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Saturday, January 29, 2011

New guidelines hit ULIP sales

THE recently issued guidelines to regulate the unit linked insurance policies (ULIPs) are expected to slowdown its sales and impact the overall insurance sector’s growth during the current financial year 2010-11, according to Insurance Regulatory and Development Authority (IRDA).
The industry grew at about 23 per cent during the financial year 2009-10.

ULIPs contribute about 80 per cent of the total premium collections made by private insurance firms. According to the data compiled by IRDA, first-year premium income of life insurance companies fell 20.4 per cent on year to `97.09 billion in December, 2010. While private life insurance companies’ collections fell 21.7 per cent, public sector Life Insurance Corporation of India’s collections declined 19.7 per cent.

First year premium collections indicate the quantum of new business generated by hte insurance companies. In September, 2010 the insurance regulator issued guidelines and asked private players to redesign products besides reducing costs.

Another year before insurance cos stabilise: Irda

The growth rate of insurance companies may come down this fiscal and it will take a year before they stabilise, the Insurance Regulatory and Development Authority (Irda) said today. Irda Chairman J Hari Narayan stated this when asked about the impact of new Ulip norms announced by the regulator last year. The new norms came in to affect from September 1, 2010.

He said growth may be affected not only due to the developments within the industry but also overall economy. Insurance companies are of the opinion that certain provisions of new ULIP norms like capping of surrender charges and the even distribution of charges over the lock-in period of five years will adversely impact the profitability of companies. Ulip sales will also be adversely affected as agents may be unwilling to sell products at lower commissions.

Replying to a question, the regulator said the insurance companies expressed concern over norms
on pension products. He said the draft guidelines of IPO norms for life insurance companies will be issued next month and refused to divulge further details.

Friday, January 28, 2011

Govt public debt in Q3 up 4% at Rs 28,62,624cr

The total public debt of the Government increased by 4 per cent to Rs 28,62,624 crore during the third quarter of the current financial year from Rs 27,53,378 crore in the previous quarter.
The Government's debt constitutes both internal and external debt.

While the Government's papers of various maturities period, including the securities issued to international financial institutions, are classified as internal debt, the external debt are that from multilateral and bilateral agencies, including IMF . Internal debt in Q3 constituted 89.6 per cent of public debt, compared to 89.2 per cent at end of the second quarter.

The outstanding internal debt of the Government stood at Rs 25,64,983 crore in Q3, thereby constituting 36.6 per cent of GDP ( Gross Domestic Product )) compared with 35 per cent in the previous quarter.

The report further said all the key deficit indicators of the central Government during April-November 2010, as per centage of budget estimates (BE), were lower than their levels during the corresponding period of the previous year on account of higher revenue collections. On the foreign capital inflows, the report said, the inflows on account of foreign investment were considerably higher during the months of September and October 2010 mainly on account of increase in portfolio investment by FIIs.

The rupee appreciated during the quarter from Rs 44.93 per USD at end-Sep 2010 to Rs 44.81 per USD at end-December 2010, the report said.

AP plans suicide cover, wants MFIs to foot the bill

The Andhra Pradesh government is planning a legislation that would make it mandatory for microfinance companies to pay a compensation of Rs 5 lakh to families of borrowers who commit suicide because of debt burden.
This would raise the liabilities of microfinance companies and compound their problems which they already face in slowing loan repayments after curbs on loans and recovery.

Andhra Pradesh, which accounts for nearly a third of the industry, triggered a debate on how microfinance has to be regulated when it enacted recovery and lending rules last October following suicides and unethical practices by lenders. The Reserve Bank of India appointed a committee under YH Malegam to suggest regulations, whose report was made public last week. The sector is on the verge of collapse due to wilful defaults, which the industry blames on the AP Act.

The state government was under pressure from opposition parties to offer compensation to suicide victims. The latest proposal is expected to help it pass the buck without any pressure on the exchequer, which is already finding it difficult to finance various welfare schemes. 

Saturday, January 22, 2011


Hi Friends,

Congratulations to all the finalists of PRAGYAAN Quiz(PRELIMS) round . Names of the finalists are as follows:

Answers of the quiz:
1) C. TAAL

2) 43 Runs








10) C.



13) B.




17) FIAT





22) 1.








30) A.HARD

Friday, January 21, 2011

IPO guidelines for life insurers to be ready this fiscal: IRDA

 Insurance watchdog Irda today said the guidelines for public float of life insurance companies will be ready this fiscal, while the non-life may take more time. In October last year, market regulator Sebi had approved life insurance companies to issue IPOs.
As per the draft guideline compiled by Irda, insurance companies that are in operation for the last 10 years would only be eligible for coming out with IPOs.

Also, the present IPO guidelines of Sebi requires a three years track record of profit for a company to float a public issue.
However, the non-life insurance companies will have to wait a few months to hit the capital market as Irda is in the process of making a formal proposal to Sebi.

Several private sector insurers, including Reliance Life and HDFC Standard Life, have already shown interest in tapping the capital market to augment their resource base.
Though HDFC Standard Life has completed 10 years of operations, Reliance Life does not meet this criteria.
As per the disclosure norms in offer document mandated by Sebi, the insurers would have to come up with disclosure of risk factors specific to the companies.
Also the offer document would have a glossary of terms used in the insurance sector.

Currently, most of the 22 private life insurers and 17 non-life players have foreign partners. The Insurance Act caps foreign direct investment at 26 per cent.

Govt plans insurance cover for HIV-infected

India is set to have the first, government-run policy to provide health and life insurance covers for People Living with HIV (PLHIV).Sources in the National Aids Control Organisation (NACO) confirmed that a meeting had been finalised between key stakeholders, including insurance companies, economists and international and national healthcare experts, to work out a sustainable model for the policy.
The meeting, scheduled for February 3 and 4, will see delegates of various countries where successful insurance policies have been implemented for PLHIVs. The aim is for experts to study the models of these countries to arrive at a structure suitable for India.
According to a senior NACO official, though providing insurance cover to PLHIVs was outlined as an important agenda in the ongoing National AIDS Control Programme-3, cohesive action was being taken only now.

“Representatives from South Africa, the US, the Philippines and Namibia have confirmed their participation. The conference will also see a strong representation from the insurance sector. Officials from the Insurance Regulatory and Development Authority will also be present,” the official said.The government is seeking the help of NGO Population Services International (PSI),which has implemented a micro-level insurance programme for HIV-affected persons in high-risk states such as Karnataka, Andhra Pradesh and some districts of Maharashtra. According to Ravi Subbaiah, PSI project in-charge, “Our existing programme only provides for a cover up to Rs 30,000 for patients with CD 4 count up to 300 (CD4 cells or T-helper cells are a type of white blood cells that fight infection and their count indicates the stage of HIV or AIDS in a patient). We are now looking at a pan-Indian project for a much greater premium, with importance on accessibility of services to patients.”

He added that where the PSI programme only provides health insurance, brainstorming sessions with NACO had focused on a complete life insurance cover.

The PSI’s existing initiative ‘Connect’ is supported by the United States Agency for International Development (USAID), and provides patients cashless facilities at hospitals enlisted in the network.

For a premium of Rs 1,511, the patient has to pay Rs 750, and the rest is subsidised by the PSI. Patients can avail of Rs 15,000 on hospitalisation at the onset of AIDS, and the other half for treatment of co-infections associated with AIDS.



Wednesday, January 19, 2011

LIC reduces stake in HUL to 6.95 per cent

Hindustan Unilever (HUL) stated that by selling its share in the market, the insurance firm,Life Insurance Corporation of India (LIC) has lessened its stake in the company to 6.949 percent.As on November 21, 2007, LIC had held 8.949 per cent in the HUL but, has sold 45,935,297 shares aggregating to 2 per cent stake in HUL at a value of Rs 1,254.6 crore,

Meanwhile, HUL also said that the shares were sold over a period of 4 years from November 21, 2007 till January 6, 2011. LIC now has 151,642,638 shares or 6.949 per cent stake in HUL after the share sale.

The Life Insurance Corporation of India (LIC) is the largest state-owned life insurance company in India, and also the country's largest investor. It is fully owned by the Government of India. It also funds close to 24.6% of the Indian Government's expenses. It has assets estimated of 9.31 trillion (US$202.03 billion).
It was founded in 1956 with the merger of more than 200 insurance companies and provident societies.

Canara HSBC Oriental Bank of Commerce Life Insurance appoints new CEO

Canara HSBC Oriental Bank of Commerce Life Insurance has appointed John Holden as the new CEO succeeding Harpal Karlcut, who moved back to HSBC Insurance on an overseas assignment.

Holden worked with HSBC for over 26 years in banking, marketing and insurance, spending the majority of his career in the group's life, pensions and investment businesses, supporting retail, commercial and private banking propositions.
He has also spent the last 13 years in Korea, Taiwan, Malaysia, and the Middle East and has played a key role in creating successful bancassurance distribution partnerships.

Prior to joining Canara HSBC Oriental Bank of Commerce Life Insurance, Holden was deputy president and chief operating officer of Hana HSBC Life Insurance; a joint-venture between Hana Financial Holdings and HSBC Insurance.

Canara HSBC Oriental Bank of Commerce Life Insurance and Canara Bank chairman & managing director Sunder Rajan Raman said that we are confident that John with his deep understanding of the life insurance sector and experience will provide appropriate leadership to the company build on its growth trajectory and make valuable contribution in taking it to greater heights.Canara HSBC Oriental Bank of Commerce Life Insurance is joint venture between India-based Canara Bank and Oriental Bank of Commerce, and HSBC Insurance (Asia Pacific) Holdings.

Tuesday, January 18, 2011

key insurance statistics for year 2009-10

Life insurance premium income 265540 crore rupees
Growth in premium income 19.69 %
Penetration 4.60%
Density ( per capita premium) 47.7 dollars

General Insurance
Penetration 0.6
Density 6.7 dollars
Premium income 34620 crore rupees
Growth in premium income 14.06%

These are some of the important statistics about insurance industry asked by GIC people last year. Remember that per capita premium and density is same.

Monday, January 17, 2011

RBI `desperate' to rein in inflation surge

The Reserve Bank of India is "desperate" to control inflation, said its Governor, Dr D. Subbarao, on Monday. Pointing out that a lot of other countries were still flirting with deflation while India is having a surge in inflation, Dr Subbarao said- :"When I meet other central bank governors, they tell me `why don't you give us a bit of your inflation.' That's how desperately they want some inflation and how desperate we are to control inflation."

The Governor's expression of concern on the rising inflation, coming as it does in the run-p to the third quarter review of the monetary policy scheduled for January 25, indicates that the central bank could raise key shortterm interest rates by at least 25 basis points to head-off the rising tide of inflation, say analysts.

In December, the Wholesale Price Index (WPI) based inflation surged to 8.43 per cent from 7.48 per cent in the previous month, mainly driven by the runaway increase in food prices. In its midquarter review of the monetary policy last month, the RBI said that the risk to its projection of 5.5 per cent inflation by March 2011 is on the upside. Speaking at a function at the Indira Gandhi Institute of Development Research, the Governor said the challenge for the RBI was to calibrate monetary policy by taking into account the demands of inflation management and the demands of supportive recovery.


The dilemma facing the central bank in calibrating monetary policy is borne out by the fact that even as the WPI inflation is much above its comfort level of 5.5 per cent, industrial growth plummeted to an 18-month low of 2.7 per cent in November (against 11.3 per cent for the same month of last fiscal).  Any further monetary tightening measure aimed at inflation control now runs the risk of derailing growth.


Though food inflation, based on the annual WPI, eased marginally to 16.91 per cent in the week ended January 1 (as against the previous week's annual rise of 18.32 per cent), the pace of decline has been slower than expected largely due to structural factors. The RBI, in its mid-quarter review, had warned that there is a risk that rising international commodity prices will spill over into domestic inflation. Going forward, rising domestic input costs for the manufacturing sector combined with aggregate demand pressures could weigh on domestic inflation.

Sunday, January 16, 2011

13 changes in I-T Act needed before IFRS convergence

Panel wants nod to keep two accounts in 1st yr.

The finance ministry will have to make 13 changes in the Income Tax Act of 1961 if it has to resolve all direct tax issues arising out of the convergence of Indian accounting standards with International Financial Reporting Standards (IFRS), an expert committee has said.

The group, set up by the country’s audit standard setting body — Institute of Chartered Accountants of India(ICAI) — may ask the ministry to either amend the rules or allow industry to maintain parallel books of
accounts in the initial year of transition (2011-12).The group, which comprises chartered accountants and Central Board of Direct Taxes officials, will submit its report to the ministries of corporate affairs and finance, is learnt.

Harmonisation of the provisions of minimum alternate tax, issues related to tax deducted at source, tax
differences arising out of recognition of constructive liabilities or obligations as against the current practice of recognising only legally enforceable liabilities, goodwill depreciation or depreciation of intangible assets, mark-to-market treatment, etc, are some of the issues highlighted by the committee.

The committee discarded the idea of applying IFRS convergence only on consolidated financial statements and allowing companies to follow existing accounting standards for standalone statements. It stated that maintenance of parallel books of accounts would also require the same effort and would be a better option.

The move comes at a time when various sections of industry are seeking a deferment of the IFRS convergence deadline set by the ministry. The ministry has been consistent in its stand that a select group of companies, put in the Phase I group, will have to follow the new Indian Accounting Standards that converge with IFRS from April 1.

The Phase I group excludes banks, insurance companies and smaller companies and has companies that are part of the National Stock Exchange’s bellwether index Nifty, the Bombay Stock Exchange’s Sensex, companies whose shares or other securities are listed on foreign stock exchanges and companies, listed or not, which have a net worth in excess of Rs 1,000 crore.

Apollo Munich Health Insurance Wins Celent Model Insurer Asia 2011 Award

- Winner in 'Policy Administration System' Category for Mastek's ElixirAsia Health Solution

- System Implemented in 60 days

Apollo Munich Health Insurance Co. Ltd. (AMHI), was felicitated with the Celent Model Insurer Asia 2011 award in the Policy Administration System (PAS) category. The award recognizes excellence in technology best practices at insurers in Asia, in various categories.

Apollo Munich implemented Mastek's ElixirAsia Health within a period of 60 days. The workflow-enabled system supports straight through processing (STP) of the whole health product life cycle with integration to all back end systems. Mastek is a high-end IT solutions player with global operations, providing new technology and IP-led enterprise solutions with a focus on the Insurance and Government verticals worldwide.

Apollo Munich has multiple product lines in the health insurance space and caters to the retail as well as the corporate market segments. AMHI wanted to administer multiple health insurance product lines through a single system that could support the entire health insurance business, within the challenging timeline of two months. The application went live in 60 calendar days thus meeting the challenging implementation target.

The ElixirAsia Health solution standardized insurance activities for different lines of business providing integrated support for distribution management, underwriting and financial receipting. The system's customer-centric framework allowed a single-window view of all insurance functions thereby increasing productivity of the Business Users.

The solution enables AMHI to configure new products in 1-2 days with a significant improvement on time to market.

Commenting at this achievement, Mr. Antony Jacob, Chief Executive Officer, Apollo Munich Health Insurance Company Limited said, "It gives me immense pleasure to receive this award. We are committed not only to improve our business efficiency and growth but also enhance the customer experience through systematic development of our systems and processes. To meet the challenge, we needed a solution provider that had the domain knowledge to understand and implement the needs of our industry and work on our vision with immediate effect. Mastek helped us implement the right kind of solution using its industry insights within the stipulated time of two months. The solution has truly facilitated higher customer satisfaction index and live our promise of Let's Uncomplicate."

On this occasion, Wenli Yuan, Senior Analyst, Asia Research Group, Celent, said, "Apollo Munich Health Insurance Company has implemented a workflow-enabled system that supports straight through processing of the whole health product lifecycle with integration to all back end systems. Apollo Munich was chosen for Celent Model Insurer Asia because of the company's best practices for automation, system integration, and STP."

Mr. Vilas Kanyal, Head - Asia Pacific at Mastek, said, "We congratulate Apollo Munich Health Insurance for receiving the Celent Model Insurer Asia award. We are honoured to partner with AMHI to implement our ElixirAsia Health solution, which supports their entire health insurance business. They are a leading player in the industry and have helped shape the growth of the insurance industry. We are committed to providing best-of-class IT solutions and services on our Elixir platform to our customers and have successful implementations in health, individual and group life in the Asian Insurance industry."

PSU insurers in talks with ICC for WC insurance cover

Eyeing a multi-crore deal, four state-run insurers, besides General Insurance Corporation are in talks with ICC for insuring the cricket World Cup 2011 commencing on 19 February.India will host 27 matches at eight venues, Bangalore, Chennai, Delhi, Mumbai, Kolkata, Punjab, Gujarat and Nagpur.
The state-owned re-insurance firm General Insurance Corporation (GIC) and the four PSU general insurance companies , United India Insurance, New India Assurance, Oriental Insurance and National Insurance would insure the one and a half month long event.
“The General Insurance Corporation is finalising the insurance cover for the one and half month long cricketing event. It all depends on the total cost involved in hosting the games and the sum would be decided soon,” United India Insurance chairman and managing director G Srinivasan said.

The 2011 World Cup would begin on 19 February and end on 2 April. The broadcasting rights for the international sporting event is with ESPN and the telecaster has reportedly asked for a cover of over Rs. 500 crore.
He said the insurers would provide cover broadly to organisers of the event and media telecaster.

“Insurance cover would be to organisers in the event of cancellation and also to media for revenue loss arising out of loss of advertisement in telecasting the games,” Srinivasan said.

The insurance cover would compensate for any loss arising from cancellation due to a natural calamity, like earthquake, floods or riot, and terror attacks.

The International Cricket Council (ICC) cricket World Cup is the showpiece event of the cricketing calendar and takes place every four years, with matches contested in a 50 overs per side format.

Apart from India two other Asian countries, Bangladesh and Sri Lanka would together host a total of 49 matches of the World Cup.

Insurer liable till vehicle owner's name is in register

The Supreme Court held last week that the insurance company will be liable to pay compensation for road accident death even if the owner had sold the vehicle so long as his name is the official register. The previous owner might have handed over possession of the vehicle to the buyer, but he and his insurer continued to be liable to pay compensation to third parties if the insurance policy is in his name. In this case, Pushpa vs Shakuntala, the owner sold the truck to another person. But the vehicle was insured by Oriental Insurance Company in the previous owner's name. There was an accident killing three persons. Their dependents moved the motor accident claims tribunal against Oriental and the previous owner. The tribunal and the Himachal Pradesh high court held that the previous owner had no liability as he was no longer the owner of the vehicle. They ruled that the new owner alone was liable to pay. The dependents appealed to the Supreme Court. The insurance company argued in the Supreme Court that the liability should entirely be that of the new owner as the old owner had lost control of the vehicle after the sale. Reversing this view, the Supreme Court made the insurance company liable to pay the compensation amount.

Govt plans health cover for all Indians

A health insurance scheme that will cover every Indian is on the cards.A committee of experts appointed by Prime Minister Manmohan Singh and headed by K Srinath Reddy, chief of the Public Health Foundation of India, is working on a publicfunded scheme, likely to be introduced in the 12th Five Year Plan, starting in 2012-13.

“We are looking at a scheme where people will pay premium depending on their income,” said Planning Commission member secretary Sudha Pillai. For instance, the government may pay the entire premium for those below the poverty line. For the better off, the government’s contribution will diminish the higher the individual's income.

This scheme is likely to cover not only hospitalisation expenses, but also treatment undergone at listed hospitals. Most private health insurance schemes cover only hospitalisation. It will also provide cover for conditions private schemes frequently do not — like heart ailments and pregnancy.

The scheme also intends the Centre to pay a higher premium for women — across all sections.There is already a health insurance scheme under the Rashtriya Swasth Bima Yojana for BPL families. Close to half of 6 crore BPL families are covered under this scheme. In the next step, all those enrolled in the Mahatma Gandhi National Rural Employment Guarantee Scheme will be covered, followed by women enrolled in over 10 lakh angwanwadi centers around the country.

According to the National Sample Survey Office, an Indian spends 80 % of his health expenses on buying medicine. The high cost of treatment makes health services unaffordable to many.

Presently, over 90 % Indians are not covered by any public or private health insurance.

Saturday, January 15, 2011

Ogilvy Mumbai Launches a Campaign for ‘Future Generali Insurance Week’

Future Generali Insurance Week

Ogilvy Mumbai creates a new campaign for Future Generali. Through this initiative, Future Generali has taken a higher stance of propagating the message of ‘need for insurance’ or ‘Insurance is a must’ to secure one’s family.
The campaign includes a series of 3 TVC’s supported by Radio, Out of Home (OOH) and a comprehensive On-ground activation program to be held across Big Bazaar outlets.

The brief was quite simple: To come up with a clutter breaking concept that will cut through this over-communicated, cluttered category particularly during the peak investment period of January to February. The intent was clearly to create a concept that is just not clutter breaking but also has a strong positive message that is communicated very simply.
Abraham Alapatt, Head – Brand & Communications – Future Generali India Life Insurance Co Ltd: “We at Future Generali Life, wanted to do something dramatic and strong to break down the barriers of apathy and procrastination that affect all of us when it comes to Insurance Planning. Insurance Week is Future Generali’s way of creating a unique annual occasion to remind millions of Indians – in a hard hitting, un-ignorable way, of the need to re-evaluate their insurance needs, and highlight to them the various simple ways they can buy insurance.
The campaign’s creative thought is rooted in an Indian insight: the “Karta” philosophy – that the family bread-winner needs to ensure the financial security of his family during and after his life, to ensure his peace of mind. The light hearted handling of this hard hitting message in the ads, makes this bitter pill easier to swallow. The simple act of signing a white balloon at a Big Bazaar to signify ‘Mukti’ – is a powerful metaphor for life, and the promise of financial security for our families.”

Sumanto Chattopadhyay, Executive Creative Director, South Asia: “In our culture, we blinker ourselves to the inevitability of death. We simply do not prepare for it. When the provider of the family passes on, those left behind suffer. Not just emotionally, but financially. An insurance policy serves to reduce the sudden financial loss caused by death which only adds an additional burden on the grieving. Sometimes, by creating a timebound period in which one is urged to act, we find that people overcome their avoidance behaviour and respond. Hence, Future Generali, is taking the lead in the insurance industry and introducing ‘Insurance Week’.

The ad campaign features a regretful spirit who wishes he had provided for his loved ones before passing on. This spirit cannot truly be laid to rest, as he sees the suffering he has left behind. Our hope is that by depicting a possible scenario in the future, with an immediate solution to avoid it, we will urge and encourage them to take an insurance policy against it.

“ Sukesh Kumar Nayak, Senior Creative Director: “Insurance ensures peace of mind not only in this life but in the afterlife too. This hard hitting message is delivered in a light hearted manner by a regrettable ghost to build the Insurance Week property.”

Heeral Akhaury, Senior Creative Director: “To create the Insurance Week property we used a creative rendition of the phrase ‘let your soul rest in peace’ and who else but a ghost urging you to do so.”
Ajay Mehta, Client Services Director: “The attempt is to create a movement through Insurance week and make one realize the importance of having an Insurance policy. So go ahead – “Sign Karo, Mukti Pao.” .

Swiss Re: Global insurance industry led by double-digit growth in emerging Asia

Swiss Re’s economist predicts sustained strong growth in Asia's insurance industry in 2011, with emerging markets continuing to outpace mature markets. Life and non-life insurance premiums in emerging Asia grew strongly by 16.8% and 17.3% respectively, in real terms in 2010, with significant contribution in particular from China. Such strong momentum is expected to continue in 2011; but there are emerging risks to watch out for.

Emerging Asia’s GDP expected to grow 8% in 2011

The world economy is expected to continue expanding steadily by an annual average of 3.5% in 2011. Emerging Asia (China, India, Indonesia, Malaysia, Philippines, Thailand and Vietnam) is forecast to grow at 8% in 2011. China and India are the key engines for the economic growth, which are projected to maintain an annual growth rate of 8-9% in the coming two years. By 2020, China and India are expected to be the second and fifth largest economies in the world.

“The Asia economic outlook remains positive, driven by robust domestic consumption and investment demand, sustained capital inflows into Asia, rising intra-regional trade and investment, and supportive government fiscal and monetary policies, ” said Clarence Wong, Swiss Re Chief Economist Asia.
“However, the rosy prospect is clouded by emerging risks, such as rising inflation, brewing asset bubbles, potentially abrupt reversal of capital flows, and increasing risks of currency wars and trade protectionism,” added Clarence Wong.

Strong growth in emerging Asian insurance premiums

The global insurance industry has recovered from the financial crisis and premium growth is expected to accelerate in 2011.
“In Asia, life insurance and personal non-life business lines will benefit from the region’s vibrant economic performance, rising incomes, urbanisation and demographic change caused by aging populations,” said Clarence Wong.

Life insurance premium growth continues in Asia

In emerging Asia, the real growth rate of life insurance premiums accelerated to an estimated 16.8% in 2010 from 10.7% in 2009 and is expected to grow by around 10.3% in 2011. China’s life insurance premium grew remarkably by 24.4% in 2010 (after adjustment for inflation), while Indonesia, Malaysia, Thailand and Vietnam also recorded growth in excess of 10%.
“Emerging Asia outpaces all other emerging regions. This is most obvious in life insurance while emerging Asia can sustain annual growth of 8-10% over the next 10 years. Alongside robust demand for investment-linked insurance products, the potential of protection-type insurance in Asia is also significant,” said Clarence Wong.

Rising disposable household income, low deposit interest rate, and improving investment sentiment will drive demand for investment-linked products. Health insurance has also seen tangible increases in demand over the past years.
However, current low interest rates may impact insurers' investment yields. Those insurers with embedded guarantees in their products may suffer further losses.

Life reinsurers continued to benefit from strong growth in the primary insurance markets. There are also rising demands for reinsurance solutions aimed to provide capital relief and to support M&A transactions in the primary sector.

China’s non-life insurance premium growth outpaces the world

Emerging Asia is also the growth leader in non-life insurance, where premiums increased by 17.3% in real terms in 2010. It is forecast to grow at 12.5% in 2011. Growth is particularly strong in China (21.5% in 2010 and 14.1% in 2011) and Vietnam (13% in 2010 and 14.2% in 2011).

Motor business will benefit from further increases in car ownership. Higher incomes will fuel demand for property insurance. Demand for commercial lines insurance will continue to increase due to government-sponsored infrastructure projects and recovering trade-related lines of business.
“Non-life insurers tend to exhibit a pattern of improved premium growth but weak profitability due to pressure on pricing, low investment returns, and rising claims,” added Clarence Wong.

For the property and casualty sector, the 1 January renewals in Asia indicated that the overall reinsurance capacity remained abundant, suppressing reinsurance pricing. Nonetheless, price corrections were seen in areas where there had been losses, such as the natural catastrophe area following the Australian hailstorms and New Zealand earthquake.

Challenges ahead

Although interest rate hikes may help improve insurers’ investment returns, these will put pressure on available capital if assets are marked-to-market. Underwriting will need to be disciplined to maintain profitability since inflation is rising in Asia that could impact insurers’ claim costs.

“We expect risk-based capital (RBC) solvency regimes to be more common in Asia alongside firmer enforcement of RBC standards. Some regulators are also increasingly making use of scenarios and stress tests to compliment RBC regimes. This will add pressure to insurers’ balance sheets and increase their need for capital. Insurers should focus on underwriting and risk management, and ensure that premium rates are sufficient to cover their increasing risk exposures,” said Clarence Wong.

Irda set to allow standalone claim consultants

The insurance regulator Irda has decided to allow standalone claim consultancy in the industry.
Confirming the development Bharat Boda, president Insurance Brokers’ Association of India (IBAI) said “Irda has acceded to IBAI’s request for standalone claim consultants. A notification in this regard will be issued by the regulator soon.”Claim servicing requires a professional approach and in the absence of which the insured people aredeprived of the real customer service and insurance industry receives bad name.

Complicated claims for which existing intermediaries like brokers or agents may not be able to provide
expert advisory services can now involve stand alone claim consultant said Boda.
In another significant development, Irda stated that soon the Know Your Customer (KYC) scheme would
also be launched for non-life products and beyond a certain amount the premium will only be accepted in the form of cheque.
The KYC scheme enjoins upon the insurer to get PAN No. details of the insured ones.
Irda is positively inclined for the training needs of brokers on various aspects of industry through online
training programme.
“Irda has in-principle approved our proposal but with a caveat that they would consider only such training programmes proposed to be conducted by IBAI in respect of which prior approval of IRDA has been obtained. IBAI is currently in dialogue with Insurance Institute of India to devise such courses”, said Boda.
Boda also suggested that licensed brokers should be permitted to appoint sub-brokers to penetrate large
potential market.
“The reason for promoting sub-broking is for penetrating into the rural market to tap business potential.Irda having considered relaxation in cases of India Post and micro insurance agents should allow , subbroking as it is essential for providing adequate service to clients by broking community”.

The IBAI has also asked Irda make IBAI as a self regulatory body for putting in place the system and processes for issuing licenses to new applicants, renewals and also for taking disciplinary action

Friday, January 14, 2011

Rising life expectancy leaves insurance demand unchanged

The expectation of life at birth increased by six years for men and eight years for women between 1990 and 2008. Since mortality rates dipped most in infancy and early childhood, the increase in expectation of life for young adults was more modest, in the range of 2-4 years.Despite this apparently small increase, it turns out that there has been a sharp drop in the probability of dying between the ages of 20/30 and 60. For men, the probability of dying between the age of 20 and 59, before life insurance cover runs out, has dropped from 1 in 3 in 1990 to almost 1 in 4 in 2008. There has been a corresponding drop in the probability of death for women, from more than 1 in 4 to well below 1 in 5.

So, unless the IRDA presses insurers to cut premiums, or extend life cover till age 70, life insurance will become a much more profitable business. Life insurers will be able to reap where they have not sown.
However, while the decrease in the probability of dying for young adults translates into huge gains when aggregated, the effect on individual willingness to bear risk is likely to be negligible. In short, the rise in life expectancy affects mainly the supply side, in particular the cost of providing insurance, while leaving demand pretty much unchanged.

But there is also another side to the story. Men and women aged 60-64 can expect to live another 15-17 years, and those who are yet alive ten years down the line will find that they have another 10 or 11 years to go.

The Options

So the major change, so far as consumers of insurance products are concerned, is that they ought to think of investing more in annuities, to provide themselves with a steady stream of income until their death; though of course the need for annuities will vary with the availability of pension, for the pensioner and his/her surviving spouse.
For those who have managed to save Rs 20-30 lakh at the end of the day, by far the best bet is LIC's Jeevan Akshay, which gives an income of around 9.3 per cent in perpetuity at age 58, followed by the Postal Department's Senior Citizen's saving scheme, which gives 9 per cent on a five-year fixed deposit. At present rates of exemption/deduction, incomes of about Rs 20,000 a month are tax-free until the age of 65, and Rs 30,000 a month thereafter.

If banks now start offering 10 per cent plus on fixed deposits, go for them, but only for shortterm gains. Banks are of little use in the long term. Assuring oneself of an income on the basis of a ‘reverse mortgage' on a self-occupied house is a good option only for those who have no other option. Reverse mortgages typically provide an income for only a certain number of years; for this as well as other reasons, they cover your bank's risk rather than your own.


Only 10-year-old life cos can tap markets

 The insurance regulator may have decided to announce guidelines for equity issues by life insurance companies early next month, but companies which are not yet 10 years old will not be able to approach primary markets.
However, companies that are in existence for 10 years, but have not registered net profits for the past three consecutive years, will be able to do so through the book-building process, Irda chairman J Hari Narayan told ET.
Companies like Reliance Life Insurance and HDFC Life Insurance have expressed their intention of approaching the primary markets for raising additional funds.Given the 10-year stipulation for IPO, Reliance Life will have to wait for another year.

Reliance Life had approached the finance ministry some two years ago for allowing it to raise funds from primary markets . It wanted the ministry’s permission to skip the 10-year stipulation. Irda, it seems, is not too comfortable with the idea.

Technically, insurers will be able to approach the markets once the guidelines for equity issues by life insurance companies are out. “We hope to provide the guidelines in the next 2-3 weeks,” said Mr Narayan .

Thursday, January 13, 2011

How Inflation Impacts Insurers

Inflation is the economic phenomenon of increasing prices for goods and services. It impacts insurers’ claims and general expenses, the value of liabilities and, less directly, the value of assets. Growth in insurers' claims costs has historically exceeded inflation due to additional factors include the effects of increased litigation, changes in social norms, and rising expenses for medical treatment.

Inflation affects life and non-life insurers in different ways

For non-life insurers, unanticipated inflation leads to higher claims costs, thereby eroding profitability. For life insurers, both inflation and deflation are risks. Inflation is often accompanied by rising interest rates, which reduce the value of return guarantees. Rising inflation can have a negative effect on demand, and may lead to policyholders cancelling their policies as well as increasing costs for insurers. In the case of deflation, or if very low inflation persists, interest rates tend to fall. This makes it more difficult for life insurers with large portfolios of minimum interest rate guarantee savings products to earn the appropriate asset returns.

Insurers have several options for mitigating inflation risk

Insurers concerned about inflation risk can mitigate this risk in several ways. On the asset side, insurers can invest in commodities, real estate and inflation indexed bonds, which are most viable inflation hedges. These investments have performed well during periods of high inflation.

Insurers can also modify insurance contracts to shorten the tail and hence the development risk. Insurers can introduce claims made' policies or sunset clauses to address the issue of latent claims. They can also add index clauses linking premiums, limits and deductibles/retention to an inflation-related index.

Reinsurance can also offer insurers protection against inflation surprises. It is particularly helpful in emerging markets, where the risk of high inflation is greatest.

Happy Reading

Insurance cover for nuclear accidents likely

Insurance regulator IRDA is in the early stages of drafting a regulation for covering nuclear accidents.

The move assumes significance as India is expected to be a major player in this sector after its nuclear deal with US is operationalised. It is felt that the ambitious programme expected under the Indo-US nuclear deal may not materialise to the desired extent unless there is insurance protection for nuclear accidents.

As of now, nuclear power accounts for just three per cent share of the total power produced in India from different sources. However, by 2020 this source is expected to provide 20,000 MW of power against little over 4,000 MW currently.

Setback for FDI hike in insurance.

In a move that could dent investor sentiment, the parliamentary standing committee on finance is set to reject government's move to further open up the insurance sector. The Insurance Amendment Bill, tabled in Parliament, had proposed to raise the foreign investment limit in the key financial sector to 49% from 26% fixed a decade ago. A majority of committee members felt that a higher foreign investment ceiling could affect domestic players.

The panel, headed by senior BJP leader which the government had been trying to push since 2008. During his stint as finance minister, Sinha had piloted the bill that opened the insurance sector to private players and allowed 26% foreign investment.

In its previous term, the government had faced stiff resistance from the Left that was propping up UPA-1. Now, the bill seems to have run into a roadblock from a resurgent Opposition. Though the government is not bound to accept the standing committee's recommendations, the suggestions will make its task daunting and force it to cut deals with small groups in the Lok Sabha to muster support for the passage of the bill. The task will be tougher in the upper House where it is outnumbered by the Opposition. The government could hardly conduct any business in the recently-concluded winter session of Parliament due to an Opposition blockade over three major "scams"—Commonwealth Games, Adarsh housing society and 2G spectrum.

While 49% foreign investment will still mean that firms will remain in Indian hands, non-UPA MPs felt that it would not be beneficial for the domestic sector. They were also unconvinced that the quantum of domestic capital flowing into the sector was insufficient for its growth and development. UPA-1 had introduced the Insurance Laws (Amendment) Bill, 2008, in Rajya Sabha and the Life Insurance Corporation (Amendment) Bill, 2008, in Lok Sabha. The Insurance Bill is seen as an omnibus legislation to change three Acts: Insurance Act, 1938;  Regulatory and Development  Act.

A delay in increase in the foreign investment ceiling from the present level will also force life insurance firms to list. Under the present dispensation, players such as ICICI Prudential and HDFC Standard Life, which have completed 10 years of operations, are required to list in a way that the domestic partners sheds stake in favour of the public.

Several companies are eagerly awaiting the passage of the bill to postpone listing. In addition, there are some players such as Reliance Life that are awaiting clarity on the guidelines before going for sale of stake to a strategic partner.


Insurance companies' IPOs next fiscal as IRDA gives final touches to equity norms.

Insurance companies will be able to raise funds through public floats next fiscal with the insurance watchdog set to announce guidelines for equity issues by life insurance companies early next month.The regulator said it was still in the process of making a formal proposal to the market regulator, Securities and Exchange Board of India (SEBI), for allowing non-life insurers to issue shares to public.
In October last year, market regulator Sebi had allowed life insurance companies to issue public offers. According to the draft guidelines compiled by the regulator, only those insurance companies that are in operation for the last 10 years will be eligible for coming out with public offers.
The regulator is also working on the draft regulation for covering nuclear accidents. "We are in early stages. This involves large amount of risks. We will have to first constitute a pool, which will be part of the larger global pool (of nuclear accident insurance). That is yet to be figured out," Mr Narayan said. State-run reinsurer General Insurance Corporation (GIC) is working on the details to provide insurance protection against such accidents.

Private sector insurers such as Reliance Life and HDFC Standard Life have evinced interest in tapping the capital markets. Most of the 22 private life insurers and 17 non-life players have foreign partners. The Insurance Act caps foreign direct investment at 26%. According to Sebi, insurance companies in their offer document would have to mention a glossary of terms used in the insurance sector. The insurers will also have to come up with disclosure of risk factors specific to the companies.


AIG to sell Nan Shan in Taiwan for $2.16 billion

American International Group (AIG), the insurer repaying a United States bailout, agreed to sell Nan Shan Life Insurance Co to investors led by Ruentex Group for $2.16 billion in the second attempt to dispose of its Taiwan unit. AIG will sell a 97.57 per cent stake in Taipei-based Nan Shan to Ruen Chen Investment Holding Co, according to a statement by Ruentex Industries Ltd to the Taiwanese stock exchange today. The buyer will pay in cash.


Shriram group to divest 20% in Shriram Capital to Sanlam

Shriram group plans to divest around 20 percent in its financial services business holding company, Shriram Capital, for around Rs 900 crore ($200 million) in favour of South African insurance group Sanlam.Shriram Capital is the holding company for the group companies involved in the financial services like Shriram Life Insurance , Shriram General Insurance , Shriram Transport .

Future Generali unveils single premium ULIP

Future Generali Life insurance has launched a single premium ULIP called ‘Nivesh Preferred'. The plan has four term options of 7, 10, 15 and 20 years and offers two sum assured options, the company said in a release.

Wednesday, January 12, 2011

Motor insurance set to get costlier

Motor insurance will soon cost more. Car and bike owners will have to pay about 10% more on new covers, while truck owners will have to shell out around 80% extra under the new price structure proposed by the insurance regulator.

The Insurance Regulatory and Development Authority (IRDA) has published its proposed new tariff for third party motor insurance-the cover which compensates accident victims and has to be mandatorily purchased by all vehicle owners.

The IRDA, however, has not notified the date when the tariff comes into force. The IRDA has set January 17 as the deadline to receive comments from all stakeholders, after which it will announce the date on which the new prices will become effective.

The regulator has revised prices considering that third party motor insurance faced a deficit that could touch Rs 2,000 crore. While the premium for private vehicles will rise, it will not be as steep as that for trucks. For a sub-1000cc vehicle, the increase will be from Rs 670 to Rs 740, while for cars up to 1500cc the premium will rise from Rs 800 to Rs 880. In the case of trucks weighing up to 7500 kg the premium will go up from Rs 5,580 to Rs 10,040.
The IRDA has also recommended to the government that the concept of limited liability, which was discontinued in 1988, should be reintroduced. The regulator has recommended that Motor Vehicle Act be amended to introduce a limitation period for filing compensation claims. Third party insurance is the only business where rates are fixed by the regulator.

This is also the only policy where insurance companies receive a fixed premium but their liability is unlimited as claims are paid on the basis of compensation awarded by the motor accident claims tribunal.

Four years ago, the IRDA had revised rates on third party insurance substantially to wipe out the deficit. However, the regulator was forced to roll back the increase by 70% after a nationwide stir by truckers sent food prices soaring.

Premium on third party insurance has been a contentious issue.

Happy Reading

Tuesday, January 11, 2011

Irda allows insurers to invest in OVL, Coal Videsh bonds

The insurance regulator has allowed insurance companies to invest in bonds issued by foreign arms of ONGC and Coal India for acquiring energy assets abroad—a move that will significantly increase funds available for state energy firms, and at more attractive rates. Insurance companies have been seeking such investment avenues as they are required to invest 15% of their funds in the infrastructure sector. But this was not allowed as the Insurance Act forbids investments outside the country.

However, investments by companies such as ONGC Videsh Ltd (OVL), the overseas arm of the state-run explorer, are not seen as violations of the act as they are listed in India and returns on their investments are brought back to the country, Insurance Regulatory and Development Apart from opening up attractive investment option for insurers, the move would help OVL, which is leading the government's efforts to acquire overseas oil and gas assets to boost the country's energy security . India's largest insurance firm, Life Insurance Corporation of India (LIC) alone invests about .Rs200,000 crore across various asset classes every year.
"Participation of insurance companies will increase investors' participation impacting its price (interest rates) in our favour," OVL managing director RS Butola said. OVL had raised .Rs1,000 crore through a bond issue last year. The existing norms allow insurance companies to invest 50% in government-approved securities, 15% in infrastructure and the remaining 35% in equity and other instruments. Insurance companies can only invest in AAA or AA creditrated debt paper. Insurance firms have welcomed the move and said that liberalisation of norms in these sectors will also help in creation of a long term debt market.

Insurers have been seeking such investment avenues as they are required to invest 15% of their funds in the infrastructure sector. But this was not allowed as the Insurance Act forbids investments outside the country.


Indian Bank to enter life insurance, restart MF biz

Public sector Indian Bank plans to venture into life insurance. It is looking at floating a consortium with domestic and foreign partners, for which it has already initiated talks. Besides, it would also appoint a consultant to advise it on re-entry into the mutual fund industry.
Indian Bank was a bancassurance partner for HDFC Life Insurance and the agreement would mature in March. Last year, the bank earned a commission of Rs 26 crore through the tie-up and was targetting Rs 40 crore this year.The new company would take another six months to materialise and would be through a consortium, wherein Indian Bank and the domestic partner would have the majority stake and the foreign partner would hold 26 per cent.
The 104-year Chennai-based Bank has more than 1,800 branches and over 19,000 staff. It has a customer base of around 200 crore. As on date, total business amounts to Rs 1.70 lakh crore. Indian Bank is one of the pioneers in the mutual fund industry. It set up its mutual fund business in 1989, which became of the top performing mutual funds in the nineties. But in 2001, the bank transferred its schemes to Tata Mutual Fund.

Remove infra, policy bottlenecks to attract FDI: Assocham

Removal of infrastructure bottlenecks and policy reforms in sectors like retail and insurance will help India attract more foreign direct investment (FDI), Assocham said today.It said that sectors such as agriculture and retail, which have enormous potential for attracting FDI, need to be further liberalised. "Restructuring the land acquisition laws also facilitates more opportunities for investors.The country still has to deal with a sometimes sluggish bureaucracy," it added.

During April-November, 2010-11, FDI into the country declined by 27.4 per cent to $14.02 billion vis-a-vis the corresponding period of the previous year. However, it said if the prevailing global situation improves, India may emerge as the third-most favoured destination for FDI after China and the US. The government is mulling over liberalisation of the FDI policy in sectors like multibrand
retail and defence.

Irda asks insurers not to charge differential premium

Insurance regulator Irda today asked insurance companies to refrain from charging policyholders differential premium without prior approval of the watchdog. In the papers submitted to Irda before launching any product, insurers mention a range within which the premium rates would vary depending on unfavourable risk factors.

Irda asked insurers to market their products in accordance with the terms and conditions as approved by the watchdog. However, Irda has noticed that some insurers offer premium rates outside the range filed with Irda, offer discount in premiums and offer enhanced benefits on the product without charging any premiums.

"This is unhealthy practice, which besides attracting regulatory penal action, will impact the financials of the insurer, ultimately affecting the interest of the policyholders and shareholders as well. Such practices should be stopped forthwith," the circular said.

Edelweiss Tokio Life Insurance gets initial approval from Irda

Edelweiss Tokio Life Insurance Company, a joint venture between Edelweiss Capital and Tokio Marine,today said it has received the initial R1 approval from the Insurance Regulatory & Development Authority (Irda).

R1 is the first step of regulatory clearances required for carrying on the business as a life insurance company in India.

"Life insurance premiums are likely to increase from the present level of Rs 2 lakh crore to about Rs 10 lakh crore in the next decade. We are excited by this opportunity and are confident of bringing a differentiated offering leveraging product development capabilities, understanding of Indian consumer needs and our partners' global experience," Edelweiss Tokio Life Insurance Director Deepak Mittal said in a statement.

Tokio Marine is one of the world's largest insurance groups headquartered in Japan. With over 130 years of experience in the insurance sector it has expanded its reach across geographies in life and non-life insurance sectors.

Monday, January 10, 2011

US health insurers vie for cashless service in India

American health insurance giants Aetna and United Healthcare are in the race to provide cashless service under health insurance in India. The two companies are among nine that have been shortlisted by government-owned general insurers which control close to 80% of the cashless mediclaim market.

The health giants are among the 24 that have responded to a request for joint venture proposals by the General Insurers Public Sector Association (GIPSA) that represents four of the largest health insurers —New India Assurance, National Insurance , Oriental Insurance and United India Insurance. These state-owned companies plan to float a captive third-party administrator (TPA) for managed healthcare services. GIPSA is seeking a partner that will provide technical support in networking and negotiating with healthcare providers.

The other companies shortlisted include Patni Computers and French Coris International , which provides claims management services . Cambridge Solutions and Lason , two BPO firms which are keen on diversifying into healthcare, are in the list. Among the existing TPAs, emeditek and Medi Assist have been shortlisted.

This stance affected thousands of policyholders as most of the tertiary care hospitals refused. Since then, things have changed. “In Delhi, most of the large hospitals have joined the network, including Batra, Gangaram , Saint Stephens. We are waiting for the corporate chains of Apollo, Max and Fortis,” said Pawan Bhalla, MD, Raksha TPA. In Mumbai of the five large tertiary care Hospitals Jaslok is agreed to have joined.

Existing TPAs have been up in arms against GIPSA’s decision to have a captive firm. Their main concern was that such a firm would put them out of business. The association of TPAs had filed a complaint with the Competition Commission of India (CCI) that such a captive firm would create a monopoly. A decision by the CCI is expected next week.

However, the initial antagonism appears to have worn off a bit considering that the health insurance market is growing at 35-40 % and most TPAs have their hands full managing the business. Also , there are indications that GIPSA may not hand over its entire health insurance business to the captive company to manage.

Star Health eyes Rs 1500-cr premium collection in FY 11

MUMBAI: Star Health and Allied Insurance Company is eyeing Rs 1500-crore premium collection by the end of this fiscal year (FY 11), a company official said.
Apart from retail customers, the company has collaborated with different state governments and public agencies to ensure medical coverage to their employees, farmers and others.

Last fiscal the company collected a total premium of Rs 979 crore. The company has launched two new products - Star Unique Health Insurance and Star Wedding Gift Insurance.

The Unique Health policy provides cover for hospitalisation benefits as well as pre-existing disease after awaiting period of 11 months. The policy is available under three sum insured options- Rs 1-lakh, Rs 2-lakh and Rs 3-lakh.

The second policy offers basic health cover for the couples on a floater basis. The policy also provides for child delivery expenses.

The qualifying age-bracket for availing the benefits of the policy is 18 to 40 years.

Saturday, January 8, 2011

FSDC guidelines to define Finance Ministry role

Guidelines being prepared on functioning of the Financial Stability and Development Council(FSDC), a high-level body set up to sort out inter-regulatory issues, will define the role of the finance ministry and how member regulators’ autonomy is not compromised.

FSDC was formed to bring greater coordination among financial market regulators. The council is headed by the finance minister and has the Reserve Bank of India (RBI) governor and chairpersons of the Securities and Exchange Board of India, Insurance Regulatory and Development Authority and Pension Fund Regulatory and Development Authority as other members along with finance ministry officials.

According to information, the finance ministry’s role could be confined to an improving level of financial literacy and inclusion as well as devise means for doing this job, apart from being the lender of the last resort.A broad thrust of the guideline will also on FSDC handling only broader issues and ensuring that sectoral regulators continue to play their role as regulating and developing respective markets. In the first meeting of the council on last Friday in New Delhi, discussion took place regarding the formation of guidelines.

There will be a committee under the council headed by the RBI governor that will be first-level moderator of regulatory coordination. Guidelines will also decide that the council should hold minimum meetings during the year. However, the notification issued regarding FSDC suggests that the council should meet as frequent as possible.

A sub-committee or a steering committee headed by the governor can meet more frequently. This sub committee is in lieu of a high-level coordination committee, which is now dismantled.

Friday, January 7, 2011

Basic of finance part1 time value of money

Basics of Finance-part one
The Time Value of Money-
Present Value
How much you got now.
Future Value
How much what you got now grows to when compounded at a given rate

I  give you 100 dollars. You take it to the bank. They will give you 10% interest per year for 2 year.
  • The Present Value = $ 100
  • Future Value = $121.
FV= PV (1 + i )N
  • FV = Future Value
  • PV = Present Value
  • i = the interest rate per period
  • n= the number of compounding periods
Example1 -Determine Future Value Compounded Annually
What is the future value of $34 in 5 years if the interest rate is 5%? (i=.05)
  • FV= PV ( 1 + i ) N
  • FV= $ 34 ( 1+ .05 ) 5
  • FV= $ 34 (1.2762815)
  • FV= $43.39.

Example2-Determine Present Value Compounded Annually
you can go backwards too. I will give you $1000 in 5 years. How much money should you give me now to make it fair to me? You think a good interest rate would be 6% (You just made that number up). (i=.06)
  • FV= PV ( 1 + i ) N
  • $1000 = PV ( 1 + .06) 5
  • $1000 = PV (1.338)
  • $1000 / 1.338 = PV
  • $ 747.38 = PV
Example 3-Determine Present Value Compounded Monthly
Here's that last one again, but with monthly compounding instead of annual compounding. (i equals .06 divided by 12, because there are 12 months per year so 0.06/12=.005 so i=.005) 
  • FV= PV ( 1 + i ) N
  • $1000 = PV ( 1 + .005) 60
  • $1000 = PV (1.348)
  • $1000 / 1.348= PV
  • $741.37 = PV
Here is all about time value of money. You can calculate for half yearly compounding or quarterly compounding.

In case of half yearly compounding take n= 2* no of years
                                                                  I= annual interest/2

Thanks & Regards
Danish Khan