The Hindu Business Line : ULIPs in vogue thanks to equity investments

Kolkata June 14 ULIPs (unit-linked insurance plans) are riding high on their equity investments, increasingly making their presence felt as savings and investment tools, a trend that is getting reflected in terms of both performance and average ticket size.

Unit-linked products, the domain of which is seen to be expanding steadily, will continue to attract sections of the investing populace, insurance companies feel, while referring to figures that are evident in the latest performance charts.

Performance chart

ULIPs - those focusing on equities - have on the whole managed to perform well during recent times, relative to the broad market, which has delivered decent returns in the past few years, the frequent ups and downs in indices notwithstanding, they point out.

While returns from the index may not have been anything to write home about insofar as very short-term periods are concerned, its three-year performance has been quite impressive, notes Mr Sam Ghosh, CEO, Bajaj Allianz Life Insurance. The results have found reflection in ULIP returns too, he mentioned.

"That ULIPs are here to stay is not a subject of debate any more. What we have to see how they perform in the days to come", he said, adding that the insurance industry is likely to throw up ULIP variants in the days ahead.

Strong show

A random selection from the list of performs include products such as Kotak Aggressive Growth, which has given 47.5 per cent over a two-year period ending on April 30, 2007, ICICI Pension Maximiser (36 per cent since inception in May 2002) and Aviva Life Unit Linked Growth (34 per cent CAGR since inception in January 2004). These are heavily invested in equities selected from across industries. These figures are based on market prices declared by the insurance companies; market price declared is essentially NAV after adjusting transaction charges.

Unit-linked plans, which essentially seek to blend insurance with investment, have managed to convince larger sections of the market, insurers suggest. This, it is felt, is mirrored in the larger ticket sizes that are getting reported these days.

The industry has in recent times witnessed a general increase in the average consumer's allocation, indicates Mr S.K. Mitra, who heads Birla Sun Life Insurance. "We know how savers are taking to insurance products. There has been a clear upturn on this front", he stated.

A variety of ULIPs are available in the market, courtesy insurers who have tried to widen their range of products. These include those that have considerable investment in equities. The latter, they feel, have been able to satisfy investors adequately.

Investment advisors who counsel clients on their portfolios confirm that insurance products now account for a greater share of investors' surpluses, securing a firmer place against such straight-laced options like mutual funds. The latter, according to figures pertaining to end-May, have seen a definite increase in their asset base: The AUM (assets under management) of all fund houses put together has now crossed previous records. Of these, diversified equity funds (which are lately increasing in number, thanks to the arrival of newer products) have generated an average 40 per cent for the one-year period ended June 11.

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