The Hindu Business Line : Insurance cos invest Rs 15,000 cr in equities in Q1

According to analysts, insurers have found value at lower prices as their customers are still opting to invest in equity-oriented Unit Linked Insurance Plans (ULIPs).

Life Insurance Corporation of India alone invested Rs 12,000 crore in the first quarter, against Rs 7,400 crore in same year ago period, said a senior official at the corporation.

According to BSE figures, domestic institutional investors – including insurance companies, mutual funds and banks -- have invested Rs 20,306 crore in the stock market in the first quarter, against Rs 8,471 crore a year ago.

SEBI data say that mutual funds invested Rs 3,131 crore in the first three months of fiscal 2008-09, against Rs 4,152 crore a year ago.

Thus, excluding mutual funds, institutional investors have pumped in Rs 17,175 crore, against Rs 4,319 crore in the previous year.

Based on these figures, senior insurance company officials estimate that the insurance industry would have invested at least Rs 15,000 crore in the stock market, given that banks, in comparison, make minimal investments in stocks.

According to Mr Deepak M. Satwalekar, MD and CEO, HDFC Standard Life Insurance Company, 85-90 per cent of the new business premium from ULIPs is being invested in equity-oriented funds (where allocation to equity is as high as 90-100 per cent).

“Sales have been slow in the past 3-4 months, but customers are still opting for ULIPs with a higher equity contribution. The age profile of the customers has also been getting younger, and customers are choosing plans that have a longer term,” he said.

ULIPs enjoy tremendous popularity with as much as 70 per cent of the industry’s premium coming from these policies. In the case of many private insurers, over 90 per cent of the new business premium comes from ULIPs.

“ULIPs have a minimum 5 five-year term and, more than wealth maximisation, most customers are looking at goal-based saving by buying a child plan or a pension plan. Customers are still opting to invest in equities,” said Mr Puneet Nanda, Chief Investment Officer, ICICI Prudential Life Insurance.