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Record Premium Collections by Private Life Insurance Companies in Aug-21

Record Premium Collections
07/09/2021

Jul-21 was a month of 11% contraction in life premiums but new business premiums (NBP) bounced back to 2.88% growth in Aug-21. Interestingly, while LIC reported lower premiums in Aug-21 comparable to last year, the premium collections of private insurers was sharply higher YoY. Much of this growth came from ULIPs and protection products.

The bigger story was the dichotomy between private insurers and LIC. During Aug-21, the total NBP mop-up was up 2.88% YOY at Rs.27,821 crore. Big daddy LIC saw the NBP falling by -3.82% in Aug-21 to Rs.18,961 crore. However, private insurers saw new business premiums grow by an impressive 20.94% yoy to Rs.8,860 crore. 

This is the highest levels of premium collected by private insurers in a month. Private insurers also compensated for the fall in LIC premium collections so the life insurance industry overall ended with growth of 2.88%. For FY22 (Apr-Aug), LIC saw NBP premiums taper by -6.75% YOY while private insurers saw premiums grow 23.05%. As a result, overall NBP premiums FY22 (Apr-Aug) was up 1.62%.

How the Big four private insurers stacked up in Aug-21?

1)    SBI Life Insurance: The second largest private insurer reported 24% growth in NBP flows for Aug-21 YOY. However, Aug-21 premiums were up 74% compared to the average for first 4 months of FY22.

2)    ICICI Prudential Life: The third largest private insurer reported 43% growth in NBP flows for Aug-21 YOY. However, Aug-21 premiums were up 37.5% compared to the average for first 4 months of FY22.

3)    HDFC Life Insurance: The largest private insurer reported muted -6% fall in NBP flows for Aug-21 YOY. However, Aug-21 premiums were up 22% compared to the average for first 4 months of FY22.

4)    Max Life Insurance: Max reported 16.5% growth in NBP flows for Aug-21 YOY. However, the Aug-21 premiums were up 34.8% compared to the average for first 4 months of FY22.
 

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Cairn Energy to withdraw Legal Cases and Claims against India

Cairn Energy Legal Cases
by 5paisa Research Team 07/09/2021

Cairn has accepted the terms offered by Indian government to put an end to the legal dispute over retrospective taxation. One condition is that this would only apply in case the other party agrees to withdraw all legal suits and commits not to proceed legally in future.

The dispute goes back to the sale of Cairn India by its parent Cairn UK to Vedanta. The government had sent a tax bill of Rs.10,247 crore to Cairn UK for unpaid capital gains tax. It withheld dividends payable to Cairn UK, held back tax refunds and disposed of shares lying in Cairn demat account to recover dues.

To get back the money from Indian government, Cairn UK had approached the arbitral courts, which had given an order in their favour. With this order, Cairn was trying to recover monies from the Indian government by confiscating global Indian assets including foreign bank accounts, ships and Air India planes.

Things changed after the Indian cabinet approved rescinding retrospective tax legislation. Post scrapping retrospective tax legislation, Indian government offered to refund amounts withheld without interest or penalty. This entails paying back $1 billion to Cairn UK. This payment will be subject to Cairn UK withdrawing all legal cases filed in this regard.

The CEO of Cairn made a statement on 07th September that they were willing to accept the offer of the Indian government. The decision had the approval of institutional shareholders like Fidelity and Blackrock. As per the agreement, Cairn UK will also withdraw all relevant legal cases against Indian government.

This will put an end to the 10-year dispute between Cairn UK and the Indian government. Since Cairn UK was the most prominent retrospective taxation case, it also puts an end to such roadblocks to foreign investment. Interestingly, Cairn UK has committed to distribute 70% of the pay-out by the Indian government as special dividend to its shareholders.

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Outcome of the Telecom Committee Meeting

Outcome of the Telecom Committee Meeting
by 5paisa Research Team 08/09/2021

There were major expectations that the Cabinet Meeting on Telecom on 08 September would be a game changer. However, the meeting started at 11 am on Wednesday but did not discuss any of the contentious issues like relief package for Vodafone, change in methodology of AGR computation, deferral of spectrum fees payment etc. The I&B Minister, Anurag Thakur, merely said that the issue was not discussed.

 

In a way, it is disappointing for telecom stocks, especially Vodafone Idea. It is struggling with its mounting losses, falling customer base and a huge outstanding liability of Rs.180,000 crore. Most of this is owed to the government in the form of Annual Gross Revenue (AGR) dues and spectrum fees payable.

 

The last relief for telecom players was when outstanding AGR dues were defrayed over 10 years in equal instalments. Here were some key expectations that telecom companies had from the Cabinet Committee on Telecom.

 

• There were expectations of rationalization of telecom license fees so as to reduce the prospective burden on telcos.

 

• It was hoped that the AGR definition would be tweaked to exclude non-telecom revenues sources to give relief to telecom companies.

 

• Telecom players were expecting a moratorium of another 2 years on AGR pay-outs, but markets are unsure how attractive it would be with interest implications.

 

• There were hopes that government would intervene to bail-out Vodafone, which is stuck with debt of Rs.180,000 crore and huge accumulated losses that have wiped out their net worth.

 

• The street was expecting that part of the debts of Vodafone Idea would be converted into equity so that the government becomes a partner in the rescue.

Anurag Thakur has been non-committal on whether this would be taken up for discussion next week. Any worsening of the situation at Vodafone Idea would not only lead to loss of jobs, but also a huge dent on banks that guaranteed most of the statutory payables.

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5 Mantras To Know When You Are Saving For A Downpayment

5 Mantras To Know When You Are Saving For A Downpayment
by 5paisa Research Team 08/09/2021

5 Mantras To Know When You Are Saving For A Downpayment

 

 Start Early: Most people start saving only a couple years before they decide that they want to buy a house. The key to making the saving process easier is to start early and allow your savings to grow before you ‘need’ to buy a house. This will allow you to go at a slower pace and save smaller amounts of money each month towards the same and not pressurize you into changing your lifestyle significantly or become a burden.

 Budgeting: The first step is to sit down with your income and expenses and figure out in what range you could buy a house and what kind of down payment you could afford. It is essential to go over the expenses that you are currently incurring and see where you could cut down and save money. Set a realistic budget for the future and try to stick to it. Ensure that you put aside a portion of your income towards saving for the down payment each month.

 Discipline yourself by automating your savings: If you are not the kind of person that could be disciplined about saving, then consider automating them. Decide how much you would like to save each month and set up an automated transfer of that amount to a savings account at the start of each month or start Systematic Investment Plan (SIP) in a mutual fund scheme of your choice. This will make saving and investing a habit.

 Make the most of your savings: Consider maximizing your savings by starting an SIP in an equity mutual fund. Since equities are best if you have an investment time frame of more than 5 years, it is always best that you start this as early as possible. An SIP will not only automate your savings and inculcate discipline, it will also help you reap the benefits of equity investing while smoothening some of the volatility associated with equity markets.

 You also have to pay interest: When you are looking to buy a house, the down-payment is not the only thing you need to consider. You also need to consider the monthly instalments that you pay for your home loan. You must ensure that you always have savings in a liquid investment that can take care of at least one year of home loan instalments.

 

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RBI Removes UCO Bank from PCA Framework

RBI removes UCO Bank from PCA framework
by 5paisa Research Team 08/09/2021

In a significant boost for UCO Bank, the RBI has decided to move UCO Bank out of the Prompt Corrective Action (PCA) framework. UCO Bank had been brought under PCA framework in 2017 after its financials showed a lot of stress. Its net NPAs had gone as high as 8.57% and that is a typical basket case for a bank to be put under PCA.

The PCA framework puts severe restrictions on the operations of the bank so as to limit the risk burgeoning. For example, banks under the PCA framework are constrained from expanding their loan books. They are also not allowed to undertake any fresh recruitments nor pay any bonuses to the senior managerial staff. Such banks also face severe restrictions on branch network expansion and are also restricted from paying dividends to shareholders.

The decision to remove UCO Bank from the PCA framework was taken after there was a significant improvement in its financials for the Mar-21 fiscal. In addition, UCO Bank has also given an undertaking to the government that it would meet all the criterial to remain outside the PCA framework. 

UCO Bank’s net NPAs have fallen from 8.57% in Mar-17 to 3.94% as of Mar-21. In addition, the capital adequacy ratio at 14.24% was comfortable with 85% accounted for by Tier-1 capital. In the light of these systemic improvements in numbers, RBI has decided to remove UCO Bank from the PCA framework.

Apart from having a positive impact on the stock price, the removal from PCA framework will benefit in other ways too. Now, UCO Bank can once again start to expand its branch network in an aggressive manner. The bank can also pay dividends to shareholders and look for fresh senior talent. UCO Bank has been aggressive in offering one-stop services to customers, like through its recent tie-up with Fisdom for wealth management. Exiting from the PCA should help UCO Bank generate better ROI per customer.

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5 Mantras To Know About Fundamental Analysis

5 Mantras To Know About Fundamental Analysis
by 5paisa Research Team 08/09/2021

5 Mantras To Know About Fundamental Analysis

 

 Intrinsic Value: The main goal of fundamental analysis is to evaluate a company’s financials and arrive at a number that can tell you what each share of the company should be worth. The value of the company divided by the number of outstanding shares is the intrinsic per share value of the company. This price is then compared with the market price of the share to determine if the stock is undervalued or overvalued.

 Top-Down vs. Bottom-Up: The top-down approach to investing starts with macro variables such as GDP and economy and works its way down to the company level. Whereas, in Bottom-down investing, analysis is done from the company or sector level.

 Quantitative & Qualitative: Fundamental analysis looks primarily at quantitative data such as numbers and company financials. But there is also focus on qualitative data, such as the quality of management, quality of the product or service offered by the company, and other such factors.

 Long-term Outlook: Fundamental analysis is generally used to determine investments that are more long term in nature. It allows investors to find companies that are good investments from a value and growth perspective. It is ideal for investors using the buy and hold strategy and for value investors.

 Procedure: Fundamental analysis starts with reading the company’s annual reports, understanding its business, and identifying growth factors. Then, it moves on to understanding financial statements like the P&L account, Balance Sheet, and Cash flow statements. Based on this, analysts can assume a growth rate to forecast future earnings. Then these future earnings are discounted back to the present and combined to arrive at the value of the company. Several financial ratios such as P/E, P/S and P/B ratios are calculated and compared to peers, industry average, and the firm’s own historical average to determine whether the prevailing market price is overvaluing or undervaluing the company.

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