Foreign portfolio investors (FPIs) have sold over Rs 16,000 crore in Indian equities after Finance Minister Nirmala Sitharaman raised the surcharge tax for the super-rich in the Union Budget.

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But the equity market selloff did not deter FPIs from raising their stakes in life insurance companies.

The FPI stakes in the three major insurance companies have doubled in the last one year. In SBI Life Insurance Company, the FPIs have increased their stake to 19.42 percent in June 2019 from 4.31 percent in June 2018, according to a report by The Economic Times.

ICICI Prudential Life Insurance and HDFC Life Insurance saw about 1.40 percent stake increase as compared to last month.

In terms of stock valuations, all the aforementioned life insurance companies are trading at a premium compared to the industry average but are generating handsome returns. ICICI Pru and SBI Life generated returns of over 16 percent while HDFC Life Insurance saw a 23 percent rise in returns.

Another reason behind FPIs raising their stake in life insurance companies is that the Insurance Regulatory and Development Authority (IRDA) has not changed any of its norms related to its products.

Recently, IRDA wrote a letter to the Indian Banks Association (IBA) saying it has permitted insurance companies to sign inter-creditor agreement (ICA) pact along with the banks for the resolution of stressed assets.

Moreover, the Reserve Bank of India (RBI) in its June 7th circular had directed lenders to identify stress quickly, sign ICA and resolve bad loans proactively. Since many of the lenders are insurance companies, IRDA approval becomes crucial for all lenders to unite and hammer out resolutions.

In terms of quarterly earnings, life insurance companies have reported healthy results.

HDFC Life's June quarter net profit rose 12 percent year-on-year (YoY), ICICI Prudential Life saw a 1.2 percent rise in net profit while SBI Life Insurance Company’s net profit came in at Rs 371.90 crore, an increase of 4.96 percent YoY.

For HDFC Life, assets under management (AUM) stood at around Rs 1.3 lakh crore as of June 30, up 18 percent YoY with the debt and equity mix of 62:38 in Q1.

ICICI Pru’s AUM grew 15 percent over the year to 1.43 lakh crore while SBI Life's AUM rose 22 percent YoY to Rs 1,42 lakh crore as on June 30.

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First Published:Aug 7, 2019 12:22 PM IST