ICICI Prudential Life Insurance Company is routing its equity investment through group asset management company, Pru ICICI AMC.
Puneet Nanda, head of investment at ICICI Pru said, "The lack of economies of scale has resulted in us coordinating the equity allocation through the AMC." Effectively it is buying units of various Pru ICICI funds "to give policyholders the benefit of diversification and thereby reduce the risk of investing in equities directly," he said.
ICICI Prudential recently launched its market-linked product, ICICI Pru LifeTime. This scheme has three investment options: growth, income and balanced plans. According to Nanda, the company mopped up around Rs 2 crore, of which approximately 10 per cent was for investment in equity.
"Worldwide insurance companies use AMCs to indirectly route their equity investments when the size of the corpus is not adequate to afford a good mix of risks across industries and sectors," said Nanda.
Even as the Life Insurance Corporation of India is seeking to enhance the self-imposed cap of not investing more than 15 per cent in any single company to 20 per cent, private sector players are wary of investing in the market.
Said Nanda: "Our first objective is to meet our liabilities. We can meet these through investment in fixed-income securities, instead of tapping the equity market." Many heads of investment in various new life insurance companies feel that the "equity market is not in the best state and the liquidity is horrendous". Further the changes the market regulator is undertaking, though is seen as being positive, afford some uncertainty to long term players. "While returns may be high, the risks are higher," they said.
ICICI Prudential is on the verge of entering the equity market. Till date it has met its short, medium and long term liabilities through fixed-income securities.
LIC is looking at increasing the cap on old economy stocks as it proposes to invest 10 to 11 per cent of incremental funds in the market. "We are trying to get better return on investments, as our returns today depending primarily on government securities," said LIC managing director A Ramamurthy.
In contrast, new players such as ICICI Prudential are indecisive over allocating assets to a market that is seen as being volatile. "The biggest decision for us is asset allocation, rather than stock picking," said Nanda.
