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Economic Times Mar 28, 2012, 09.34AM IST Mayur Shetty, TNN

LIC not a day trader, but a long-term player: DK Mehrotra Acting Chairman, LIC
In normal times the Rs 12 lakh-crore Life Insurance Corporation of India, the country's largest financial institution , supports nearly 40% of government borrowing. LIC was in the news recently for bailing out the government's disinvestment programme and bearing part of the government's burden of capitalizing banks. The regulatory environment, meanwhile , has thrown up new challenges for the life industry. In an interview with TOI's Mayur Shetty, LIC's acting chairman D K Mehrotra speaks on how the corporation is responding to these changes.
How have the new guidelines on charges, agency and pension plans impacted LIC? The changes in the charge structure have affected us only marginally as our charges were already low. However, the withdrawal of existing plans and the time lag in approval of new plans led to a dislocation of the whole marketing process as, besides new products, fresh training had to be given to the field force and new marketing strategies had to be devised . The minimum premium under Ulip policies had also to be substantially increased - from Rs 5,000 to five figures - to ensure viability and this has shrunk the Ulip market. The increase in lockin period has also discouraged the customers. Similarly, the new regulations on pension has led to withdrawal of all pension plans barring LIC's immediate annuity plan, Jeevan Akshay VI. The change in agency regulations has led to accelerated exits and the insistence on 100% online exam - resulting in low pass rate, especially in deep rural areas - has not helped the matter. However, having been in the industry for more than half a century, we hope to weather this storm too. It has become important to clearly define annuity & pension as a common man is not clear about the difference between the two. There should be more thrust on pension due to increased longevity, high cost of medical treatment and shifting to nuclear family structure. Has the shift away from Ulips hit LIC's ability to tap opportunities in equities? The shift to traditional plans has been a conscious decision and has not impacted our ability to tap opportunities in the equity market. All investment decisions have been taken keeping the customer's interest at the fore, and if opportunities favor better returns to the customer, we would be back in equity markets in full swing. Witnessing the high volatility in the capital market , retail investors have refrained from going in for Ulips. There have been reports that LIC is acting as a proxy for the government in recapitalizing banks... As already mentioned, all investments are done with the focus on maximizing mobilization of people's savings. In the process, the government or banks may have benefited even as we strive to deploy funds to the best advantage of the investors as well as the community as a whole, keeping in view national priorities and obligations of attractive return. LIC is not a day trader and always goes into the market with a long-term perspective . Our decisions are always based upon proper diligence. LIC continues to hit the 10% ceiling in more companies. Has there been any special dispensation from IRDA? If you look at the size of our total investment portfolio of Rs 12 lakh crore, there is a limitation in terms of the number of companies that we can invest in. But even in cases where the investment has exceeded 10% of the company's capital, there is no concentration of risk for LIC because that investment is only a fraction of our portfolio. What is your view on IRDA proposal that banks have zone-wise distribution pact with life insurers? Prima facie, the idea does not seem to be very practical or customer friendly. The banks and LIC have a pan-India presence and zone-wise arrangements may only lead to duplicity of efforts and resources, which is a waste. We are, however , prepared for any distribution arrangements proposed by IRDA. This step may cause inconvenience to a customer , particularly those employed in transferable jobs. The Direct Taxes Code proposes an EET (tax exempt at investment - tax exempt at accumulation - taxed at maturity) regime for life insurance policies? Life Insurance is a long-term contract and EET would only act as a deterrent. The proposed exemption of Rs 50,000

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is inclusive of tuition fees. The rise in educational expenses has been pretty steep and once the customer fulfils the educational needs of his children, there is nothing left as exemption for the insurance taken. We would advocate a separate exemption of up to Rs 1 lakh for insurance needs, exclusively for life insurance, health insurance and pension. What has been LIC's international strategy after the global financial crisis? Though we want to mark our footprint in some more territories , the regulatory compliance , being time consuming, constraints our entry. Nevertheless , focus is to increase the contribution of the foreign operations into our kitty. LIC's credit card business has been in the offing for a long time... We have now tied up with Axis Bank and have a fruitful partnership with them. The ultimate objective is to provide value-added credit card services to customers and employees of LIC, its subsidiaries and group companies. We wanted to increase the customer comfort and credit card was seen as a payment solution for them. LIC has started selling products directly? What kind of direct distribution set-up do you envisage? Direct marketing is one of our emerging distribution channels and is doing exceedingly well. This channel caters to customers who are tech savvy and prefer to deal with us online . We hope to sell policies online very shortly. We also have the direct service executives who provide the physical service to customers incase they require partial services like submission of the signed proposal form to the office. ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Financial Express Thursday, Mar 29, 2012 at 1558 hrs IST

ICICI Pru to pay policy-holder Rs 7.15L

New Delhi: ICICI Prudential has been directed by a consumer forum here to pay Rs 7.15 lakh to one of its insurance policy holders for not informing him that his cheque for second year's premium had been dishonoured and not giving him the opportunity to renew his life-time pension scheme. The District Consumer Disputes Redressal Forum held that the ICICI Prudential Life Insurance Co Ltd ignored the principle of "natural justice" as it was duty bound to inform the complainant (Ashok Kureel) about bouncing of his cheque. "The conduct of insurance company was not in accordance with natural justice. It should have informed the complainant about the dishonour of the cheque and he should have been called upon to make the payment for renewal of the original policy," the forum said. South Delhi resident, Kureel had alleged in his plea that the ICICI Prudential did not only fail to inform him about the dishonour of cheque, but also converted his life-time pension scheme to 'paid-up' on the ground that he defaulted in payment of second year's premium. He said that after receiving the cheque for second premium in November 2008, the company had issued him a renewal receipt and a consolidated premium certificate in January 2009 for the period 2008-09. In its defence, the company said it had duly informed Kureel to renew his policy despite which he failed to do so, and as premium was not paid by the due date, the life cover and rider benefit, if any, available to Kureel ceased as per the terms and conditions of the scheme. The forum observed "the cheque was received by the company in November 2008 and till February 2009 it remained silent and did not inform the complainant". It directed the company to return Rs 7,00,000, the first premium of the policy, along with Rs 10,000 compensation for causing harassment and Rs 5,000 as litigation charges.

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Economic Times 28 Mar, 2012, 06.10AM IST Shilpy Sinha, Reena Zachariah & Maulik VyasShilpy Sinha, Reena Zachariah & Maulik Vyas, ET Bureau

Missing CEO: Policy paralysis hurting LIC, SAT, UTI, GIC, IRDA & NIA?
Imagine a train without an engine. That's the state of some of the key state-run financial institutions that are without full-time chief executives, including two where millions of Indians invest their hard-earned money. The state of the government, blamed for policy paralysis, is affecting these vital institutions built over decades, which serve public interest. Institutions such as Life Insurance Corporation and UTI are trusted household names and dithering over key appointments in such organisations could send wrong signals apart from affecting their operations. Appointments in the government are an elaborate process, but it is supposed to start on time and ensure that decision-making does not suffer. The absence of chief executives, in some cases full-time ones, is hurting. This, at a time when the economy is getting strained, forcing companies to come up with their own solutions. Most of the institutions are stable at this point of time. But leaving these institutions headless may result in certain important decisions getting postponed, which can cause damage in the long term. Indecision can lead to these companies ceding ground to nimble private sector rivals, who are out to capitalise on such opportunities. These are not institutions where investors are looking for quarterly earnings that could keep the management on its toes, but closed ones whose financials are not even known, or scrutinised. Absence of key personnel at the regulator may not look as problematic as it is with corporations, but they are vital for the markets just as much, says ET. Life Insurance Corporation Wanted: Chairman Vacant for: 11 months Foundation year: 1956 Last Chairman: TS Vijayan New business income for the country's biggest life insurer dropped 20% in the financial year so far when the industry has slid 14% India's biggest institutional investor and the custodian of 30 crore investors' savings has been headless for more than nine months. Life Insurance Corporation, the nation's largest insurance company, manages funds worth more than Rs 12 lakh crore and is also at the receiving end of corporate governance issues when it bailed out the government by buying a huge chunk of Oil & Natural Gas Corp share sale. The government is yet to appoint a full-time chairman after TS Vijayan superannuated in May 2011 amid its unit LIC Housing Finance charged with corruption. DK Mehrotra was elevated to the post of acting chairman, but his powers are limited when it comes to decision-making. His contract, as an acting chairman, has been renewed three times, but the suspense on whether he would be made permanent or not still lingers.

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A file nominating him as chairman is somewhere in the pile of such files doing the rounds in New Delhi. To add to the confusion, the government deputed Rakesh Singh, additional secretary, finance ministry, to head the corporation. Uncertainty is telling on its business when new income up to February 2012 dipped 20% to Rs 24,835 crore, worse than the industry's 14% slide. SAT Wanted : Presiding Officer Vacant for: 04 months Foundation year: 1995 Last Presiding Officer: Justice Sodhi In October 2011, SAT upheld the Sebi order against Sahara to refund all money to investors; group's two entities have collected through OFCD schemes The Securities Appel late Tribunal, or SAT, a quasijudicial authority that rules on appeals against the capital market regulator Securities and Exchange Board of India's orders, is awaiting a new presiding officer since last December. This is an institution that shook the investing community with orders in cases such as the Sahara Group that was ordered to refund Rs 17,400 crore. Justice Nauvdip Kumar Sodhi's six-year term got over in December 2011. During his tenure, Justice Sodhi had passed orders including the one against the kingpin of the stock market scandal in 2001, Ketan Parekh and his associates. SAT also ruled in cases including former Satyam Computer's promoters and auditors PwC. Unlike other institutions, decision-making has not come to a halt since two other officers have been empowered to decide on matters that are pending. But the catch is that they can't take up new cases till a presiding officer arrives. Some of the pending cases include International Paper's acquisition of additional stake in AP Paper Mills, Khandwala Securities' case. The authority is without a presiding officer after a long time. For a brief time in 2002, it went without a head.

UTI Wanted: CMD Vacant for: 14 months Foundation year: 2003 Last CMD: UK Sinha The state-owned asset management company has not been able to launch a fund in the past one year UTI manages Rs 58,000 cr of investor money UTI Asset Management was created not to repeat the many troubles it faced in the first four decades in its previous avatar as Unit Trust of India. But it is facing different kinds of issues now. Thanks to public lobbying, the asset management company has been without a fulltime chairman for more than a year, and mind you it manages Rs 58,000 crore of investor money. One of the fallouts has been that it has lost its ranking in the industry to become the fifth-largest by fund-size. UTI last year witnessed one of the unseen sights in the asset management industry - labour strife - with those managing with temporary powers being accused of bias, prejudice and authoritarianism. The fund house was unable to launch any new scheme last year since rules didn't allow it to, but was later granted a relaxation by Sebi as it had all the processes in place. The state-owned shareholders of UTI MF such as Life Insurance Corporation, State Bank of India, Punjab National Bank and Bank of Baroda and the US-based T Rowe Price are at loggerheads on who should succeed Sinha. While state companies back the one favoured by the government, Jitesh Khosla, a civil servant, T Rowe wants a professional. In January, Imtaiyazur Rahman, an acting chief financial officer and company secretary, was made an

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interim chief executive officer. What signal does it send to investors? GIC Wanted: CMD Vacant for: 03 months Foundation year: 1972 Last Chairman: Yogesh Lohiya General Insurance Corp has seen claims of Rs 1,500 crore in 2011-12 due to natural catastrophes that struck Japan, Thailand & Australia General Insurance Corporation, the sole re-insurer in the country, cannot formulate policies, or take decisions, other than clearing the daily backlog of files, thanks to the fact that it doesn't have a chairman after Yogesh Lohiya retired in December. In January, the government appointed AK Roy as the officiating chairman. The process of appointing a CMD started well before the post got vacant, but the final appointment is yet to happen as the government is entangled in a maze of issues. Many speculate that Roy would be heading the corporation, but the fact is that since it is not yet in writing, his hands are tied. GIC has seen claims of over Rs 1,500 crore this financial year, due to a number of natural catastrophes, including the earthquake in Japan, f loods in Thailand and Australia. This is the biggest claim GIC has seen since it took up the role of re-insurance here. A large part of the claim, arising out of the international operations, may force the reinsurer to re-look its strategy for the domestic market rather than expand outside. Despite the board taking key decisions, a CMD needs to have the power to implement them, which is yet to come.

IRDA Wanted: Member Actuary Vacant for : 11 months Wanted: Member Life Vacant for: 04 months Foundation year: 2000 Last Member-Actuary: R Kannan Last Member-Life: G Prabhakara How about a police station without enough policemen, or a healthcare centre without doctors or nurses? That probably seems to be the case with the insurance regulator, Insurance Regulatory and Development Authority. A member on the board to look after actuary services is not around since R Kannan retired in May last - the result is that many products are pending with the regulator. The qualifications for the post were relaxed after the first advertisement failed to attract any application. Though the government has short-listed two for the post - SK Roy Choudhury and K Sahay - it is yet to give a final go ahead. Another post of Member Life is unoccupied after G Prabhakara's exit in December 2011. Although Meenakumari J, joint director, has been given additional charge of actuary, there are limitations on what a person can accomplish, or be eager to do without total responsibility for the work. There are not many takers for these posts because of a gulf between the financial capital of Mumbai and Irda headquarters at Hyderabad. Yet another gulf is the pay. Can the government match expectations? New India Assurance Wanted: Chairman Vacant for : 08 months

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Foundation year: 1919 Last Chairman: M Ramadoss The largest general insurer in the country, New India Assurance, posted a loss of Rs 421 crore in its over 90 years of existence The st ate of New India Assurance is hardly assuring these days as the state-run company plunged into losses for the first time in nine decades and remains headless after its chairman was ousted on corruption charges. If this is the state of the largest non-life insurer, it is fertile ground for rivals, but not for the firm. The delay in appointing a full-time chairman here is because the CBI is still probing M Ramadoss for alleged irregularities in selling insurance cover. Ramadoss is accused of misusing his office when he was the chairman of Oriental Insurance Company. The company provided credit insurance cover to Paramount Airways at unviable rates. Unless, charges against him are proved or denied, the company may not get a full-time chairman anytime soon. His term gets over in December 2013. The delay in coming to a conclusion on whether Ramadoss committed the crime or not may cost the company dear. This is at a time when the rivals are getting active with enough funds. Meanwhile, AR Sekar has been made the officiating chairman. Also, the insurer has been asked to explain losses of Rs 421 crore.

livemint.com Wed Mar 28, 2012, 12.09AM IST Anirudh LaskarShilpy Sinha, Reena Zachariah & Maulik Vyas

LIC allowed to buy over 10% in listed firms

Govt also allows insurer to pick up as much stake as necessary to recapitalize staterun banks

Mumbai: Indias insurance regulator has allowed the countrys biggest insurer, Life Insurance Corporation of India (LIC), to exceed the cap of 10% that insurance firms can own in listed companies in a move that clearly demonstrates the Insurance Regulatory and Development Authoritys (Irdas) approval of the governments use of the insurer as the investor of last resort.

In recent months, the government has used LIC to recapitalize state-owned banks and bail out a share sale of Oil and Natural Gas Corp. Ltd (ONGC), a state-owned firm which it was partly exiting. Two senior LIC officials confirmed the move by Irda. The officials didnt want to be named be cause the regulator has only communicated the decision verbally to the state-owned insurer and is yet to send a formal note.

Insurance regulations currently restrict insurers from buying a stake of more than 10% in listed firms. In infrastructure companies, their holding in the form of both debt and equity is allowed to go up to 20%.

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We are looking at a number of changes in the existing regulations, including investment, Irda chairman J. Hari Narayan said. Six committees are working to suggest the c hanges. The revisions will be subject to approval of the proposed insurance Bill. If we allow LIC to invest more than 10% (in listed companies), we will also allow other life insurers (to do that).

Giving LIC leeway to exceed the 10% investment limit may provide a boost to the equity markets and facilitate the governments divestment plan. The government aims to raise Rs. 30,000 crore through sales of shares in public sector companies in 2012-13. It has been able to raise only around Rs. 14,000 crore against a target of Rs. 40,000 crore this fiscal.

LIC bought a 4.4% stake this month in ONGC, the chunk of a 5% stake sold by the government through an auction in which the insurer emerged as virtually the sole buyer. Last month, LIC agreed to pick up a 5% stake in public sector banks, including Punjab National Bank, Central Bank of India and Indian Overseas Bank, for around Rs. 3,700 crore, helping meet the growing capital requirements of the lenders in which the government is the majority shareholder, Mint reported on 6 March. After the preferential allotment, LICs stakes in most of these banks may cross 10% , according to information on BSE, breaching Irdas investment guidelines, that report said. An Irda official said at that time that the regulator would scrutinize LICs final shareholding pattern before taking a decision.

The government drew criticism for drafting LIC to rescue the ONGC share sale, although it maintained that the purchase was a commercial decision by the insurer, even though comments by LIC officials indicate a worrying absence of walls between the government and the insurer.

LIC itself is owned by the government. Our money is the governments money, said one of the two LIC officials cited above. All funds are guarded by a sovereign guarantee. So it is up to the government on how it will utilize the corporations money.

Investments by LIC have always been a contentious issue as the insurer continues to hold over 10% in at least 41 listed firms, although most of these holdings have been accumulated over several years.

LIC increased its stake in seven firms between December 2010 and December 2011.

Earlier, the regulator was allowing us to pick up more than 10% on a case -to-case basis. Now we have been informally allowed by the regulator to invest more than 10% in other sectors as well, apart from infrastructure. We are expecting a formal letter, added the official.

Several analysts have predicted a correction in Indian equity markets in the coming days over concerns about the governments inability to push economic reforms, political uncertainty, a depreciating rupee, the high fiscal deficit and slowing economic growth.

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After record inflows from foreign institutional investors (FIIs) in the first quarter of the calendar year, several legal experts expect the trend to reverse due to tax implications on foreign investments of the general anti-avoidance rules that, on paper, are meant to help the revenue authority crack down on transactions seeking to circumvent tax laws but, in reality, blur the lines between tax avoidance and tax evasion.

On the back of strong foreign inflows, Indian markets are trading at least 12% up this year after falling 24.6% in 2011. Historically, whenever FIIs have pulled out from Indian stocks, domestic insurers, especially LIC, have played a critical role in supporting the equity markets.

LICs investment in Indian stocks during the current fiscal is estimated at around RS 40,000 crore. The corporation has assets of at least Rs. 12 trillion. During the fiscal, LIC has invested at least Rs. 1 trillion across securities.

In another significant development, the government has also allowed the state-owned insurer to pick up as much of a stake as is required to recapitalize state-run banks that are required to comply with the new international capital norms.

We have been told by the government to subscribe to the preferential equity shares of state -run banks in order to help them meet the capital adequacy norms, the second LIC official said.

We will buy their stocks as long as required to recapitalize them. In some of the banks, we have already decided to pick up an additional 5%. If required, we will buy more. But while selling these holdings in future, well not offload at one go as it may impact the stock and the market, he added.

The finance ministry has announced a Rs. 15,880 crore capitalization package for public sector banks in fiscal 2013. Under law, the governments holding cannot fall below 51% in any public sector bank.

Given the state of its finances, it could be difficult for the government to meet its capital commitments. In such a scenario, allowing LIC to buy stakes in state-run banks will ensure that these banks do not suffer from lack of sufficient capital. According to a Mint analysis, 24 state-run banks have a government holding of much more than 51% as on 31 December 2011.

anirudh.l@livemint.com -----------------------------------------------------------------------------------------------------------------------

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Vijaya Bank gets shareholders' nod to raise Rs 1.47 bln via pref allotment to LIC
Thu, March 29, 2012 | 12 PM IST

New Delhi: Indian state-run lender Vijaya Bank has received shareholders' approval to raise Rs 1.47 billion through preferential allotment of equity shares to the country's largest life insurer Life Insurance Corp of India (LIC). Accordingly, the bank will issue 22.87 million equity shares to LIC at an issue price of Rs 64.27 per share, Vijaya Bank said in a statement filed with the stock exchanges. Other public sector lenders like State Bank of India, Punjab National Bank, Bank of Baroda, Indian Overseas and Union Bank of India have also got approval from their respective shareholders to raise funds via preferential issue of equity shares. Shares of Vijaya Bank Thursday were trading at Rs 56.65 on the Bombay Stock Exchange (BSE) at 11:10 am, down 1.99% from the previous close. ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Punjab National Bank raises Rs 15.89 bln via pref share issue to LIC
Thu, March 29, 2012 | 4:28 PM IST
New Delhi: India's second largest state-run lender Punjab National Bank has raised over Rs 15.89 billion via preferential allotment of equity shares to the country's largest life insurer Life Insurance Corp of India (LIC). Accordingly, the bank issued 15.84 million shares to LIC at Rs 1,003.69 apiece, Punjab National Bank said in a statement filed with the stock exchanges earlier Wednesday. The bank is also expected to raise another Rs 12.75 billion from the Government of India through a similar route, for which it has already got the shareholders' nod. Shares of Punjab National Bank Thursday were trading at Rs 916.70 on the Bombay Stock Exchange in late afternoon session, up 0.41% from the previous close. Other state-run lenders like State Bank of India, Punjab National Bank, Bank of Baroda and Union Bank of India have also received approval from their respective shareholders to raise capital via preferential allotment of equity shares. The government is expected to infuse a total of Rs 150-160 billion into select state-run banks in the current financial year 2011-12 to shore up their tier-I capital adequacy ratio to 8%. ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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Syndicate Bank raises Rs 3.27 bln via pref share issue to LIC
Thu, March 29, 2012 | 3:43 PM IST

New Delhi: Indian state-run lender Syndicate Bank Thursday said it has raised over Rs 3.27 billion via preferential allotment of equity shares to the country's largest life insurer Life Insurance Corp of India (LIC). Accordingly, the bank issued 28.66 million shares to LIC at an issue price of Rs 114.15 apiece, Syndicate Bank said in a statement filed with the stock exchanges. The bank is also expected to raise another Rs 5.39 billion from the Government of India via a similar route, for which it has already got the shareholders' nod. Shares of Syndicate Bank Thursday were trading at Rs 105.25 on the Bombay Stock Exchange in late afternoon session, down 1.45% from the previous close. Other state-run lenders like State Bank of India, Punjab National Bank, Bank of Baroda and Union Bank of India have also received approval from their respective shareholders to raise capital via preferential allotment of equity shares. The government is expected to infuse a total of Rs 150-160 billion into select state-run banks in the current financial year 2011-12 to shore up their tier-I capital adequacy ratio to 8%. ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

The Indian Express New Delhi, Mon Mar 26 2012, 21:45 hrs

'No proposal to shift to paperless insurance model'

Insurance regulator IRDA is not considering any proposal to shift the sector to a paperless model, but customers can opt for e-insurance.

"Insurance Regulatory and Development Authority (IRDA) has reported that there is no proposal to shift the insurance sector to a paperless model," Minister of State for Finance, Namo Narain Meena said in written reply to Lok Sabha on Friday.

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He further said, "The insurance companies could continue to issue paper insurance policies. However, where an insurer issues e-insurance policies, the company shall do so at the option of the policyholder by utilising the services of an insurance repository licensed by the Authority."

"The insurers issue the electronic policies only at the option of the policyholders thus the paperless model is unlikely to create inconvenience to the illiterate and rural population of remote villages," the Minister added.

It is also clarified that all insurance policies in electronic form shall be treated as valid insurance contracts.

According to the information provided by IRDA to the government, there are five entities which have been granted inprinciple approval to act as insurance repositories to hold insurance policies in electronic form on behalf of policy holders.

These entities are NSDL Database Management Limited; CDSL Ventures Limited; Stockholding Corporation of India Limited; Karvy Consultants limited; and Repository Services Limited.

It is explained that the objective of an insurance repository is to provide policyholders with a facility to keep insurance policies in electronic form and undertake changes, modifications and revisions in the insurance policy. These are to be done with speed and accuracy in order to bring efficiency, transparency and cost reduction in the issuance and maintenance of insurance policies.

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