The Hindu Business Line : Market lure: Insurance cos’ exposure to equities on the rise

Chennai, Feb. 9 Insurance companies are emerging as big investors in stocks, with a sharp increase in their premium collections under market-linked insurance products. Insurance companies, including LIC and the private players, mopped up a total of Rs 44,695 crore in the April-November 2007 period by way of first premium. This is higher by 27 per cent over the same period last year.

As about 40 per cent of the mop-up for insurance products is bunched up in the January-March quarter, industry sources estimate that collections for this fiscal could be about Rs 80,000 crore and including renewal, could touch nearly Rs 1,50,000 crore.

Collections for ULIPs, which are market-linked plans, have seen a sharp increase in recent years and now account for the bulk of insurance premia collected. About 40-50 per cent of this amount, on an average, would be invested in the equity markets, industry sources estimate.

Collection trail

At least 70 per cent of the money mopped up by private players and between 40-50 per cent of the sum collected by LIC could find its way to the equity markets. Apart from the first premium, insurers also collect renewal premia on policies sold in previous years.

Total collections by the industry this year could amount to Rs 1,50,000 crore, estimates Mr Shekhar Bhandari, Senior Vice-President (Sales), Kotak Mahindra Old Mutual Insurance.

He told Business Line that at least 40-50 per cent of this total collection, about Rs 65,000-70,000 crore, can be invested in the equity markets.

On his growth projections for the industry, he said that the industry as a whole was likely to grow 40-50 per cent this year.

As per IRDA data, private insurers have expanded their mop-up by 72 per cent and LIC by 48 per cent, until end-November 2007.

Sustaining growth

Mr Bhandari also felt that if the industry sustains current growth rates, collections may swell to Rs 5,00,000 crore annually by 2012, including the renewal premium. If 45 per cent of these funds find their way into stocks, this will amount to Rs 2,25,000 crore.

Mr Puneet Nanda, Executive Vice-President and Chief Investment Officer, ICICI Prudential, said that out of total assets worth Rs 28,000 crore managed by the insurer, close to Rs 20,000 crore is invested in equity.

To put this number in perspective, FIIs made net investments of Rs 71,486 crore in 2007, as per the data available with SEBI.

Insurance companies may become significant players in the Indian equity markets, if the current popularity of market-linked products continues.

Related Stories:
LIC’s equity exposure clocks Rs 12,000 cr so far this fiscal
Regulator keeping close watch on ULIP growth

More Stories on : Stock Markets | Life Insurance | Investments

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