LIC to invest R45k crore in stock mkts

LIC has invested around R1,83,000 crore in 2010-11 in other securities & earned R90,000 crore income 

Source: indian express

Life Insurance Corporation(LIC) plans to invest R45,000 crore of its total investment kitty of R2.15 lakh crore in the stock markets this year. LIC has already invested R5000 crore since April.

DK Mehrotra,acting chairman of India’s biggest insurance company says, “Existing regulations stipulate that 50% of the funds have to be deployed in government securities. That apart, we will invest around R45,000 crore in equities, slightly more than the R43,000 crore that we had put in last year.” Mehrotra says LIC booked a profit of close to R17,000 crore during 2010-11 by selling stocks. The corporation, which invested around R1,83,000 crore in 2010-11 in other securities earned income to the tune of R90,000 crore. “We believe the market, after experiencing some volatility, could be stabilising and despite high inflation and rising interest rates, we could add to our portfolio if there is an opportunity,” he observes.

Mehrotra says premium incomes have been

picking up in the last two months. LIC currently has just under a 70% share of the life insurance premium market with private sector players together accounting for the rest. The acting chairman says LIC will focus on traditional products that provide assured returns to the policy holders and also commission to the agents.

“As of now we are happy to have a product mix of 65:35 in favour of ULIPs,” he points out. ULIPs had become popular, accounting for nearly 90% of the industry’s new business, before the product was hit by the more stringent norms put in place by Insurance Regulatory and Development Authority (IRDA) in September last year. “Going forward, this mix may change to 60:40. Our strength lies in our conventional products and we will leverage our existing products.”

During 2011-12, LIC plans to adopt a changed marketing strategy and is targeting 4.26 crore policies to garner R54,000 crore worth of fresh premium. Last year the corporation had sold 3.70 crore policies and had mobilised R44,000 crore worth of premium and R42, 000 crore through renewal premiums. “We have already settled 1.83 crore of claims so far and paid a sum of R55,000 crore to our policyholders. We are revamping all our customer touch points to provide a full range of customer services including financial transactions,” he said.

According to a BCG report, the insurance industry is expected to reach $350-400 billion by 2020,with India being among the top three life insurance markets in the world and among the top 15 non–life insurance markets.

The report states that the total penetration of insurance (premium as percentage of GDP) has increased from 2.3% in 2001 to 5.2%in 2011. In addition there has been a vast increase in the coverage of insurance. The number of life policies in force has increased nearly 12–fold over the past decade and health insurance, nearly 25–fold, with the progress aided by the dramatic shift in the availability of products.

The report estimates the total insurance premium at approximately R17 lakh crores to R22 lakh crore in 2020 with life insurance premium being between R15 lakh crore and R20 lakh crore.