sbi life - mr.muralidharan[1]

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PENSION ANDRETIREMENT SOLUTIONS

ASSOCHAM WORKSHOP

23rd Feb 2008



Retirement Planning Need

Level of awareness

Need of Financial literacy

Reality

Available Mechanisms Individual level, Employer level, Govt. level

Financial instruments

What SBI Life offers? Individual & Group Plans

Performance Highlights

PRESENTATION PATH



To ensure financial independence of yourself and your family against

Increasing cost of post retirement living

Health Care Costs

Increasing life expectancy

RETIREMENT PLANNING - NEED



NEED FOR PENSION

Present Age 30 yrs

Basic Monthly Salary today (In Rs) 15,000

Basic Monthly Salary after 30 yrs i.e. at retirement age

(assuming effective annual salary growth rate as 5%)

61,742

PF Savings (12% Employer contr. + 12% Employee contr.) 24%

Accumulated Savings in next 30 yrs (In Rs) 1,305,440

Life Pension (Monthly) amount available at age 60 (In Rs) 15,872

Pension as a percentage of last drawn salary 26%

Not enough to sustain thelifestyle for retirement days

(Pension only 1/4th of lastdrawn salary)

IT MAY FURTHER DETERIORATE WITH FALLING INTEREST RATE



Need for Pension«.?

Income Expenses

(Rs. in µ000 p.a.)

0

00

00

00

00

00

00

0 0

e



Covers only 11% of working population.

Few private employers provide pension

provisions.

Existing schemes are either unfunded or woefully under-funded.

Joint Family System

Fixed Assets ± very low level of financialsavings.

EXIXSTING PENSION SUPPORT SYSTEM

Rapid increase in

elderly population

expected to touch

113 million by2016, OASIS



Pension

Expenditure

1995-96

INR Billion

2000-01

INR Billion

CENTRAL

GOVT.

57.33 224.10

STATE

GOVT.78.13 281.97

TOTAL

% of GDP1.39% 2.29%

Source: Indian Pension System by Hatton, Joshi, Fangli

EXTENT OF BURDEN ON GOVT.

Expected to

increase

exponentially in

future



Traditional and informal methods of

income security such as Joint family

system ± Breaking down

joint family system is on the decline;

according to a survey 60% of families across

India are nuclear in nature.

BREAKDOWN OF TRADITIONAL

SUPPORT SYSTEM



According to a survey 96% of householdscannot survive beyond a year on their

current savings in case of any eventuality.(Source: NCAER-MNYL survey2008)

Ignorance about their financial security. Thoughts of saving for everything but old

age.

To buy a house, a car, finance children¶seducation, other short term goals.

Retirement comes last.

Reliance on traditional and informal methods

such as joint family system

LEVEL OF AWARENESS



According to a NCAER-MNYL survey

Indian households keep 65% of their savings

in liquid assets (like bank or post office

deposits and cash at home) 23% In physical investments like real estate

and gold.

Only 12% in financial instruments.

NEED OF FINANCIAL LITERACY



Retirement Solutions for Employers1. Group Superannuation Plan

CapAssure Superannuation Plan

2. Group Gratuity Plan

CapAssure Superannuation Plan Golden Gratuity ULIP

3. Group Leave Encashment Plan

CapAssure Leave Encashment Plan

Pension Plans for Individuals

1. Unit Plus II Pension

2. Horizon II Pension

WHAT SBI LIFE OFFERS?



CapAssure Plans -> Highlights Capital Protection Schemes

Funds are managed on a dedicated group

pool (80% in Debt (GoI Securities, Corporate Debt)

and a maximum 20% in Equities).

Returns realized during the year are

declared at the end of each year.

Returns once declared are credited to theclient¶s account and becomes part of capital

for the next year.

GROUP PLANS - HIGHLIGHTS



INDIVIDUAL PLANS - HIGHLIGHTS

Pension FundsSince

April'07

Last 1

year

Since

Inception

1. Pension Equity 39.19% 34.87% 34.60%

2. Pension Growth 50.19% NA 57.70%

3. Pension Bond

(annualized)13.04% NA 12.33%

4. Pension Balanced

(annualized)49.03% NA 48.14%

Individual Pension Plans



Employee Benefit Schemes



TYPES:

GRATUITY

SUPERANNUATION

LEAVE ENCASHMENT

GROUP INSURANCE

OTHERS

EMPLOYEE BENEFITS

Employee Benefit Solutions



TWO OPTIONS: Paygo ± pay from current revenue as and when it falls due.

Funded ± set aside a dedicated fund for benefit disbursements.

Self Managed Fund

Insurer Managed Fund

Tax benefits are available if funded through a trust (IT Rule 87, 101)

Investments prescribed by I.T. Rule 67. An Insurance policy is a qualifying investment.

Accounting Standard (AS) 15 prescribes how:

Employee Benefit Liabilities are to be valued?

Scheme Assets and Liabilities are to be shown in Balance Sheet?

AS 15 effective from Financial Year ending 31st March 2008.

HOW BENEFITS ARE MANAGED?


TIME TO ACT IS NOW



Relevant I.T. Rules: 67, 87, 101 Tax Exemption if:

Funded through irrevocable trust.

Annual provision up to 8.33% of annual wage bill.

Trust follows I.T. investment pattern (Rule 67).

If invested with an Insurer

WHAT I.T. RULES SAY?




EB Liabilities have to be valued as per prescribedActuarial Valuation Method and Actuarial assumptions.

Immediate recognition of net benefit liabilities on the

company¶s balance sheet.

Scheme Assets have to be µmarked to market¶.

Market Value of assets to be shown in balance sheet.

WHAT AS 15 SAYS?




HOW IS IT DONE?


COMPANYBoard decidesto fund benefit

liability

Sets up Trust;Trust deed;

Trustees etc.

Register TrustWith I.T. Deptt.

Evaluate and

select Insurer

Fund by making

contributionsINSURER



Restricted investment options Min. 15% in State Govt. Secs.; 25% in Central Govt. Secs.

Only upto a max. of 5% in equities.

Stringent norms in liquidating any investments made.

Hence lower returns

Cost of Administration

Sub-optimal EB Cost Management

AS 15 implications: assets to be valued each year atmarket value; therefore fluctuating provisioning

requirement.

ARE YOU SELF-MANAGING EB?


Smoothen your EB Cost by Outsourcing to an Insurer



Returns? How high?

How Stable?

IS YOUR EB, INSURER MANAGED?


FY

Insurer-

1

Insurer-

4

SBI Life

(Non-Linked)

Peer Group

(Non-Linked)

ULIP with20% Equity

ULIP with30% Equity MAX. MIN. MAX. MIN.

2004-05 3.34% 6.49% 11.17% 10.17% 8.20% 7.40%

2005-06 13.19% 21.55% 11.80% 10.80% 8.55% 7.90%

2006-07 6.15% 5.42% 10.20% 9.50% 9.30% 8.70%

Is your Capital Safe?

How Stable is your Insurer?

Does it Protect your Capital?



WHAT DO WE OFFER


TYPE NON-LINKED(Traditional)

LINKED(ULIP)

P.F. X X

GRATUITY ¥ ¥

SUPERANNUATION - DB ¥ X

SUPERANNUATION - DC ¥ X

LEAVE ENCASHMENT ¥ X

ANNUITIES Retail as well as Bulk



CapAssure Gratuity Scheme

CapAssure Superannuation Scheme

CapAssure Leave Encashment Scheme

ULIP Gratuity fund

Various Annuities/Pensions

SBI LIFE SCHEMES




A non-unit linked scheme ± No Market Risks!!! Your contributions are protected

(CAPITAL GUARANTEE)

Funds are managed in a dedicated Group Gratuity Pool;

(80% in Debt ( GoI Securities, Corporate Debt, Corporate Loans) and a Maximum of 20% in Equities)

Returns realized during the year are declared at the end

of each year.

Returns once declared are credited to clients account and becomes part of capital for the next year.

CAPASSURE GRATUITY SCHEME




Bonus allocation in the beginning.

In the traditional as well as ULIP version

A UNIQUE FEATURE




If you had invested 100 with us 4 years ago, your fund would be

worth 154.82.

Years Cumulated Returns

Year 1 12.50%

Year 2 25.06%

Year 3 39.82%

Year 4 54.08%

SBI Life¶s Performance ± Compounded Returns




SBI LIFE STRENGTH

Lowest Operating Expense Ratio (percentage of net premium) amongst

all the life insurance companies in India.

Company Name 2005 ± 06

SBI Life Insurance 12.52%

Other Major Private Life Insurers 20% to 25%


SBI Life spends the least amount

of policy holders premium

Source: IRDA Annual Report

WE ARE PRUDENT SPENDERS



OUR FINANCIAL STRENGTH

Company NameNet Capital in Business % (Net

Worth/Share Capital)

SBI Life Insurance 92.19% as on 31st Mar07

Other Major Private Life Insurers 25% to 50%

SBI Life¶s Capital has been supporting

the business and not expenses

Source: IRDA Annual Report




We maintain substantial Solvency Margin to support our business and protect policy holders.

We do not depend on sovereign guarantees for this

purpose.

OUR FINANCIAL STRENGTH




³The investment objective of t he Group Retirement

Scheme is Capital Protection wit h Optimal Return tot he policyholders on a Consistent basis wit hin a

reasonable risk framework´

Investment ObjectiveOUR INVESTMENT PHILOSOPHY




Debt:

Typical Investments Instruments ± primarily government securities and top

quality PSU/Corporate debt instruments

Prime Strategy Drivers ±Duration Management, Spread Analysis, Limited

Credit risk Strategy factors inflation rate, interest rate, liquidity, policy changes, rating

changes etc.

Equity:

Investment Horizon ± Medium to Long term

Investment Style ± Growth and Value

Key Investment Criteria ± Sustainable Business Model, Company

Fundamentals, Earnings Outlook, Valuations, Emphasis on large caps, Retur

on Investments

OUR INVESTMENT STRATEGY




OUR INVESTMENT PROCESS

Multilayered

Approved by the Board

Supervised by the sub committee

Strict ALM guidelines

Clear separation of front and back office.

Strict sectoral, industry,institution sub limits.



WE AIM TO DELIGHT CUSTOMERS

Gratuity scheme is long term contract and has regular

servicing requirements.

We have clearly defined turn around time (TAT) for

every service activity.

All TATs are monitored very strictly; Monthly

review of TATs.

SBI Life will nominate a Key Account Manager tomanage relationship.

A Service level agreement to customize our service TATs.




SBI Life

With Us,With Us,You¶re SureYou¶re Sure


sbi life - mr.muralidharan[1]

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