FACULTY OF MANAGEMENT

STUDIES

AFFILIATED FROM – GURUKUL KANGRI

VISHWAVIDYALAYA

CASE STUDY – AFP INNOVA

SUBMITTED TO : SUBMITTED BY
:
Dr. V.K Singh Tarun Singh Gusain
MBA(BF) IInd SEM
ROLL NO. : 13
BACKGROUND: In 2008, Chilean government passed a
Law for pension industries and introduced a bidding
process to be held in 24 months in pension industry
DENIEL UGARTE become the CEO of AFP Innova in
2009, Ugarte realized that the tender for new affiliates
presented a huge opportunity, but he was too late to
the game. Thus approximately 7,00,000 new workers
will enter the labour force during the 2 year period.

If I was the CEO of AFP INNOVA, I’ll taken some steps

as follow:
1. Explain the pension policy to every worker in detail.
2. Make them understood the additional benefits of
our policy.
3. The cost of the insurance is isolate, the handing
commission charged by AFPs in order to manage
social security funds was 1.89% of the worker’s
monthly taxable income.
4. Aware the customers about there commissions in
AFP they paid. Because these amount was
automatically deducted from there salaries.
5. I’ll try to understand the customer lack of interest in
pensions fund products and try remove these.
6. There are surveys in which 97% of workers didn’t
know how much they were being charged.

The CLV and CE analyses resulted in the following

assumptions:
 For the first year, the average monthly taxable
income of all NC is US$ 510. The average monthly
taxable income of all NC increased at a rate of 5
percent per year.
 Proposal commission fee: 1.14 percent.
 Investment needed to implement the new AFP: US$
6,000,000.
 AFP total business expenses needed to sustain the
new AFP: US$ 110,000 in 2009, US$ 3,400,000 in
2010, US$ 10,400,000 in 2011, US$ 12,000,000 in
2012 (2013, 2014,etc. US$ 12,000,000 £ (1 þ (year 2
2012)/100)).
 The annual retention rate is 90 percent (100 percent
for the first two years) and the annual discount rate
is 10 percent.