This year also LIC will invest around Rs.60 K Cr. in stocks: LIC Chairman

This year also LIC will invest around Rs.60 K Cr. in stocks: LIC Chairman

(Excerpts from LIC Chairman's interview to CNBC-TV18)

Q: How do you map the New Year, especially in terms of collections for LIC? How robust do you think

it’s going to be?

A: Last year was a quite a good year, we collected Rs 182,000 crore premium. This year also we are looking forward for a better collection than last year.

Q: What is LIC’s own observation on the ULIP issue? What has been your recommendation to both parties, Securities and Exchange Board of India (SEBI) and Insurance Regulatory and Development Authority (IRDA)?

A: I am too small to recommend to any of the regulators. We are an insurance industry which is controlled by IRDA. Any industry whether it is life insurance industry or any industry would like to report to one regulator rather than multiple regulators. It makes our life easier.

Q: Going back to the point you were making about premium collections business. This year you closed up with more than or close to 71,000 crore. What is LIC’s target for collections in the New Year? 

A: Rs 71,000 crore, which you are referring to, is for the new premium. Our total premium collection was much higher, Rs 182,000 crore. This is a figure we would like to improve it to more than Rs 200,000 crore. Not just new premium, but we are looking at the total premium collections.

Q: How much of the new premium has come in from the ULIP kind of product? Just want to get a sense of how much reliance you had on that product at LIC last year?

A: Rs 71,000 crore, you are talking about, is new premium, around Rs 22,000 crore has come from group premium, remaining portion that is individual premium. The ULIP collection was more than Rs 64,000 crore, remaining has come from the non-ULIP platform. The product, which we have launched towards the end of the year, we are closing in the first week of May, we hope it will garner something like Rs 8,000 crore.

Q: Do you think this product will now be tweaked for next year whichever way the outcome happens? It

seems like it had a significant chunk as you said from last year’s subscriptions. If you have to tweak this ULIP product from its current form, do you think it might have some material bearing on how much you can garner this year?

A: This is a close ended product for 90 days and usually we do not repeat a product in the same form in the coming months or maybe we will give a gap before we launch the products. We would like to include some new features, if at all we are going to bring a product.

Q: What kind of features might that include?

A: We are discussing internally. Our marketing and product development departments are having  number of ideas. We will bring it out at a due time.

Q: You were fairly active in a lot of the government paper that hit the market whether it was NMDC of REC or NTPC. Sutlaj Jal Vidyut Nigam Ltd opens this week, will LIC be looking to subscribe there?

A: According to our policy, we talk about our investments only after it happens. We can talk about what happened last year, but what is going to happen this year is not out for discussion.

Q: How much do you think you will pump into the equity market in the current financial year, given your estimates of new subscriptions?

A: Last year, it was more than Rs 60,000 crore. Our equity investment largely depends upon whether our collections are coming through ULIP politicise or traditional policies. For e.g. traditional policies, there is a limit we observe ourselves, maximum 10% goes to the equity, whereas from ULIP products it is decided by the choice of the customer. So it is difficult to predict at this moment of time, at the beginning of the year, what will be the product mix we are going to get it and how much we are going to invest in the equity market. Given the current situation, if it is continuing like this, it will be substantially higher than Rs 60,000 crore. But I am not too sure how our product mix will look next year.

Q: It seems very conceivable that next year the product mix is quite different from the traditional to ULIP that you have had in the previous year, in which case your exposure to the equity market might be substantially lower?

A: It could be. If ULIPs do not constitute a bigger chunk of new premium, it could be lower. Last year we collected Rs 182,000 crore of that unit linked premium is hardly Rs 40,000-41,000 crore, rest of it has come from either group products or other products. So even if unit linked is showing a decline or the share of new policies come down, we will be able to more or less maintain it maybe.

Q: Your own expectation is that in the next month or two the whole ULIP issue will be sorted out and you will be able to issue new unit linked products once again?

A: What I said was, I hope within a month or so all the controversy will subside, but we already have a basket of linked products which is quite comprehensive. I do not think we need to bring another product immediately into the market because we have pension product, we have joint life product, life products, and the entire basket is full. I do not think we need to bring anything to introduce in the market immediately, but if opportunity comes we will bring a products.

Q: For now in the past month or so since this controversy came to light, your ULIP schemes have still been attracting investment and new investors?

Otherwise we would not have collected this much premium.

Q: What is your own view of the Indian stock market over the next one year?

A: It should be showing steady growth that’s what all the analysts tell me, there should be very good growth next year also.

Courtesy: moneycontrol.com

LIC pumps Rs 61,000 cr into equity market last fiscal

NEW DELHI: State-run Life Insurance Corporation pumped over Rs 61,000 crore into the capital market during 2009-10, 50 per cent more than what it invested in the previous fiscal.
"We have invested Rs 61,468 crore in the equity market for the year ended March 2010 which is almost 50 per cent higher than the previous fiscal's," LIC Executive Director (investment operations) N Mohanraj told PTI.
The equity exposure of LIC was over Rs 20,000 crore higher as the company had invested Rs 40,800 crore in the share market in 2008-09.
During the year, the gross investment, including bonds and government securities, touched Rs 1,91,737 crore compared to about Rs 1,65,000 crore in the previous fiscal, he said.
On further prodding about investment details, Mohanraj said that it was sector agnostic and spread across many companies.
Besides, LIC also participated in the primary market in a big way by investing in both initial public offers and follow-on public offers by public sector companies.
LIC invested about Rs 12,000 crore in the primary market during the year, he said.
The life insurance major was among the largest investors in NTPC's follow-on public offer and Rural Electrification Corporation.
Asked about the cause for increasing exposure in the stock markets, Mohanraj said that the sentiment in the equity market is improved and slew of public offers are in pipeline.
Moreover, the investment is also linked to premium collection. If the premium towards equity linked ULIPs goes up, the investment in the equity market goes up, he said.
As on February 28, in last fiscal, LIC's market share in terms of first year premium was 65.06 per cent and in terms of policies to 70.79 per cent, as per the IRDA data.
The life insurance behemoth had 61.12 per cent market share in terms of first year premium income and 70.52 per cent in terms of insurance policies in 2008-09.

Courtesy: ET,25 Apr 2010

LIC to Manage Govt.'s pension plan for unorganised sector workers

The United Progressive Alliance government is set to roll out yet another social security plan -- Swavalamban -- that will provide lifelong pension of at least Rs 1,000 per month to workers engaged in unorganised sectors.

The pension could be still higher if the worker is able to voluntarily save more through higher contribution.

Finance Minister Pranab Mukherjee in likely to launch the scheme in the first week of July from Rai Bareli, the Lok Sabha constituency of Congress president Sonia Gandhi.

R Gopalan, financial services secretary, has begun consultations with the heads of the Life Insurance Corporation, the Insurance Regulatory and Development Authority, and the Pension Fund Regulatory Authority Fund, as a prerequisite to the implementation of the scheme. The scheme is likely to get final shape by mid-May.

Initially, the scheme will be available for only three years. Its continuation will depend on the response it gets from the unorganised sector. The government will pay the pension as the scheme is to be run by the state-run Life Insurance Corporation of India under the supervision of the Pension Fund Regulatory and Development Authority.

Under the scheme, a worker will have to contribute Rs.100 a month for 20 years to be eligible for drawing the pension until death or completion of 60 years of age. The central government will put Rs.1,000 a year for the first three years in each such pension account opened as part of the government's commitment to provide social security to the vulnerable sections of the society.

Mukherjee has earmarked Rs 100 crore (Rs 1 billion) in the 2010-11 Union Budget for the scheme that will benefit up to 1 million (10 lakh) workers. While presenting the Budget in the Lok Sabha on February 26, the finance minister had appealed to the state governments to contribute a similar amount to make the scheme more robust.

Although he does not expect an unorganised worker be able to pay more than Rs 100 a month to enjoy the pension benefits that the government employees enjoy, Mukherjee has set the minimum limit of Rs 1,000 a year and the maximum limit of Rs 12,000 as contribution to the scheme.

Informed sources say that this is the same New Pension Scheme that was made available to all Indians -- in the age group of 18 to 55 years who are not a part of any scheme for economic security after retirement from work -- on May 1 last year.

Gopalan has already discussed the new scheme with IRDA chairman J Hari Narayanan to give clearance to the scheme at the earliest. Gopalan says there are 1.4 million LIC agents in India and the government plans to incentivise them to attract the unorganised workers to subscribe to the Swavalamban scheme.

If each agent is able to enrol at least three or four workers, there will be at least 5 million subscribers over time.

(Excerpts from a news item of rediff.com 5.4.2010)

LIC breaches targets in Total Premium Collection & Equity Investment

Life Insurance Corporation of India (LIC), the country’s largest institutional investor, is planning to pump in at least Rs 75,000 crore in equities during the next financial year. This will be 25 per cent higher than the Rs 60,000 crore it invested in the stock markets this year.

During the current financial year, LIC had originally targeted to invest around Rs 50,000 crore in equities but the target was breached.

Against a target of around Rs.1,75,000 crore total premium income, the life insurer is likely to close the year with premium income of close to Rs 2,00,000 crore.

In 2008-09, FIIs had sold around Rs 48,250 crore in the equities space, while LIC had invested Rs.40,300 crore.

Earlier, FIIs invested 60-70 per cent of the institutional resources, while domestic institutions accounted for the rest. “With insurance companies led by LIC emerging as large investors in equity markets,  perhaps for the first time the ratio will change, where over 60 per cent investment in the equity capital markets will come from domestic institutions. In the next two years, 75 per cent of the money will come from domestic institutional investors,”

Over a period of two years, LIC’s investment in equities has increased by over 86 per cent.

“Our investment is a function of how our policyholders want us to invest and how we are expected to invest as per the guidelines. For us, the bottom line is safety,” a senior LIC executive said.

LIC is known to be a long term player and more stable compared to FII or other domestic investors. It provides long term cushion to the market.  This year, apart from allocating Rs 60,000 crore to equity papers, around Rs 35,000 crore is in corporate debt instruments, while another Rs.65,000-Rs 70,000 crore has been invested in government securities. The remaining 35,000 crore have been invested in other instruments and in infrastructure sector. While the details of investment the infrastructure sector were unavailable, the company is expected to fall short of the 15 per cent exposure norm for want of quality papers, a senior LIC executive said.

During the next financial year, company executives said, LIC’s total premium income was expected to go up by around 15 per cent, which will result in a total mop up of around Rs 2,30,000 crore. Of this Rs.75,000 crore will flow into equities, while details of other investment are still being finalised.

LIC expects its premium collection from new business to go up by 25 per cent. Between April and February, first premium income was estimated at Rs 54,320 crore.

(Excerpts from a News item from Business Standard, 30.3.2010)