Business Daily from THE HINDU group of publications
Saturday, Sep 15, 2007
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Business Daily from THE HINDU group of publications Saturday, Sep 15, 2007 ePaper |
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Life Insurance Markets - Investments Web Extras - Mutual Funds
Mr T.S. Vijayan Our Bureau Mumbai, Sept. 14 Life Insurance Corporation of India (LIC) is riding the equity wave. The Corporation, the largest life insurer in the country, has made a net investment of Rs 12,000 crore in the stock market so far this fiscal. “We have made an investment of Rs 12,000 crore in equity and Rs 30,000 crore in debt as on August 31, 2007,” said Mr T.S. Vijayan, Chairman LIC. A senior LIC official said that the total purchases (excluding sales) in the stock markets stood much higher at Rs 19,700 crore for the same period. LIC’s total purchases had been Rs 24,000 crore in the entire fiscal of 2006-07. The official added that the total purchases in equity would double by the end of the fiscal if the current demand for the Unit Linked Insurance Plans continues. ULIPs are investment-oriented products and are the mainstay for LIC. “Around 80 per cent of the premium has come from ULIPs, and they continue to be the flavour of the market. Policyholders prefer investing in equity-oriented growth funds where most of the investment is made in stocks,” the Chairman said. Under ULIPs, a substantial amount of the premium is invested in equity, depending on the choice of fund. In the case of traditional products (Life Fund), however, LIC can invest only 8-10 per cent of the policyholder’s fund in equity. The Corporation has invested Rs 5,700 crore under the Life Fund and has pumped in Rs 14,000 crore under ULIPs this year. Total investment Addressing a press conference here on Friday, Mr Vijayan said that LIC’s total investments in the current fiscal would be more than Rs 1,17,000 crore, against last year’s Rs 90,000 crore. `Total investments’ include funds deployed in equity, debt, corporate bonds, infrastructure and other-than-approved securities. In terms of new business, the corporation raked in Rs 15,126 crore in first premium as on August 31, 2007, a growth of 31 per cent from the year-ago period. In 2006-07, the corporation had registered a 118 per cent growth in first premium income at Rs 39,541 crore. The strong growth in the last fiscal has meant that LIC has been able to report a valuation surplus of Rs 15,127 crore, 22 per cent higher than the previous year’s Rs 12,405 crore. Valuation surplus is the profit made by an insurance company after deducting liabilities incurred on premium payment and expenses. While 95 per cent of the surplus, amounting to Rs 14,370 crore, will go as bonus to customers who have ‘with profit policies’, the balance 5 per cent (Rs 756.36 crore) will go to the Government. The Corporation has managed to achieve a solvency margin of 150 per cent by building up reserves of Rs 36,472 crore as on March 31, 2007. The insurer has been under pressure from Insurance Regulatory Development Authority to meet the solvency requirement. It had been building these reserves in the past few years to achieve a solvency margin of 150 per cent, a formula that is applicable to the private insurance companies. Solvency margin means the excess of assets an insurance company is required to maintain over its liabilities, similar to the capital adequacy ratio that banks have to maintain. More Stories on : Life Insurance | Investments | Mutual Funds
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