Life Insurance Corporation of India (LIC) has seen more than 40% growth in new premiums for the month of March 2015 (on a month-on-month basis), said its chairman S K Roy. Speaking on the sidelines of the ET Financial Inclusion Summit, Roy said that they have seen a positive growth even on a month-on-month basis in the fourth quarter and hoped to end the financial year on a positive note.
"Since our base is high, a 40% growth is substantial. We aim to have a 15% growth with respect to new premiums even next fiscal," said Roy. He said that even though this was a challenging year, they would be able to show good growth.
With respect to the long-term bonds to be floated that would be of 20 year and 40 year duration from next fiscal, the LIC chairman said that the life insurance companies have long-term liability and they are always in the look-out for such instruments. "This is a very positive move from the government. There will definitely be a good demand for such papers, especially from life insurers. I am sure that LIC will take advantage of this," said Roy.
Long-term bonds of 40-year maturity are to be auctioned by the central government for the first time in the next financial year. Finance Secretary Rajiv Mehrishi had on Monday said the government would use these 40-year bonds to borrow up to Rs 10,000 crore and the dates were yet to be finalised for the launch.
According to the issuance calendar of marketable dated securities for the first half of the financial year (April-September), issued on Monday, for every week beginning April, the Reserve Bank of India (RBI) will auction a 20-year and above security for an amount in the range of Rs 3,000-4,000 crore. The government will borrow Rs 3.6 lakh crore in the first half.
Both for equities and debt, Roy said that the investment for next year would be higher than this year. In this financial year (FY15),LIC had planned to put about Rs 60,000 crore of its total investment corpus of Rs 3 lakh crore in equity markets. This was a rise of about 50% compared to the equity investment of Rs 40,000 crore in last financial year.
While large private life insurers have a Unit-Linked Product (Ulip), LIC did not have one. Roy said that they have already filed a Ulip product with the regulator and expect to launch it soon. Ulips constitute less than 10% of the total product mix of LIC and the rest comprises traditional life insurance products.
In March, LIC had also committed to invest Rs 1.5 lakh crore in the Indian Railways over five years for development of various commercially viable projects. Roy said that they might look at such proposals in the future, but nothing was on the table at present.
While there has been concerns about a drop in the new premiums of the industry due to a fall in new premiums of LIC, Roy allayed these concerns and said that they had planned to have 25 products and now have more than that. Roy added that they aim to have double the number of products in the next fiscal than what they have this year.
Though government securities have been the highest chunk in their investment corpus, Roy said that they would also look at corporate bonds and equity. However, he added that as a large financial player, they would not invest in low-rated instruments, like those below A1 rating. Also with respect to public sector banks and their investments in it, Roy explained that they would stick to the limits given by the regulator.
State Bank of India (SBI) is planning a Rs 15,000 crore Follow On Public Offer (FPO) in next fiscal. Roy said that they will appraise the FPO as and when it is on offer. "Last year, we invested substantially in the SBI QIP and it proved to be a good decision," he said.
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