Outlook Money – 01.03.2018

I

n the last one and a half years,
six insurance companies—
ICICI Prudential Life
Insurance, ICICI Lombard,
SBI Life Insurance, New India
Assurance, General Insurance Corp
of India and HDFC Life Insurance—
have made their debut on the
bourses in quick succession.
The stocks have drawn mixed
responses from investors. Three
out of six stocks slipped into the
negative territory (See: A Mixed
Bag), after listing.
Analysts are closely watching
the insurance sector, as the stocks
performed below expectations and
stayed far from setting the bourses
on fire. The question, however, still
remains: Are we too quick to judge
these stocks on the basis of their
short-term performance?

Analysts believe the sector

will appeal to those who have

patience to dig in their heels for the

long haul. A report from Morgan

Stanley contends that the recent

announcement in the Union Budget

on imposing a 10 per cent long-term

capital gains tax (LTCG) on equity

stocks and mutual funds has given

Ulips an upper hand, which is a

positive news for the life insurance

sector. “Against this backdrop, life

insurance products, particularly

unit-linked insurance policies

(Ulips), could appear relatively

attractive from a medium- to

long-term investment perspective.

Taxation of insurance products is

governed by Section 10 (10D), where

income is tax free in the hand of the

investor at the time of withdrawal...

it should benefit ICICI Prudential

Life Insurance and HDFC Life

Insurance,” the report noted.

Think long-term

Emerging out of the long shadow of

uncertainty – hurdles in insurance

regulations and clearance of the

2015 Insurance Laws (Amendment)

Act – the sector’s prospects looked

brighter in the recent months.

In FY17, life insurers’ first year

premium collection rose 26 per

cent, partially prompted by the

government’s demonetisation drive.

Similarly, the general insurance

segment grew 32 per cent during

the same period. Growth rates are

expected to remain high in the

near future, even though it may

not match performances of the

last fiscal, analysts say. This year,

domestic ratings agency ICRA has

Insure Against Risks

Six insurers have gone public to be met with mixed responses. Should they

be in your portfolio? Himali Patel and Preeti Kulkarni look for answers

56 Outlook Money March 2018 http://www.outlookmoney.com

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