Insurers play safe on Dalal Street

Choosing to play safe, given the volatility in the equity markets, life insurance companies increased their net investment in stocks by just 10.52 per cent to Rs 61,125 crore during the last financial year.

According to data compiled by the Life Insurance Council, the representative body of life insurance companies, net investment made by the largest institutional investor, Life Insurance Corporation (LIC), stood at Rs 40,000 crore in 2009-10.

It has invested Rs 61,000 crore in the equity markets and sold stocks worth around Rs 20,000 crore during the last financial year. During the last financial year, it had invested a total Rs 1.91 lakh crore across segments including equity, debt, infrastructure, government securities, corporate bonds, etc.

Though insurers remained the biggest domestic institutional investor in equity markets, their net investment was 45 per cent lower than that of foreign institutional investors (FIIs). FIIs invested a net Rs 1,10,759 crore in the equity market in the last financial year. At the same time mutual funds sold equity worth Rs 10,508 crore, according to data from the Securities Exchange Board of India (Sebi). During the financial year, market had rallied 80.54 per cent.

“Investment in equity depends on the collection under linked products. As the fundamental operating principal, insurers increase investment when they see right opportunity,” said Bajaj Allianz Life Insurance Chief Investment Officer Sashi Krishnan.

“Companies have taken a cash call. Equity investment depends on the mix of the business. Since the new business growth was flat for private players, they invested in equity from their renewal premium,” said Abhijit Gulanikar, chief investment officer, SBI Life.

Around 90-95 per cent of new income for private players is under Ulips. Total premium collection went up by 18 per cent during the last financial year to Rs 2,61,025 crore. New business premium income rose by 25 per cent to Rs 1,09,213 crore from Rs 87,006 crore in 2008-09.

During the last financial year, renewal premium went up by 12.63 per cent to Rs 1,51,812 crore as against Rs 1,34,704 crore collected during 2008-09.

Over the last two years, LIC has shifted its focus from unit-linked insurance plans (Ulips) to traditional plans. Last year, LIC collected 35 per cent new business premium income from traditional plans. It aims to increase this number to 40 per cent of the new business in 2010-11.

Also, 80-85 per cent of the renewal premium collected by LIC is under conventional policies. Since only 10 per cent of this amount is invested in equity, according to investment guideline, equity exposure comes down. LIC is looking to invest Rs 2 lakh crore across various sectors, of which Rs 75,000 crore may be invested in equity in 2010-11.