LIC’s exposure in equity markets to double, aided by ULIPs

LIC’s exposure in equity markets to double, aided by ULIPs

Mumbai: Gone are the days when LIC, at the behest of the government, used to anchor troubled stock markets. Today, the life insurer has a mandate from ULIP investors to buy shares.

Life Insurance Corporation of India has already purchased equity shares worth Rs12,000 crore in the markets this fiscal, with 80% of its new business premium coming from unit linked insurance products (ULIPs).

“Our investment in equity has been Rs12,000 crore this fiscal and Rs32,000 crore in debt as on August 31, 2007," LIC’s Chairman T. S. Vijayan said on Friday after presenting the bonus and financials for 2006-07.

Birla Sun Life Insurance pioneered ULIPs in India just four years back and LIC’s first ULIP product was introduced in early 2005.

Driven by ULIPs, LIC’s investment in equity markets is set to double this fiscal if current demand continues.

Meanwhile, the total purchases of LIC in the stock market this year had already touched Rs19,700 crore as compared to Rs24,000 crore in the entire fiscal of 2006-07.

Besides total ULIPs fund investment of Rs14,000 crore in market this fiscal, another Rs5,700 crore exposure in markets represented traditional products.

Under ULIPs, up to 80% fund gathered by LIC could have exposure to equity markets in contrast to only 8 to 10% exposure taken for traditional products.

LIC’s total investment in the capital market as on March 31 stood at Rs1,24,643 crore.

ULIPs unlike traditional products offer the option of investment under four different funds that take exposure in bond and equity market as per the risk appetite of an individual.

The policy holder has the option to choose any one of the four funds called bond, secured, balanced and growth funds.

To a query that traditional products had taken a hit with the ULIPs popularity soaring, Vijayan said, “LIC was planning to give a strong push to its traditional products" too.

In all, LIC has 48 different products of which only three were ULIP products but their share in new business premium was 80%.

The two new ULIP products introduced by LIC last month are Profit Plus and Fortune Plus with 5 to 20 years terms.

With a healthy growth in its businesses this year LIC planned to invest around Rs1 lakh 17 thousand crore this year in equity, central and state govt. bonds, infrastructure securities as compared to Rs90,000 crore last year.

However, insurance giant’s market share was getting eroded with private insurance companies eating the pie.

Last year LIC market share was 74.18% with a premium collection of Rs55,934.6 crore while the private insurers’ together had a total share of 25.82%.

In terms of number of new policies however LIC enjoyed a much better market share of 82.83% with 3.82 crore new policies.