Aviva Life Insurance Company Ltd is expected to bring in more capital over the next few weeks to sustain its high premium growth rate.
Speaking to Business Line, Mr Stuart Purdy, Managing Director, Aviva Life said, "We will take a decision this week." Aviva is currently capitalised at Rs 320 crore (equity plus reserves).
Mr Purdy said that Aviva of UK and the Dabur group, the two joint venture partners, had contributed Rs 60-80 crore annually as capital.
"Additional infusions will be very much in line with those figures," Mr Purdy said.
But, he added, "We would very much prefer the government to increase the foreign direct investment ceiling to 49% or even beyond."
Dabur group is a 74% stakeholder in the life insurance joint venture. Aviva holds the remaining 26% stake.
The additional capital is to conform to the solvency margins prescribed by the Insurance Regulatory and Development Authority.
At present, the regulator's prescribed ratio is 150% of the insurable liabilities.
Aviva's capital requirements also currently stem from high growth rates it has seen since the beginning of this year. This was because along with premiums, insurable liabilities also tend to rise.
Cumulative premiums of Aviva are estimated at Rs 317 crore, about 106% more than the corresponding period of last year. The bulk of the premium accretions came from unit-linked policies.
Unit-linked cover unlike conventional guaranteed return cover or pure risk cover is far more capital efficient, and help contain the capital requirements.
But policyholders' return risks tend to be high. To help policyholders maximise their returns, Aviva had set up its own team of fund managers, he said.
Aviva, he said, also plans to open 66 new branches during the current year to augment its direct reach further in the country and popularise its unit-linked policies.
Currently, its reach in the Tier II cities is through its bancassurance arrangements with 20 banks, including Canara Bank and 14 co-operative banks.
Mr Purdy said that the company's attempt to grow the group insurance business was beset with problems.
"We have hit a hiatus on group plans with the fringe benefit tax coming into force," he said.
As a result, this business currently contributed only 1-2%, though it was beginning to grow.
Taken from Business Line
Canara Bank stock price
On November 27, 2015, Canara Bank closed at Rs 270.80, up Rs 8.45, or 3.22 percent. The 52-week high of the share was Rs 478.40 and the 52-week low was Rs 250.85.
The company's trailing 12-month (TTM) EPS was at Rs 41.93 per share as per the quarter ended September 2015. The stock's price-to-earnings (P/E) ratio was 6.46. The latest book value of the company is Rs 488.43 per share. At current value, the price-to-book value of the company is 0.55.
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