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Despite a difficult year, life insurance industry's assets under management (AUM) have increased by 11.38 per cent, though the new business premium incomes have declined.
Data released by Life Insurance Council show that the assets under management for the industry was at Rs 15,04,629 crore as on June 2011, compared to Rs 13,50,850 crore in June 2010. Of the total AUM, fixed income investments accounted for Rs 9,77,895 crore and equity investments for Rs 4,96,330 crore. Other investments were Rs 30,404 crore.
High interest rates, which may have helped fixed income options generate better returns, could have helped the industry achieve this milestone, though equity assets witnessed negative returns over the same period. During this one-year period, the premium inflows for the insurance industry declined by 5.18 per cent from Rs 58,559 crore to Rs 55,523 crore.
In difficult times, the silver lining for the industry was that it reported a healthy increase in renewal premium inflows. For the quarter April-June 2011, the renewal premium income stood at Rs 37,221 crore against Rs 32,959 crore for the corresponding period last year, a rise of 13 per cent.
New business premium for the quarter declined by 28 per cent to Rs 18,282 crore till June 2011.
Asked to comment on why new business premium witnessed a slowdown, Mr Amitabh Chaudhary, CEO of HDFC Life, said: “It was primarily due to the base effect. For the insurers, first five months of last year were good compared to this year. With new regulations, every insurance company was forced to take a relook at its business model and this led to a cut in costs, invariably happening at the agency and direct channel level. With reduction of commission, especially in ULIPs, the distributors have lost interest in selling these products.”
According to the Life Insurance Council if one considers the new business premium collected in the last two years, the industry's premium collection has grown at 13 per cent CAGR despite a fall in the new business premium this year.
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