Principal plans life insurance entry by year-end

US-based Principal Financial Inc, with assets worth $160 billion around the world, plans to enter the life insurance market by the end of the current calendar year along with its banking partners.

The group had earlier shown keen interest in entering the pension insurance sector and is awaiting necessary clearances.

Speaking to Business Standard, Norman R Sorensen, president, Principal Financial Group, said, "The group has firmed up the plans to set-up a life insurance company, a pension fund company and an insurance broking company in India."

Sorensen said that all the new companies would be formed in association in partnership with the state-owned Punjab National Bank and Vijaya Bank.

According to him, the newly opened pension sector, for which the ordinance has already been promulgated by the Union government, has huge potential. "We expect the necessary regulatory framework to be in place by July and then the sector would be open for private players," he said.

Sorensen also felt that a system needs to be created where both the employees and the employer can contribute equally and no withdrawal should be allowed at the accumulation stage.

"Apart from this, different investment categories are required to facilitate a wider choice for the customers," he said.

"The company will have an equity capital of Rs 100 crore initially and the partners are willing for the foray with new and innovative products from the parent company - Principal," Sanjay Sachdev, country manager (India), Principal Financial Inc said.

He added that the company would approach the Insurance Regulatory and Development Authority and file the necessary documents in the first quarter of the next financial year.

The group in the country currently manages around Rs 6,000 crore of assets and according to Sachdev it is expected to reach Rs 7,000 crore by the end of the financial year. The company has over 3,00,000 customers spread over 14 different funds with 28 schemes.

Sachdev said that the company is in the process of launching a sector oriented fund called Focus Advantage Fund.

"The fund would focus on investments into five or six core sectors like IT, textiles, pharma, automobile components and infrastructure. We expect to launch this fund by the end of the month," he said.

In the last 18 months the company has invested around Rs 10 crore on its IT initiatives. Sachdev also said that company expects its market share to be around 15 per cent by the end of the calendar year up from the present 10 per cent.