Life insurance AUMs beat slowdown, up 9% in FY12

The total assets under management (AUM) of life insurers increased by 9% to R16,18,544 crore as on March 31, 2012, compared with R14,82,549 crore a year ago.


The increase comes despite an apparent slowdown in the industry, leading to a 3% drop in the total premium to R2,83,315 crore for FY 2011-12 compared with R2,91,605 crore last year, said the provisional data of Life Insurance Council, the industry body for all life insurance companies.

The total new business premium collected by the industry for last financial year stood at R1,13,678 crore compared with R1,25,618 crore last year, a drop of 9.5% y-o-y.

Linked new business saw a significant drop of 67% y-o-y to R17,455 crore compared with R52,739 crore last year. Non-linked new business premium, however, showed a growth of more than 32% y-o-y to R96,224 crore as on March 31 compared with R72, 878 crore in 2010-11.

Secretary-general of Life Insurance Council SB Mathur said: “This drop in total premium can be attributed to the change in regulatory roadmap, declining number of products and disappearance of pension business in the individual segment.”

If we consider individual pension business, which forms a major segment of the new premium for life insurance companies and on which policyholders have traditionally placed trust during the accumulation stage, has fallen drastically in FY 2011-12 to meager 1.80% of total new business premium, he added.

New business premium garnered from individual pension policies during FY 2011-12 shrank considerably to paltry R1,139 crore compared with R19,257 crore in 2010-11 and R26,389 crore in 2009-10. This virtual disappearance of pension premium and declining new business unit linked premiums had wide repercussions on the overall investment done by life companies in the Indian equity market.

Net investment done by life insurers in equity markets has shown a steep decline. In FY 2011-12 the net buying by life insurers in equity stood at R26,990 crore compared with R30,565 crore last year. In 2009-10, the net buying done by life insurers was R65,411 crore and during 2008-09 financial crisis, when FIIs withdrew more than R46,000 crore from equity markets, Indian life insurers had invested more than R55,000 crore reducing volatility in the equity markets.

Monolith LIC’s share of equity investment in last few years has also shown a sharp declining trend with a drop of over 50%. In FY 2011-12, LIC had invested R15,735 crore in equities compared with R39,215 crore in FY 2009-10 and R35,835 crore in FY 2008-09.

In tandem with declining new business premiums, the number of individual new business policies this year too declined to 4.41 crore from 4.81 crore last year. However, life insurance industry has retained its dominant retail character, with more than 34.16 crore in-force policies on the books of life insurers as on March 31, which is the highest number of in-force policies in the world.

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