Three out of 5 biggest insurance players in equities are from public sector

It's not just the Life Insurance Corporation of India (LIC).

Three out of the top five biggest insurance players in the stock market are also public sector ones, shows an analysis of data about insurance funds' activity in the equity segment. The General Insurance Corporation of India (GIC Re) and the New India Assurance Company occupy third and fourth spot, show figures from Prime Database (nseinfobase.com). The only two private sector ones in the list are ICICI Prudential Life Insurance Company and HDFC Life Insurance Company.

The biggest player is LIC at Rs.6.21 trillion in equities. The other two public sector players account for another Rs 31,628 crore. The two private players (ICICI Prudential and HDFC) account for Rs.41,165 crore in equity assets. This is based on December-end shareholding data. Those holding more than one per cent in a company are required to compulsorily disclose it on the stock exchange. The total assets are based on the sum of all such disclosed stakes. Data disclosed so far for March also shows a similar trend.

The longer run may well see private players dominate, according to experts.

Pranav Haldea, Managing Director of Prime Database Group said that the market share of private players has been rising over the last several years.    

"Over the last 2 decades, since they were granted licenses, the private sector insurance companies have performed extremely well to gain market share from the incumbent. This trend is only likely to continue," he said.

Sector regulator, the Insurance Regulatory and Development Authority of India (Irdai) in its annual report for 2018 mentioned the changing market dynamics.

“On the basis of total premium income, the market shares of LIC decreased from 71.81 percent in 2016-17 to 69.36 percent in 2017-18. The market share of private insurers has increased from 28.19 percent in 2016-17 to 30.64 percent in 2017-18,” it said.

A similar mention was made for the general insurance segment.

“In case of public sector general insurers, all four companies expanded their business with an increase in respective premium collections. However, the market shares of all the public sector insurers except New India has decreased from previous year,” said the Irdai annual report.

A market expert also suggested that private players would benefit from slightly more aggressive bets in equity which could help fuel higher returns and contribute to the growth of their portfolios over the long-term.

The two private insurance players declined comment citing a silent period before results. Public sector players including LIC and New India weren't immediately available for comment.

One insurance player said that insurance companies have the ability to take a much more long-term view on the equity side because the liabilities that these insurance companies have are also long-term in nature and there are no redemption pressures unlike other asset managers. Such capital also benefits some of the long gestation industries where they need capital that can remain invested over extended periods of time.

“The point is the state-owned insurance companies have been in existence for 50-60 years (or more). As the private life insurers grow, the book size will get bigger. As all these private players grow… these components (investment in equity markets) will also grow,” said the person.

“For all state-owned insurance companies, the regulations are the same for investment in equity markets. It’s based on the regulation set out by the Irdai. What GIC Re is doing is also as per the Irdai norms”, said Chairman-cum-Managing Director at GIC Re Alice Vaidyan.