The Hindu Business Line : ULIPs post compounded annualised returns of 40-45%

Love them or shun them, unit-linked insurance plans, especially the ones heavy on equity, have managed to ride the rapidly advancing stock market, leaving a trail of fairly decent returns in their wake.

A section of ULIPs has delivered 40-49 per cent returns (compounded annualised) in the past three years, their two year figures surpassing the former in a few cases.

The unit-linked products in question – launched by a host of insurance companies – have investments across sectors, which have helped them diversify their asset allocation in a better way, it is learnt.

Data pertaining to July 10, compiled by SKP Securities, suggest that plans such as Bajaj Allianz Unit Gain Equity Plan, Aviva Life Bond 5 Growth, HDFC Unit Linked Endowment Growth Plan and ICICI Prudential Premier Maximiser (Growth) II Plan have given returns of more than 40 per cent over a three-year period. The exact figures are 41.57 per cent, 42.19 per cent, 49.09 per cent and 41.31 per cent respectively.

Insurance advisory sources point out that ULIPs, particularly those with marked equity components, are well in a position to gain from the surging stock market. This, it is felt, has been adequately displayed by the latest performance numbers.

The broad market has moved up considerably in the past three years and more, the trend reflected in the indices. Despite the volatility that has been evident in different phases, the Sensitive Index is now ruling at over 15,000 points, while the Nifty is lodged comfortably over 4,500 points.

On a two-year basis too, certain unit-linked plans are ahead of the rest. Two of Bajaj Allianz products, Unit Gain Equity Plan and Unit Gain Plus Equity Index, have delivered 40 per cent each during this period.

The unit-linked plans have consciously spread their portfolios over a range of industries, sources note, adding that returns from these products are subject to market risks. HDFC Standard Life’s growth fund, for instance, has allocated its assets over 10 distinct segments of the market, with capital goods and infotech stocks accounting for larger allocations, roughly 19 per cent and 12 per cent as on end-May.

Kotak Aggressive Growth, which has over 90 per cent in equities, has included stocks from about 15 sectors, banking, infotech and oil & gas being the more weighty allocations.

The insurance industry is expected to come up with more ULIPs in the coming days. This week itself has seen Tata AIG Life announce a whole-life unit-linked product, complete with multiple fund options. These include mid-cap equity fund, aggressive growth and stable growth.

While mid-caps have higher volatility, Tata AIG Life feels the stocks offer attractive wealth creation opportunities over the long term.

Public-sector insurer Life Insurance Corporation, which now has several unit-linked products, has also achieved fairly decent returns with Bima Plus, which traces back to early 2001, it is felt. This product – which offers options called secured, balanced and risk – has NAVs of over Rs 23, Rs 28 and Rs 42, respectively.

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