Insurance firms sold stocks even as MFs were buying
Mumbai: Insurance companies appear to have taken a contrary call last fiscal on equities, and sold stocks when both domestic mutual funds and international portfolio investors were betting on stocks. Insurers were net sellers of `22,823 crore stocks when mutual funds were net buyers of `53,000 crore.
The equity markets have rallied since last year based on macroeconomic indicators and easy liquidity. Profit booking, inflow in nonlinked insurance and redemptions in Ulips also contributed to insurance companies turning net sellers. Benchmark Sensex grew 17.22% to 29,620 last fiscal.
Private insurance companies saw fresh inflow coming into Ulips this year as investor sentiment turned positive on equities.Individual new business premium on adjusted basis rose 20% between AprilFeb 2016-17, when private sector went up 25% and LIC 16%. However, the country's largest life insurer did not invest much in equities last year, choosing to book profit instead. Life Insurance Cor p's investment was subdued for AprilDec 2016-17. LIC invested `39,000 crore a g ainst `64,000 crore in the same period previous year.
“Stock markets look expensive and earnings have to meet expectations if market is to sustain at these levels,“ said Aneesh Srivastava, CIO, IDBI Federal Life Insurance.
The insurance regulator had revised Ulip norms in 2010 including a lock-in of five years and cap on charges, bringing down product margin. “Post the regulations around unit-linked products, the sale of new business had come down,“ said Sampath Reddy , chief investment officer, Bajaj Allianz.
Investment in equity or debt depends on the nature of product.Most insurance companies tried to leverage the debt market rally to improve overall yields by booking some profit.
“Ulip funds are managed as per mandate of the fund and as per defined benchmarks communicated to investors. Hence, these funds remain invested in fixed income or equity markets even if markets are overvalued in the near term.Non-linked funds are liability driven portfolios where there are implicit guarantees involved. In these funds, we prefer to pare down exposure in risky assets like equities if returns expectations are low,“ said Srivastava.
The equity markets have rallied since last year based on macroeconomic indicators and easy liquidity. Profit booking, inflow in nonlinked insurance and redemptions in Ulips also contributed to insurance companies turning net sellers. Benchmark Sensex grew 17.22% to 29,620 last fiscal.
Private insurance companies saw fresh inflow coming into Ulips this year as investor sentiment turned positive on equities.Individual new business premium on adjusted basis rose 20% between AprilFeb 2016-17, when private sector went up 25% and LIC 16%. However, the country's largest life insurer did not invest much in equities last year, choosing to book profit instead. Life Insurance Cor p's investment was subdued for AprilDec 2016-17. LIC invested `39,000 crore a g ainst `64,000 crore in the same period previous year.
“Stock markets look expensive and earnings have to meet expectations if market is to sustain at these levels,“ said Aneesh Srivastava, CIO, IDBI Federal Life Insurance.
The insurance regulator had revised Ulip norms in 2010 including a lock-in of five years and cap on charges, bringing down product margin. “Post the regulations around unit-linked products, the sale of new business had come down,“ said Sampath Reddy , chief investment officer, Bajaj Allianz.
Investment in equity or debt depends on the nature of product.Most insurance companies tried to leverage the debt market rally to improve overall yields by booking some profit.
“Ulip funds are managed as per mandate of the fund and as per defined benchmarks communicated to investors. Hence, these funds remain invested in fixed income or equity markets even if markets are overvalued in the near term.Non-linked funds are liability driven portfolios where there are implicit guarantees involved. In these funds, we prefer to pare down exposure in risky assets like equities if returns expectations are low,“ said Srivastava.
