Sun Life Financial and Indian Economic Surge

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Sun Life Financial

Sun Life Financial is a leading international financial services organization, whichvides a diverse range of protection and wealth accumulation products and serviindividuals and corporate customers around the world.52 Sun Life Financial

started in 1865 and has operations in key markets worldwide, including Canada, theStates, the United Kingdom, Ireland, Hong Kong, the Philippines, Japan, Indonesia,China, and Bermuda (Figure 4.8). As of September 30, 2007, the Sun Life Financialgrcompanies had total assets under management of CDN$427 billion.

FIGURE 4.8 India Economic Scenario

2007 Global Services location Index

India 3.2 .3

China 2.9

Malaysia 2.8

Thailand 1-:2

Brazil 2.6 1.

Indonesia

Financial structure= Business environment

People and skill availablity

Insurance SectorIndian Market Overview of Insurance SectorThe Government of India (Gal) opened up the Indian insurance sector to the privateparticipation with effect from April 2000. The Gal-owned Life Insurance Corporation 01(L1G)and four subsidiaries of the General Insurance Corporation of India (GIG)werethelife- and nonlife insurance providers in India until 2000. Several Indian private firms innership with foreign firms have entered the market by offering new insurance produToday, about 14 firms are in the life insurance sector and equal number of firms aresucfully. Operating in the nonlife insurance sector.

The Indian insurance sector has been a major contributor to the domestic savingsincountry. India accounts for just 0.59 percent of the $2,940 billion global insurance mPublished information project that the Indian insurance industry has a potential to grow125 percent in the next 10 years. Growth in the life insurance sector is expected to be1than the nonlife sector (Figure 4.9).

Both the Gal-owned and private sector insurance firms started developing custdesigned products for market penetration.

Performance of- the life insurance sector: According to the Indian InsurRegulatory and Development Authority's (IRDA) annual report for 2003-04, the Indianinsurance sector continues to grow rapidly. It underwrote a premium of Rs. 84.25 bilr($1.95 billion) during April 2004 to September 2004, a growth of 55 percent compared tocorresponding period in the previous year. Out of Rs. 84.25 billion, the share of the individpremium was Rs. 66.97 billion ($1.55 billion) and the balance Rs. 17.27 billion ($401bilr

CHAPTER 4 The Economic Environments Facing Businesses 177

URE 4.9 India Has Been Ranked Superior to Other Major CountriesMany Prominent Surveys.

Projected GDP Growth Rates for Select Upcoming Economies

2005-10 2010-15 2015-20 2020-25 2025-30 20]0-35 2035-40 2040-45 2045-50__ Brazil China __ India Russia

grouppremium.The GOI-owned LlC led the life insurance market with an impressive 81t marketshare and the private insurance firms shared the balance 19 percent.

Performanceof the nonlife insurance sector: Indian nonlife insurance sector under-apremiumof Rs. 92.11 billion ($2.14 billion) during the period April 2004 to September

,a growthof 15.05 percent compared to the corresponding period in the previous year.\hetotalpremium,the government-owned insurance firms and the Export Credit Guarantee

ationtogether accounted for 81.74 percent (Rs. 75.29 billion equivalent of $41.75 billion)theeightfirms in the private sector accounted the balance during the reporting period4.10).

India-InsuranceScenario in India .

•Population:1.05 billionSavingsrate:around 26 per<?entof GDPEstimatedmiddle class population: 300 millionInsuredpopulation: 110 million onlyTheannualgrowth in the average insurance premium in India has been 8.2 percent com-paredwiththe global average of 3-4 percent.Insurancedensity in the country, based on per capita premium, was $5 in the life insur-ancesegmentand $2 in the general segment. Compared with the Indian life insurancestandard,insurance density is $3,236 in Japan, $1,079 in the U.S., $18 in Brazil, and $14iIMexico.

•Theshareof life insurance premium to GDP is 1.29 percent in India.SunLifeFinancial saw the economic stability and growth in India. It formed a joint ven-lurewithIndia's leading company, Aditya Birla Group to capitalize the market as well astoadhereto the legal environment.

SunLife Insurance Company LimitedSunLifeInsurance Company Limited (BSLI) is a joint venture between the Aditya Birlaandthe Sun Life Financial Services of Canada. It started operations in March 2001

receivingits registration licence from IRDA in January 2001.Thecompanystarted its operations with the launch of innovative unit-linked insurance

s.Thecompany has geared up through superior value creation and technology in ful-~saimsto provide multiple products and benefits, greater investment opportunities,

toprovidethe vast investor populace in India with better liquidity and security."

SunLife Asset Management Company LimitedSunLifeAsset Management Company Ltd. (BSLAMC), the investment managers of

SunLifeMutual Fund, is a joint venture between the Aditya Birla Group and the Sun Life

FIGURE 4.10 Growth Expected in India, IBEF

Growth Expected in India

To sustain the GDP growth of more than 8 percent, India requires an investment of US$ 1.5 trillionin the next five years

0 GDP-US$ 750 bn

0 GDP growth rate-9.5 percent2006 0 Services contribution-60 percent \

0 GDP-US$ 590 bn 0 FDI limit is expected to be close to

0 GDP growth rate-9 percent100 percent in major industrysectors such as Telecom,

0 Services contribution-54 percent Semiconductors, Automobiles,etc.

0 FDllimit not 100 percent in majorindustry sectors such as Telecom, 0 Balance of trade-ShouldSemiconductors, Automobiles, increase with surging exports asete. compared with imports

0 Balance of trade-US$ (-)46.2 0 Investment goal~US$ 305 bnbn

0 Investment goal-US$ 250 bn

\\

2010

o GDP-US$ 900 bn

I 0 GDP growth rate-9 percent

o Services contribution-60-65 percent

o FDI limit is expected to be 100percent in major industry sectorssuch as Telecom,Semiconductors, Automobiles,ete.

o Balance of trade-Should bepositive with increased level ofexports as compared with imports

o Investment goal-US$ 370 bn

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Financial Services Inc. of Canada. The joint venture brings together the Aditya Birla Groupexperience in the Indian market and Sun Life's global experience.

Birla fund offers a range of investment options, which include diversified and sectorsp-cific equity schemes, fund of fund schemes, hybrid and monthly income funds, a widera"of debt and treasury products and offshore funds.

BSLAMC follows a long-term, fundamental research based approach to investment.111approach is to identify companies, which have excellent growth prospects and strong fU1da-mentals. The fundamentals include the quality of the company's management, sustainabil~of its business model and its competitive position, amongst other factors. Birla SunUteAsset Management Company has one of the largest team of research analysts in the indus-try, dedicated to tracking down the best companies to invest in.

Birla Sun Life AMC strives to provide transparent, ethical and research-based invest·ments and wealth management services.".

QUESTIONS

1. How is the insurance market in India changing? Why is India an attractive market for investment?2. Why did Sun Life Financials enter the Indian market?3. What was the entry mode in India for Sun financials and why?