‘Headwinds galore’ for insurance sector: ICICI Securities

Any ruling that advocates trail commissions or a ban on ULIPs will be significantly negative for the sector, the brokerage has said

ICICI Securities Ltd, a unit of ICICI Bank Ltd, has said that it believes the 'status quo' in the ongoing conflict between the insurance and stock market regulators will be difficult to maintain in light of the finance minister’s comment on the phasing out of the current ‘front load’ structure in the life insurance space.

"Such a structure, if implemented, will be significantly negative for the industry. The implementation would lead to sharp decline in sales and persistency in the short term, pressurise margins and have negative impact on valuations," ICICI Securities said in a research report.

On 10th April, market regulator Securities and Exchange Board of India (SEBI) banned 14 life insurance companies from raising funds through unit-linked insurance plans (ULIPs), without an approval from its side. Later on 14th April, SEBI came out with a second order that exempted the existing ULIP schemes of these 14 players from the ban. Yesterday, the market watchdog had moved the Supreme Court and some High Courts to guard against any ex-parte decision.

ICICI Securities said that valuations of life insurance entities will suffer significantly if either the products become ‘no-load’ or the SEBI stance on regulation of ULIPs is implemented, and it awaits further clarity on the issue and keep its estimates unchanged.

Given the already high capital infusions, dependence of about 30 lakh agents on commissions and high proportion of ULIPs in sales, the brokerage said that it believes it will be difficult to implement a ‘no-load’ structure. Any ruling that advocates trail commissions or a ban on ULIPs will be significantly negative for the sector, ICICI Securities added.

The brokerage said that within its insurance coverage universe, Aditya Birla Nuvo, Reliance Capital and Bajaj FinServ will be most impacted as the life insurance business accounts for a significant proportion of their valuations while the impact on SBI and HDFC will be limited as insurance contributes to a smaller proportion of their valuations.

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With new entrants, the reverse mortgage arena will become more competitive

Various banks and insurance companies are showing growing interest in the new revised reverse mortgage product, based on the bank- insurance company tie-up model

Banks like Punjab National Bank, Corporation Bank, Union Bank and Bank of India and insurance companies like the Life Insurance Corporation of India (LIC) and Reliance Life Insurance—among other companies—are showing interest in the reverse mortgage segment. This in turn would prove to be a boon for senior citizens.

Recently, the National Housing Bank (NHB) had announced a revised reverse mortgage scheme based on a bank-insurance company tie-up model. This new revised scheme would be beneficial both for senior citizens and the bank.

According to well-placed sources, most public sector banks have shown interest in this new model. However, not much has been heard from private sector banks on this segment.

“Banks are looking at tie-ups with Star Union Dai-ichi and also at other options of tie-ups with other insurance companies,” said a source, on the basis of anonymity. It is also likely that these banks may come up with different variants of the product based on the ‘bank-insurance’ company concept.

The first reverse mortgage product was introduced in May 2007, followed by a new scheme from NHB in 2009. The first product on the basis of the new revised model is being offered by Central Bank of India along with Star Union Dai-ichi.

The new model, (see here), not only offers better returns compared to the first version introduced in 2007, it also makes the product viable for banks. Earlier, banks had to bear 100% of the risks involved in the product. But with the new product, the risks are divided between the insurance company and the bank. Typically, the bank bears an ‘over-valued property’ risk, while the insurance company would bear the longevity risk (if the senior citizen lives exceptionally longer). This could be one of the main reasons for the growing interest from banks in the revised model.

Given the fact that the revised model offers lifetime annuity payments, growing competition in this segment will help senior citizens enjoy the best value for their homes.
 

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COMMENTS

jagmohan agarwal

7 years ago

Pl advice where information is availble

on comprative offering by different banks & insurance companies.

How are the annuties & repayments worked out with an example.

Rajarama Rao

7 years ago

Which are the insurance companies which are associated with the NHB for revers3 mortgage schemes

Roopsingh Solanki

7 years ago

Alas-there is something relieving in the air-for most of people entering retirement age-reverse mortgage is REWARD of what one has worked throughout his life to build a''home''-so that he can reap the benifits of his pains which he/she put so many yrs to pay EMI-i guess this is right kind of NPS which one must think of -atleast real estate prices are not going to come down in next 20 yrs-it is real shelter which a SILVER can have for his GOLDEN AGE-

Compact Disc India: A seedy book of secrets

The animation and entertainment company claims to be getting huge orders and securing work on big projects. However, a closer inspection reveals that all is not well with the organisation

This is another company which seems to be shrouded in secrecy and working behind closed doors. The company recently announced a big-ticket deal worth $82 million (around Rs370 crore) with UK-based BBC Films, for working on an animation film on Adolf Hitler. Close on the heels of this news, came another announcement that the promoter had increased stake in the company.

In a filing to the Bombay Stock Exchange (BSE), the company announced that it will become the largest animation company in Asia, once this film is completed. Currently, it claims to be the largest in South Asia.

Compact Disc India (CDI) announced recently that Seengal Capital Advisors Pvt Ltd, New Delhi, a promoter group company, had purchased 4,50,000 equity shares of the company. With this, the promoters' shareholding has increased from 20.01% to 24.69%. It is incredulous how the promoters are trying to play the company’s stock price in the markets.

It appears to be another dubious attempt of the promoters to drive up the stock price of the company. The shareholding pattern of the company (for December 2009) shows 80% of the shares as being held by the public. Our guess is that a large chunk of these are ‘benami’ holdings of insiders who offload shares once the price takes off.

An aggrieved investor, Santosh Mhamunkar, said, “After seeing the chairman’s interview on moneycontrol.com, I thought to myself, nobody could lie in such a big manner. After seeing its market capitalisation of Rs70 crore and new order (book) of about Rs400 crore, I thought that I had found a great deal. But its price movement was honest. The stock did not show any attraction for the next few days. Then came the news that the promoter had increased holding to 24% by open market purchase. But volumes on that very day itself accounted for less than 4% of the equity.”

Apparently the company also has other big projects in the pipeline. However, there is a dearth of information about the same. In an interview with CNBC TV18, the company’s chairman, Suresh Kumar, claimed that his company had 400 animators working with it and that CDI was also in the process of setting up a new animation studio in Chandigarh. Last year’s annual report also claims that is planning to set up a pre-production animation studio facility at Los Angeles. 

CDI’s two animated feature films, ‘Eternal Love’ and ‘Futebol’ (supposedly with legendary Brazilian football king, Pele) are said to be progressing well. The demo-reels of the two feature films are slated to be ready by May 2010. Once the promos are ready, the company will enter into distribution agreements for worldwide territories. These films are slated to be released in theatres during 2011.

The company, under the first generation of management, had faced a lot of difficulties in the 1990s. It floated several companies and announced various projects which never happened to see the light of day. These included an LPG-related business, a hotel company and at least three more ventures. However, everything was kept in the dark. It seems the second generation of management currently in charge is only carrying its legacy forward.

Astonishingly, the company only features two directors on its board, Suresh Kumar and Rashmee Seengal—and does not have a single independent director. We wonder how the company is getting by the SEBI listing norms with such ease.

Last year too, the company had apparently held an annual general meeting (AGM) regarding which the shareholders of the company still have no clue as to when and what happened. A forum on the Internet was abuzz with discussions between unaware shareholders regarding the nature and whereabouts of the meeting. The company also failed to release the annual report after the AGM. The document was released on the website much later.

One of the comments read, “The AGM was so secretive that not even the company's corporate office was able to disclose the venue and time of meeting. My repeated calls to the company were handled at (the) reception, transferred to (the) investor cell and hung up. (The) company was not able to provide (the) annual report in advance. I still was at the company's registered office around 12 PM to be told that the meeting was already over. They did not have any answer as to why I never received the annual report and neither were they able to provide one then and there. There were no visible signs at the venue that the meeting ever took place.”

The comment goes on: “I was finally able to see the 17th annual general report on the company website only on 4th October evening. Till the date of meeting no communication about AGM date time and venue was on the company website. The company had not mentioned the venue and time of meeting in its communication to the BSE.”

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COMMENTS

ken

7 years ago

Very good info. Thanks. I will keep my eyes and ears open for more info about this copany

vsb2pwn

7 years ago

Dear moneylife team,

Do you have no courtesy to thank me even once .......................

Or my forum TED ????

vsb2pwn

7 years ago

Thanks Rao !!!

I earned my money hard way so did you, lest Gautam Seengals do have no authority or legal ragh to rob us !!!

Rao

7 years ago

Dear vsb2pwn,

Thanks for your contributions and fourm links. I went through the articles and views and started to agree with you that there is something suspecious about this company. I am on watch now!...Thanks again.

vsb2pwn

7 years ago

"I will wait and see who blinks first."

CDI has acknowledged time and again that they do not want to blink or be disturbed........ so far so as to ........ Mr. Suresh Seengal, once said in media - Do not talk to me about CDI..........

What is the outcome of last EGM held on 30th Nov. 2009 Mr. Rao ?

Ask CDI / BSE / SEBI till 24 April 2010 00.29 Hrs there is no communication about it !!!!!!

And are we talking about blinking ?

vsb2pwn

7 years ago

"I am very keen to know how Moneylife team responds to the message from CDI?"

And I am keen how CDI responds to me ?

But I am always an unsolicited material for them. And as per the company website they do not wecome unsolicited material........

vsb2pwn

7 years ago

Mr Rao I have answers to your questions........ Find the answers in threads (links given below) .

I also googled with key words. I also wrote to company. I also was impressed by their shareholder benovalent fund idea. At one point of time I thought Mr . G . Seengal to be a genius of sorts.

But sadly enough, Facts and Fiction are poles apart.

Standards of Journalism are not set by making claims but bring to the fore the truth.
Equally true is Standards Of Fair Business Practises are not set by making claims but to bring it out in open.

I will be happiest person on earth if somebody prooves me wrong about CDI. Alas !! None did till now, not even its management.

vsb2pwn

7 years ago

Topic: Did Compact Disc actually hold its AGM?

http://www.theequitydesk.com/forum/forum_posts.asp?TID=2452&PID=135227#135227

Topic: Compact Disc India Ltd

http://www.theequitydesk.com/forum/forum_posts.asp?TID=908

I have given these links not to advertise myself or the forum I subscribe to. But for interested investors to check upon what I say or said.......

Most of you have few questions, which I am sure are answered already in these threads.

vsb2pwn

7 years ago

I am the person who made comments quoted in last two paragraphs of the article. I stand by them today and forever. Cause for me this is not a seedy book of secrets but a seedy encyclopedia of mismanaged, misquoted, misguiding company out to rob small investors by a bundle ( or truck loads of bundles) of lies.

A detailed reasons of my saying this is not unfounded and I have quoted several instances of their misdoings in detail on the forum "The Equity Desk".

We, the forum members of The Equity Desk are free to air personal views on any company or subject. And these views are solely mine and The Equity Desk is no way obligated to subscribe or endorse my views.

Intrested Investors can read my views in two related threads on the company there. I am an investor in this company ( though my personal holding at present is just 2 shares post AGM). This negligible holding has been retained just so that this company is sued by me once forever.

I have openly challanged CDI to sue me on any wrong statement I have ever made through an open statement in TED (The Equity Desk). They have neither courtesy nor enough guts to either rebuke or clarify any of comments ever made by me.

Threatened to Sue Money Life !!!!
I once again assert if Mr.Seengal has any substance come sue me.

Need I say more Or Be more explict.......

truth finder

7 years ago

Suresh kumar seengal should consider before taking legal course. if the company wasn't fake, it would have been a target of hostile takeover. Yet no fund manager touched it.
If you see a dollar note on a crowded street, do not try to pick it up. If it was for real, someone else would have picked it up.
Markets are sometimes inefficient in pricing companies but no to this extent.

My friend lost lot of money after that hitler project news. Can suresh kumar come one on one confrontation with investors on a live program?

truth finder

7 years ago

The management should not bark when its ass is not clean. Why should private equity investors go for pref allotment when they can buy their stake from open market at 1 time earnings. all lies from the promoter. his website says he is an it-bhu grad while his daughter's website claims him to be an iit grad. what a costly typo.

Rao

7 years ago

I am very keen to know how Moneylife team responds to the message from CDI?

Rao

7 years ago

I just got a response from CDI management that they are not a false company and they are going to take legal action against Moneylife digital team. I will wait and see who blinks first.

Ramesh

7 years ago

The company has a shady past, which is not ready to leave it. ( Read more about CDIs past life! http://www.e-investing.in/showthread.php?t=1629)
The crime branch of Mumbai police has written to the Securities and Exchange Board of India (Sebi) to probe into the activities of the Seengal group and of Suresh Kumar Seengal for allegedly floating fake companies and garnering money from public issues.
Suresh Kumar, who has now floated a new company Global Internet Limited, which is set to launch Plus 21, the country's first adult channel, had earlier come out with two public issues for Compact Disc and Total Exports, raising about Rs 9.20 crore, allegedly without any plant or factory to manufacture the items the companies were supposed to.
The Chandigarh-based company has the same address, telephone and fax numbers as Compact Disc and Seengal Hotels, promoted by him.
In the case of Compact Disc India Ltd, which promised to manufacture and sell compact discs at a low price of Rs 90, the company had claimed to have a plant at Gurgaon.
However, a retired army officer and an ex-employee of the company and the officials of Contour Advertising agency, which had earlier handled two new-issue campaigns for the Seengals, said after visiting the site that there was no plant at Gurgaon to manufacture compact discs.
Information furnished in the prospectus of Compact Disc India, like a buy-back arrangement with a UK-based company Delta Disc, had also come under suspicion as Delta UK denied having any such arrangement with the Seengal company and challenged the existence of any company by the name Delta Disc, UK.
This is a fake company.
They have a habit of announcing positive developments at regular intervals to push up the stock price. Nothing is real. Thanks moneylife for exposing CDI.

Rao

7 years ago

Zed, please also note that they indeed have a non-executive independent director (santosh grover). Now please don't tell me he is their benami :-)

Having made my arguments I am not saying that CDI is above board and has no hidden secrets. What all I wanted to say is that a responsible journalist should present facts and proovide their opinions rather than relying on other people opinions to form their opinions. Hope they take my inputs positively.

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