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Insurance stocks emerge among fund managers’ favorites

November 20
20:16 2017

Insurance companies stocks are emerging as one of the favorites for domestic mutual fund managers. Until last year, the insurance sector had little or no representation in the stock market. However, a slew of big-ticket listings have caught the fancy of money managers, who are constantly on the lookout to expand their stock universe thanks to the gush of inflows.

This can be gauged from the fact that three insurers – ICICI Prudential Life Insurance Company, ICICI Lombard General Insurance and SBI Life Insurance – put together have consumed over Rs 6,000 crore of mutual fund equity assets. Further, HDFC Standard Life Insurance, which listed last week, saw investments from ICICI Prudential AMC, Reliance Nippon MF, Sundaram MF and Axis MF, among others.

Not just the IPO, but mutual funds have been seeing lapping up shares of these companies from the secondary market as well. For instance, in October, equity MFs over Rs 1,000 crore in ICICI Lombard and SBI Life.

Mahesh Patil, co-chief investment officer (CIO) of Aditya Birla Sun Life Mutual Fund, says, “There are several sectors which were not represented in the stock market. Recent listings from such sectors open up a space for fund managers and help expanding stock universe – providing further diversification which may also help in generating better returns.”

According to him, more companies from sectors like insurance may come to the capital market.

Currently, ICICI Lombard Insurance Company is the most-invested by fund managers as they hold over 33 million shares of the insurer worth Rs 2,242 crore as on October. SBI Life Insurance comes next with an investment corpus of Rs 2,147 crore for over 32 million shares.

Neelesh Surana, CIO (equity) at Mirae Asset, says, “Earlier, there were no pure-play insurance players listed on the stock exchanges. It’s a positive development and helps fund managers diversify in sectors not represented so far. Insurance is a stable business and has long term potential as inherently it is growing and has annuity business.”

Fund managers are of the view that it is not so that insurance business did not exist earlier. But its value was in-built in their parents and accordingly they had to take an investment calls, say on companies like ICICI Bank, HDFC and State Bank of India.

Althought fund managers say most insurance companies are fairly valued but healthy long-term prospects merits investment even at current levels.

“As of now, I think they are fairly valued and there is less money available for investors on the table in near term. But since these companies are quite robust in their growth and stable, they tend to provide stability to the portfolios,” said an equity fund manager who did not want to be quoted.

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