Public sector heavyweight Life Insurance Corporation (LIC) of India has outperformed its rivals in the private sector, including HDFC Life and ICICI Prudential Life, year-on-year.
LIC's shares have soared around 79 per cent to Rs 1,109.15 apiece when the market closed on Tuesday from Rs 620 per share on July 16, 2023. SBI Life Insurance also saw higher returns compared to the private competitors, surging 23 per cent from Rs 1,314 in the year-ago day to Rs 1,621.20 on Tuesday.
On the other hand, HDFC Life slumped from it's year-ago period, with Tuesday's closing price being Rs 646.55 on the BSE compared to Rs 666.55 a year ago. ICICI Prudential Life Insurance Co shares have gained with a return of 12 per cent, with its shares climbing from Rs 582 on July 16, 2023, to Rs 654.10 on Tuesday.
Insurance companies have two major sources of income – one is from the premiums charged from policyholders and the other one is from investing the premiums into assets. While LIC invested in India's growth sectors like infrastructure, the rivals in the private sector put most of their money in IT and consumer sector besides banking, financial services and insurance sectors, which have been underperforming recently.
While Indian insurance companies only 8 to 10 per cent exposure in the growing infrastructure sector, their global peers like Allianz, Nippon Life Insurance, and Metlife have invested 15 to 30 per cent in the infrastructure sector, according to analysts. Other insurers like Warren Buffet's Berkshire Hathway also invests on this line.
Like PSU insurance firms, public sector banks like SBI has also higher exposure to the infrastructure sector. SBI shares have zoomed 48 per cent from Rs 592 apiece a year to Rs 880.95 on Tuesday. In contrast, private heavyweights HDFC Bank, Kotak Mahindra Bank, ICICI Bank and Axis Bank have seen only -3 per cent to 24 per cent returns, which analyst believe are due to negligible investments in infrastructure sector.