Insurance sector OverviewA Brief History Of The Market:-Life insurance in the Indian market has been historically dominated by the government run Life Insurance Corporation (LIC). The company was formed in 1956 by incorporating all 154 private life insurance companies existing in the country at that time. However, following a strong wave of development throughout the country, the Indian government allowed privatization in the insurance industry in 2000, setting up the Insurance Regulatory and Development Authority (IRDA) to issue licences to private life insurers. Foreign direct investment (FDI) was also allowed up to a limit of 26%, which meant that non-Indian entities were allowed to hold up to 26% of equity/share capital in the Indian insurance companies.As a result, 23 private companies, mostly joint ventures, entered the market. These companies include PNB Metlife India Life Insurance, Tata AIG Life, DLF Pramerica Life Insurance (a joint venture between Prudential Financial and DLF) and ICICI Prudential Life Insurance (a joint venture between British insurer Prudential plc and ICICI). Following the de-nationalization, the life insurance industry took off. From 2000 to 2011, new business premiums (NBP) grew by 28% while gross written premiums increased by 25%. This growth propelled India into the list of the top 10 life insurance markets in the world. In 2011, the country accounted for 2.5% of the life insurance premiums written worldwide. , Indian insurance industry has remained in a good health and maintained absolute transparency and highest standards of corporate governance. Assets under management (AUM) of the Indian insurers are slated to touch Rs 20 trillion (US$ 376.51 billion) while the general insurance sector is anticipated to grow 18 per cent in 2012-13, said J Hari Narayan, Chairman, IRDA. He further reported that the insurance sector has grown substantially over the last few years, with its AUM from Rs 8 trillion (US$ 150.57 billion) in 2008 to Rs 18 trillion (US$ 338.82 billion) in 2011-12.

Insurance companies in India Company Approximate market

share

LIC 50%ICICI 10%SBI 5%Bajaj 4%Reliance 5%HDFC 6%Birla 4%Max Life Insurance 3%Tata 2%Met Life 1%Kotak 2%Others 8%

GENERAL INSURANCE

Product PercentageEngineering 4Motor Own Damage 27.63Motor Third party 14.94Health 22.58Aviation 1.08Liability 2.4Personal accident 2.63Fire 10.91Marine 5.97Others 7.37LIFE INSURANCE Product PercentageNon linked life individual 21.7Non linked gen annuity group 4.33Non linked gen annuity individual 0.85

Non linked pension group 4.22Non linked pension individual 0.25Non linked health 0.09

Linked insurance 55.01Riders 0.01Linked life group 13.54

Key findings• a 60$ billion market in India majorly dominated by Govt run LIC , This is expected to grow by 120$

billion by 2019 helped by increase in foreign investment. Insurance premiums contribute around 3% of the country s GDP

• Growth potential is huge as less than a quarter of the 1 billion strong population is covered by life insurance

• Asia accounts for more than 35% of the world’s life insurance premiums.India is one of the biggest insurance markets in the world, accounting for 2% of the world’s and 6% of Asia’s life insurance premium volume.

• Life insurance companies have registered a growth of 4 per cent in the first three quarters of financial year 2012-13. The total premium collection from the individual segment by 24 life insurers stood at Rs 40,688 crore (US$ 7.66 billion) in April-December 2012 as against Rs 39,131 crore (US$ 7.36 billion) in the corresponding period last year.

• Public sector insurer Life Insurance Corporation of India (LIC) recorded 11.3 per cent growth in the retail segment, with collection of Rs 28,017 crore (US$ 5.27 billion) during April-December 2012 while private sector insurers' collection from individual segment stood at Rs 12,671 crore (US$ 2.38 billion).

• IRDA reported that insurance density came out be US$ 49 while insurance penetration stood at 4.1 per cent in 2011.

• The measure of insurance penetration and density reflects the level of development of insurance sector in a country. While insurance penetration is measured as the percentage of insurance premium to the gross domestic product (GDP), insurance density is calculated as the ratio of premium to population (per capita premium).

Government Initiatives:-IRDA has recently formed four working groups to standardise products offered by life insurance companies, wherein the groups would consider unit-liked investment plans, linked variable insurance plans, non-linked variable insurance plans and other non-linked plans. Each group, with six members from life insurance companies along with an IRDA representative, would focus on bringing uniformity in the designs of the products, determining relevant parameters for each product and ensuring that these parameters are aligned with IRDA stipulations. They would also mention the numerical range within which the parameters could be allowed.Alongside, IRDA has released an exposure draft to regulate opening of new centres by insurance companies according to which, insurers who have completed 10 years of business have to ensure that at least 25 per cent of the proposed new places of business should be in places with population of 1,00,000 or below. The initiative would help to enhance insurance penetration in the country. The regulator further added that insurers may approach IRDA for any urgent proposals regarding opening of new branches in rural/ semi urban areas, anytime during the year in addition to the proposals submitted under the annual Business Expansion Programme. Such proposals would then be considered on merit.

• POTENTIAL - we estimate the life insurance premium volume from the Indian market at $120 billion by 2019. This is based on the GDP growth forecast in a base scenario. In an optimistic scenario, the average GDP growth rate is expected to be around 5.7%, and assuming insurance penetration of 4.6%, this would lead to premium volume of $130 billion by 2019. [1] The average GDP growth rate is expected to be around 3.6% in a pessimistic scenario, which would lead to a premium volume of $110 billion by 2019. [1] In any case, India is a big market and has a huge potential for insurers like Prudential, MetLife and Manulife. While we currently do not provide a separate breakdown of India’s premium volume in our model, you can modify the interactive charts below to gauge the effect a change in international market shares would have on our price estimates for Prudential, MetLife and Manulife.

• ROAD AHEAD:-• A World Bank study named 'Government-Sponsored Health Insurance in India: Are You

Covered?' has stated that India would have more than 630 million people covered under health insurance by 2015. Over last five years, the government-sponsored programs and schemes have significantly expanded the population covered by health insurance in India and the newly launched schemes are introducing explicit entitlements, improving accountability and leveraging private capacity, particularly with an aim of reaching the poor.

• The study anticipates that by 2015, almost half of the country's population can be covered with some form of health insurance wherein spending through health insurance is likely to reach 8.4 per cent of total health spending, higher from 6.4 percent in 2009-10.

LATEST UPDATES :-• Allstate Corp, the second largest insurer in the US has inaugurated its first technology and operations centre in Bangalore, India. The centre, an integral part of Allstate's global value chain, is majorly a technology services centre serving in the areas of business intelligence, analytics, testing and mobility. It will extend the Illinois-based company's technology infrastructure, support a 24x7 operational work-flow and enhance technology and innovation capabilities.• Metlife India is now PNB Metlife India after Punjab National Bank (PNB) picked up 30 per cent stake in the life insurance company. Apart from PNB, MetLife India has two other banks, Karnataka Bank and Jammu and Kashmir Bank as its distribution partners. At present, around 60 per cent of the business is coming from bank channels and the company expects it to increase further over next few years. Partnerships with the banks would also be fruitful as the business volume grows, said a spokesperson from MetLife.• Two of the insurance companies are planning to launch a specialised health cover for diabetic patients in India. While Apollo Munich has already filed a diabetic cover policy document with IRDA, Religare Health Insurance will soon submit documents for a similar cover with the regulator. Diabetes is an epidemic in India (with around 61 million people having it) and insurance companies look at this as a good business proposition. Unlike the existing health covers, which do not cover hospitals admissions relating to complications of diabetes for up to four years, the proposed policies will cover diabetics from day one.• With a view to cover more and more Indians under the umbrella of insurance, public sector general insurers are mulling expanding their operations to other countries in 2013-14. With a large number of Indians and Indian businesses in South-east Asia, West Asia and Africa, these regions are emerging as preferred destinations. The four general insurers - New India Assurance, United India Insurance, Oriental Insurance and National Insurance - are considering setting up more international centres. While Oriental Insurance might hold stake in proposed reinsurance firm in Nepal, New India is looking to expand in Canada, Qatar and Myanmar. United India Assurance is also looking at South East Asia and Middle East for expansion. Moreover, LIC, GIC Re, four PSU general insurers are already holding stakes in Kenyan Insurance joint venture (JV).

Strategy • Create a USP and distinguished communication strategy

Media SpendsInsurance bharti axa birla sunlife icici prudential

Theme brand and monthly plan retirement plan children plan and life insurance

Spends(april-feb'13) 86 lacs 48k 72.8 lacs

properties india-aus tests EPL ind-eng test & ind-aus test

period Feb'13 Feb'13 nov12 and feb13

Insurance edelweiss hdfc max life

Theme brand children plans brand and corporate

Spends(april-feb'13) 56.4 lacs 4.1 lacs 1.52 cr

properties india-pak t20 & studio show hdfc life quiz non india,epl,tennis&cricket

period dec'12 jun--july12 round the year

Insurance sbi insurance met life LIC

Theme brand monthly income plan jeevan anand & corporate

Spends(april-feb'13) 30.90 lacs 35.38 lacs 90.42 lacs

properties studio show non india & f1 olympics on dd and HIL

period dec'12-jan'13 april-june'13 aug12 and jan'13

• Banking sector Outlook 2013:-

• With insurance sector combined , contributes 7 % in the GDP • Three banks SBI(1) , HDFC(2) and ICICI(3) are the most valued banks in

India and stand in top 10 most valued companies in India• Primarily revenue stream is interests earned from customers • New age revenue stream is coming from chargeable services like

wealth management services , advisory,credit card , investment banking and demat services

• 2011 census – 59% of population is banking in India , 40 % is still not in reach – HUGE POTENTIAL

• RBI has not issued even ONE new bank license in last decade• Law to issue new licenses is passed by Lok sabha and yet to clear

from Rajya sabha , once cleared , more foreign investments are expected with more competition for the existing players , therefore better value for customers

• Tap emerging markets in Asia & Africa - Oversees expansion in agenda • Mobile banking – Major technological leap