OM Kotak launched its single premium, unit-linked plan "" Kotak Easy Growth Plan (KEGP) "" which offers four investment options: money market fund, bond fund, balanced fund and growth fund. | |
| "In the long run returns from equity are expected to outperform returns from other asset classes as interest rates have declined. Even at the current low inflation environment, real interest rates are barely two per cent," said OM Kotak Mahindra managing director Shivaji Dam. |
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| "Without allocation in equity, we cannot get returns to beat inflation," said Sathe. |
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| OM Kotak aims to invest only in A-group stocks, with the equity portfolio accounting for about 30-60 per cent of its balanced option and 40 to 80 per cent of its growth option. |
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| Today it has an exposure of about 15 per cent to equity stocks within its overall investment of participatory products. |
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| KEGP is a whole life plan wherein the insurance cover continues till the policyholder turns 100. Should the policyholder opt for the high cover option, wherein he gets five times the premium paid in the event of death, he can also avail of three riders "" accidental death, permanent disability and critical illness. |
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| Single premium policies are the hottest selling products overseas. Seventy per cent of Old Mutual Plc's (OM Kotak's foreign promoter) business comes from single premium products, said Dam. |
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| Despite the government's change in policy for these products two years back, making maturity proceeds taxable, 10 per cent of the industry's total premium income in 2003-04 amounting to Rs 14,685 crore was on account of single premium products. |
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| The state insurance mammoth, the Life Insurance Corporation of India (LIC) managed to mop up over Rs 1,000 crore in premium income through the sale of single premium products in fiscal 2004. |
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| Life insurance companies are known to invest long to match their long-term liabilities which well exceeds 10-15 years. |
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| However, the average maturity of OM Kotak Mahindra Life Insurance Company's debt portfolio is just one and an half years, yielding a historical return of five per cent, said the company's chief investment officer Chandrashekar Sathe. |
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| "When we started getting money flowing in, we felt that interest rates were at their historical low and hence we took a view not to invest in long-term funds, except where we had guaranteed a return of eight per cent, we matched those with 10-year investments," said Sathe. |
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| OM Kotak has decided not to invest in long-term debt instruments till interest rates touch six per cent. The benchmark 10-year paper today closed at 5.60 per cent, and has been rising for the past week. |
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