Saturday, August 25, 2012

How have LIC’s ULIP Plans Performed So Far?


Life Insurance Corporation of India, the government owned and the largest Insurance Company in India has flouted numerous and I really mean numerous ULIP Plans over the past 5-8 years. Every time they feel that a ULIP Plan isn’t performing well or if they feel people weren’t buying their plans, they went ahead and created/started a new plan and started selling it. The agents too sold them religiously by distributing pamphlets that claimed extravagant and frankly impossible returns. Anyways, the indian investor population, driven their greed to make quick bucks just bought into every one of those schemes. The past decade has been a real bumpy ride for the Indian Stock Market. Even the best fund managers have been unable to read the markets properly. So, how have the fund managers at LIC Fared? How have the various ULIP Plans flouted by LIC Fared? Well, this is what this article is all about.

So, what are those numerous ULIP Plans flouted by LIC?

They are:
1. Profit Plus
2. Fortune Plus
3. Future Plus
4. Market Plus
5. Money Plus
6. Market Plus 1
7. Money Plus 1
8. Child Fortune Plus
9. Jeevan Saathi Plus
10. Endowment Plus
11. Wealth Plus

Note that I haven’t included ULIPs that were started before 2006 as well as ULIPs that were Health Insurance Plans in disguise. If we include them as well, the number could be even more.

NAV Details of the above Mentioned ULIP Plans:

Fund NameInception DateGrowth FundBalanced FundBond Fund
Profit Plus3929510.9914.7415.07
Fortune Plus3929511.512.2514.47
Future Plus3841223.9718.1815.79
Market Plus3889914.5915.6316.52
Money Plus3905211.6114.1415.41
Market Plus 13960013.5112.2113.81
Money Plus 13956914.114.9514.7
Child Fortune Plus3975315.5414.8312.81
Jeevan Saathi Plus3996511.1810.3612.23
Endowment Plus4042210.1710.2211.61
Wealth Plus402109.72N/AN/A
Note: NAV Correct as of Today August 25th 2012

Performance Summary of the above mentioned ULIP Plans:

Following are some points that were taken into consideration before arriving at the information below:
a. Only the Growth (Equity) Fund returns are used for comparison here
b. An Assumption that 1 lakh was invested on Inception date when NAV was Rs. 10/- per unit
c. No charges, fees etc are considered. I have assumed that the investor who purchased the policy got 10,000 units. This is because each plan has a different premium allocation charge, fund management charge, fees etc.
d. The net profit has been divided by the number of years the money has been invested in order to arrive at the average returns %.

Fund NameInception DateAmount InvestedCurrent ValueNo. of Years InvestedAverage Returns (%)
Profit Plus3929510000010990051.98
Fortune Plus3929510000011500053
Future Plus384121000002397007.418.88
Market Plus3889910000014590067.65
Money Plus390521000001161005.752.8
Market Plus 1396001000001351004.18.56
Money Plus 1395691000001410004.259.65
Child Fortune Plus397531000001554003.814.5789473684211
Jeevan Saathi Plus399651000001118003.23.6875
Endowment Plus404221000001017001.90.89
Wealth Plus40210100000972002.5-1.12
Returns Summary:
a. Returns > 10% - 2 schemes
b. Negative Returns – 1 scheme
c. Less than 5% Returns – 5 schemes
d. 5 to 10% Returns – 3 schemes

As you can see, around 50% of the schemes have given less than 5% returns and one of the schemes is in negative. Only two schemes have given us returns that we can smile about and there are 3 schemes that we can be partially happy about.

The returns themselves, without considering any fees or charges are pretty dismal. There are only two schemes that have returns that we can talk about. If we consider the fees and charges for those schemes, the net Returns % could come down to around the 5-8% mark. The other schemes that already have a single digit returns % may come down to 0 or even worse Negative.

So, what are these fees and charges?

The surprising part is that the LIC India website does not have fund specific charges clearly available for investors to see. I was able to find the details only for Endowment Plus. For now, let us assume that the fees for the other plans will be around the same range as this scheme.

Premium Allocation Charges:
a. First Year – 7.5%
b. 2nd to 5th Year – 5%
c. From the 6th Year – 3%

Fund Management Charges: 0.8% per year for the Growth/Equity Fund. Other plans too have a charge of around 0.5 to 1% per year

Policy Administration Charges: Rs. 30/- per month during the first policy year and Rs 30/- per month escalating at 3% p.a. thereafter, throughout the term of the policy.

What do I think about this?

Whatever we have seen so far is not something we can be happy about. If you are someone who has not invested in any of these ULIP Plans flouted by LIC, then you can heave a sigh of relief and say “Thank God”. (Trust Me, I am doing just that as I am writing this article)

If you are someone who was unfortunate enough to have invested in any of those pathetic performing schemes, then you need to really think and decide whether to continue with the ULIP or not. I wrote an article titled Should you Exit your ULIPs Now? in May 2012 and I suggest you read it and take a wise decision.

A fun trivia before we end this long article:
6 of the above 11 schemes are already withdrawn by LIC. In other words, you cant invest in them anymore.

Only god knows if the other schemes will be continued or they too will meet the same fate as their withdrawn cousins.

Happy Insuring Yourselves!!!

12 comments:

  1. Why don't you not included Bima plus scheme for this study? please include Bima plus performance here.

    ReplyDelete
    Replies
    1. Hi Anonymous,

      Please read the Note in the section that lists all the ULIPs that are covered in this article - I had intentionally left out all ULIPs started by LIC before the year 2006. Anyways, per your request Bima Plus Details as follows:

      Inception: Feb 2001

      Risk - NAV = 57.71

      1 Lakh invested in Feb 2001 = 5.77 Lakhs today

      That works out to nearly 6 times in almost 12 years.

      I would say that this is the best performing ULIP Scheme that has been flouted by LIC. But, what are the chances that this scheme will perform like this in future?

      The scheme was started at the time when the BSE Sensex was in the 4000 range and now it is close to 18,000. So, even if the fund manager had blindly purchased all the large cap stocks listed in BSE Sensex at that time, he would be sitting on nearly 5 times returns today with no effort. The real test of a fund manager/scheme is when the market is rocky.

      Anyways - I am not trying to say that Bima Plus will not perform well in future. All I am saying is that, past performance may or may not be sustained in future and hence Investors must exercise caution while buying stuff based on past data.

      Anand.

      Delete
    2. Mr. Anonymous - I had intentionally left out all ULIP Plans flouted by LIC before 2006 because that is when LIC started selling ULIP Plans like candy. That was the driving factor behind leaving out Bima Plus or any other ULIP by LIC.

      There was no reason for me to ignore any policy specifically because personally I have nothing against LIC.

      Anand

      Delete
    3. Thanks for your kind reply,expecting same kind of study for pvt insurance ULIP products

      Delete
  2. Sir, I invested in proft plus growth fund in 2008 march. but the performance is very low. shall i switch it to other fund? how can i do the switching?

    ReplyDelete
    Replies
    1. Read this article - it will help you: http://anandvijayakumar.blogspot.sg/2012/05/should-you-exit-your-ulips-now.html

      Delete
  3. I had a Ulip of LIC and i have invested for 5 years. Since the fund was not performing well i stopped invest from now 2 years. i want refund now. shall i get he present value for the units. please help

    ReplyDelete
    Replies
    1. Imran - Have you completed the minimum premium payment/investment duration of the policy? If so, check the policy document on the minimum number of years you should stay invested. Most policies are like - minimum payment term - 5 years and minimum stay invested term - 7 or 10 years. If you have crossed this, then YES, if you surrender now, you should get the present value of your units.

      If you withdraw before this term completion - LIC can charge penalties and early termination charges as outlined in your policy document. Check the same for details

      Delete
  4. sir,my profit plus, nav rs is 16.2351 and no. of units is 7698.701, policy term- 5years and premium rs 5000 payable quaterly. that is, total sum assured for rs100000. which has been matured already on march. so what will be my return.? how much i will get back.? and how to calculate the return?
    *kindly reply as soon as possible, sir.

    ReplyDelete
    Replies
    1. Hi - Based just on the value of your units, you should get around 1.25 lakhs. There are many bonuses that LIC offers its customers and those are not available to the public. It would be better if you contact your LIC Agent to get the full details.

      From a returns perspective this scheme has earned you an average returns of around 8%

      Delete

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