakia. The total losses for the insurance industry are estimated between $3.5 and $4.5 billion... Read more

Fed, FDIC release 4 banks' 'living will' outlines

The Federal Deposit Insurance Corporation (FDIC) and the Federal Reserve Board on Tuesday made available the public portions of resolution plans for four firms with US non-bank assets between $100 billion and $250 billion.

The Dodd-Frank Wall Street Reform and Consumer Protection Act requires that bank holding companies with total consolidated assets of $50 billion or more and nonbank financial companies designated by the Financial Stability Oversight Council submit resolution plans to the FDIC and Federal Reserve... Read more

Swiss Re expects $300mn claims from Europe floods

The high water levels experienced along the major central and eastern European river systems in recent weeks are expected to generate approximately $300 million in claims for Swiss Re, net of retrocession and before tax. The flooding affected large areas in the eastern part of Germany, the Czech Republic, Austria, Hungary and Slovakia. The total losses for the insurance industry are estimated between $3.5 and $4.5 billion... Read more
 

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