KARACHI, Oct 7: Maintaining a huge Life Fund of Rs100 billion, the State Life Insurance Corporation is, in collaboration with the government, exploring to launch a fresh investment bond of 25 years maturity.

"But we want a rate of return on such a bond should be favourable for us when compared to the rate of return being offered by the government investment instruments of lesser maturity period'' a source in the State Life Insurance Corporation told Dawn on Thursday.

He recalled that the Corporation stayed away from investment in 20 years bond because the rate of return was not found favourable when matched with those of 15 years, 10 years and 5 years.

As a rule, bulk of the Slic's Fund is invested in government securities. But a drop in income from these investment to Rs7.63 billion in 03 from Rs8.50 billion attributed to lowering of bank rate to bottom last year caused much concern among the policyholders and forced the corporation executives to have a hard look at their investment plans.

Now that interest rates are crawling up again because of a host of international factors, the executives in Slic feel somewhat relieved. Nonetheless, the yearning for a possible change in investment strategy is there.

The Slic now proposes to engage a full time consultant for Fund Management to get new ideas and make it compatible with fast changing financial sector. The Slic is also looking for a consultant to look after its vast real estate empire that is worth about Rs13 billion in the market according to the valuators.

Besides these developments on the investment side, the Slic is now seeking government approval to offer a new National Accident Compensation scheme and another scheme has been prepared to bring rural population under insurance coverage.

Officials are confident of meeting the cost of two new schemes from the 2.5pc government share in the Corporation's income. Under the law, the Slic offers 97.5pc of its income to its policyholders every year as bonus. The remaining 2.5pc is given to the government as it is the lone proprietor of the company.

The two schemes are expected to give benefits to a large chunk of the population, which is badly needed when there is no security net. But for offering more benefits to the population, the Slic will have to find new investment avenues.

At present 75pc of Slic's Funds are invested in government securities. The Slic investment in government securities increased to Rs72.15bn in 03 from Rs55.14bn in 01 which is about 35 per cent rise. But the Corporation's investment in Pakistan Investment Bond (PIB) increased by over 150 per cent from Rs20.17bn in 01 to Rs52.76 billion in 03. "This provides us a base to meet out long-term obligations towards our policyholders," an officials aid.

Slic's investment in stock securities is guided by rules spelt out elaborately in the Insurance Ordinance 2000, Insurance Rules 2002 and an 1970 government circular.

Slic's involvement in Stock Exchange is different from other institutions. "We are not influenced by daily fluctuations of the equities," the official said who pointed out that Slic investment officials give more importance to long-term yields though capital gains also contribute partly to the corporation.

Under the arrangement, the Slic puts about 8 to 9 per cent of its fund at stake in the stock exchange. Its stake in equities increased from Rs6.61 billion in 01 to Rs2.01 billion in 03. The Corporation netted Rs1.31 billion from stock exchange operations in 03, which almost twice that of Rs667 million in 01.

The Slic has put about Rs2 billion in corporate debt mainly in Wapda bonds and term finance certificates. Its investment in property, according to the book value remains at about Rs2.5 billion. Bur market value is about Rs13 billion.

The Slic's authorized capital base is Rs10 billion but has a Fund of about Rs100 billion and a real estate empire of about Rs13 billion. It remains a focus of private investors who want its early divesture.

There were plans to privatize Slic, which, as afterthought, has been apparently given up. A cartel of a few private investors who may buy Slic can play havoc in the market with Rs100 billion funds and bring misery to the policyholders.