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.

- Himali Patel and Preeti Kulkarni

In 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.