Life insurers cut fresh exposure to equities by 57% in FY17

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The life insurance industry, led by state-run LIC, drastically cut down its fresh exposure in equities by 57 percent during the fiscal 2016-17 to Rs 16,793 crore from Rs 39,535 crore a year ago, data collated by the Life Insurance Council said.

This reduction was despite the fact that key market indices went up remarkably during the year with the BSE Sensex alone rising to 29,620 on March 31 this year from 25,342 a year ago.

The private sector life insurers, numbering 23, too, have been a net seller in the equity market as they sold Rs 438 crore during this period.

Accordingly, the market value of equity portfolios held by the life insurers ballooned from Rs 5.95 trillion in FY16 to Rs 7.56 trillion in FY17.

In contrast, the life insurers' investment in fixed income, where government securities are major components, grew 15 percent to Rs 21,67,143 crore from Rs 18,81,361 crore a year ago.

Similarly, the sector's investment in core segment projects increased from Rs 30,649.5 crore to Rs 34,407.5 crore, a growth of 12 percent.

As a result, total assets held by the life insurance industry grew 18 percent to Rs 29.81 trillion from Rs 25.29 trillion in the previous year.

"Sale of equity was more than that of buying during fiscal 2016-17. In spite of the fact that the industry sold heavily during the year, the market value of equity rose by 25.5 percent, or Rs 1.61 trillion, to Rs 7.56 trillion from Rs 5.95 trillion in the previous fiscal, thus its growth story continued during the year," secretary, Life Insurance Council, V Manickam, told PTI.

Again, out of the increment in market value of equity of Rs 1.61 trillion during the year, Rs 1.28 trillion was contributed by government-owned LIC alone, he said.

According to Manickam, assets under management of the industry increased by Rs 4.5 trillion to Rs 29.81 trillion from Rs 25.29 trillion in the previous fiscal.

However, as per the Council data, the industry is still under pressure on expenses management front.

The number of offices of life insurers in the country fell from 11,071 in FY16 to 10,955 in the last fiscal.

The operating expenses of the industry shot up from Rs 39,592 crore to Rs 47,501 crore, a rise of 20 per cent, in FY17.

The number of agents has also marginally gone up, from 20,165 to 20,885 during the year.

The Council is the face of the life insurance industry in the country and acts as a forum that connects the various stakeholders of the sector, which has 24 players.