Insurance business in India may touch Rs 4 lakh cr in FY14: IRDA       Insurance watchdog IRDA today said it estimates the insurance business in India to touch Rs 4 lakh crore in the current fiscal. Insurance Regulatory and Development Authority (IRDA) Chairman T S Vijayan also said the regulator is mulling to bring out norms for sub-brokers of insurance products. He, however, did not put any timeframe for bringing out guidelines.  "October seems to be business is good for all companies, both life and non-life. Whole year there should be a good growth compared to last year. Last year industry has collected Rs 3.75 lakh crore," Vijayan said on the sidelines of a programme. When asked if the business would touch Rs 4 lakh crore in the current fiscal, he said: "Anybody's guess. It will be somewhere around that (Rs 4 lakh crore)."

Earlier in his address at the Indian Institute of Risk Management convocation ceremony, Vijayan said they are very keen to bring in regulation to tighten insurance products distribution system and are mulling to regulate sub-brokers also. "Similarly distribution also we are very keen that distribution channel should contribute to the development of the industry where agents or brokers which are the traditional models. We also brought out regulation for CSC (customer service centers) seriously looking at the sub-broker level," Vijayan said.

Later talking to reporters he said: "It (regulation for sub-brokers) is still under discussion. There is no timeframe for that.    "He said the regulator is working to see that both the insurance distribution and products come to a stage where they can contribute and address the real need of the customers propelling the industry to the next level of growth.  According to him the regulator approves products in such way that there is little or no scope for mis-selling the product.

LIC laps up Essar Power's bonds for Rs 1,000 crore                                     At atime when banks are wary of increasing exposure to the troubled power sector, the Life Insurance Corporation of India (LIC) has shelled out R1,000 crore to pick up Essar Power's entire 11-year rupee bond offering.

According to sources, LIC was the sole party solicited by Essar Power, which lured the insurer by offering an attractive coupon rate of 12.5% on the bonds — a near 200-basis-point premium to the coupon rate offered on similar rated paper in the market. Essar Power was assigned a credit rating of A+ by ratings agency Credit Analysis and Research (Care) in October 2012 in respect of the company's proposed R5,000-crore bond issue. Similar rated paper in the current market is priced at 10-10.5%.

India's largest life insurance company is expected to invest around R2.25 lakh crore in the current fiscal. Of this, R40,000 crore has been earmarked for equity investments, while the rest will go into debt instruments. Essar Power, a wholly owned unit of UK-listed Essar Energy, says the main purpose of the offering was to extend the maturity of their debt, rather than lower interest costs. While the interest payments are higher than the average coupon on similar bond offerings in the market, they are in line with the interest costs the company is paying on its existing debt. The average interest cost of the company's rupee debt is between 12.5% and 13%, confirmed company sources.

With banks tightening the flow of funds into the power sector, Essar Power has been eyeing bond offerings as an alternate source of funds. Essar Power has total debt of nearly $3 billion (R19,000 crore at current exchange rate). The company's debt service requirement stands at around R1,500-2,000 crore annually. Essar Power has detailed plans to raise R5,000 crore through bond issues and is half way through the plan, having raised R750 crore in July and R629 crore in May. The previous bond offerings had attracted financial investors other than LIC as well. This latest tranche issued to LIC will be repaid from 2017 to 2024, and will be listed on the Bombay Stock Exchange. Essar Power, which currently has a generation capacity of 3,910 MW, has plans to scale it up to 6,700 MW and is betting on the extra cash from its expansion plans to help service its debt in the future. Essar Power reported a net loss of R512 crore in fiscal 2013 vs a profit of R335 crore last year, citing higher interest costs and losses sustained by the company's Salaya power plant.

Private insurers cut down on branches, LIC ups the ante                        The number of branches operated by life insurers across India has come down by over 10 per cent in the last two years, primarily because of branch closures by private players even as state-run LIC expanded its footprint. The total number of branches or offices operated by private sector life insurance companies stood at 6,759 at the end of latest fiscal 2012-13, down by 1,416 branches from the level of 8,175 branches two years ago on March 31, 2011. During the same period, public sector player LIC's network grew by 155 to 3,526 offices as on March 31, 2013.

Despite LIC's expanded network, the cumulative number of offices for all life insurers fell by 1,261 in the last two financial years to 10,285 as on March 31, 2013, as a number of big private players, including ICICI Prudential, Bajaj Allianz and HDFC Standard Life, cut down on their branch network, shows an analysis of data available with various insurers and sector regulator IRDA. The number of branches operated by private life insurers declined by 950 during the last fiscal (2012-13) alone, while 463 offices were closed during the preceding fiscal as well. The business for many life insurance players has been stressed for last couple of years and could be a possible reason behind closure of branches. The data shows that the number of offices operated by ICICI Prudential declined by 845 branches between FY10-11 and FY12-13, while Bajaj Allianz's witnessed a reduction of 110 branches in its network during the same period. HDFC Standard and Reliance Life also saw their branch networks declining by 48 and 18, respectively. The few players that witnessed an increase in number of offices between past two fiscals included Birla Sunlife, IDBI, India First, Sahara, Shriram Life and Star Union.

While LIC has expanded its branch network in past two years, the number of its agents has actually declined in this period from about 13.37 lakh to nearly 11.73 lakh as on March 31, 2013.

Aviva may exit India life insurance business-sources

Aviva PLC may pull out of its Indian insurance joint venture, valued at more than $500 million, as the British insurer retreats from less-profitable markets where it has struggled to expand, people familiar with the matter said.

Aviva, which aims to cut costs by 400 million pounds ($611 million) by year-end, is in the process of hiring corporate advisors to find buyers for its 26 percent stake in Aviva Life, its venture with Dabur Group, the sources told Reuters.

The insurer is considering various options, including selling its stake to Dabur Group if it fails to find a foreign buyer, one of the sources said. Dabur Group owns personal care and food products manufacturer Dabur India Ltd.

Aviva would be the third foreign insurer to quit India since 2012, stymied by regulations that restrict foreign ownership and fierce political opposition to changing those limits.

Aviva declined to comment. Mohit Burman, a director of Aviva Life who represents Dabur Group, was not immediately available for comment. The sources also declined to be identified due to the confidential nature of the matter.

The insurer had identified China and India as "high priority" and "must win" markets, but the move to sell out of India signals a change in that strategy.

Last year, Aviva hired former AIA Group Ltd CEO Mark Wilson to lead a turn around in its business which was hit by slower growth in its main market Europe.

Wilson joined after spiralling costs and poor share price performance triggered an investor revolt in 2012 that forced outthen-CEO Andrew Moss. This year, Aviva pulled out of its Malaysian insurance joint venture and exited from Russia.

TOUGH MARKET

Like many other foreign insurers, Aviva rushed into India after the government allowed foreign investment in the $40 billion-plus insurance market in 2000, lured by low penetration rates and the high savings rate in Asia's third-largest economy.

Life insurance penetration in India is about 3.4 percent of gross domestic product in terms of total premiums underwritten in a year, much lower than 8.8 percent in Japan and 8.7 percent in Britain.

Regulatory uncertainty, however, has proved tough for foreign insurers while insurance in general has failed to take off as expected among the public - the whole industry logged an accumulative $3 billion loss over the last decade.

Indian laws limit foreign ownership in domestic insurers to 26 percent. Government approval for a proposal to raise the limit to 49 percent has been pending for a long time due to opposition by nationalist politicians.

Insurers were also hit by a 2010 clamp-down on the sale of lucrative equity-linked products. Foreign firms remain overshadowed by state-owned Life Insurance Corp of India, which holds an almost 75 percent market share.

Foreign insurers including Britain's Standard Life, Canada's Sun Life, Prudential, Japan's MS&AD, Italy's Generali and Dutch insurer Aegon operate in India through joint ventures with local companies.

HSBC recently launched a process to sell its 26 percent stake in an insurance joint venture with two Indian state-owned banks. Dutch banking and insurance group ING and New York

Life have also exited their India insurance joint ventures.

Profit at Aviva's India unit fell by more than half in the financial year ended March 2013 to about 320 million rupees ($5.25 million), while total premium income dropped roughly 12 percent, according to company filings.