LIC goes slower on equities in FY17

Single premium segment boosts income to Rs 1.45 lakh crore

The country’s largest insurer, Life Insurance Corporation of India (LIC) — a dominant player in both debt and stock markets — has focused on booking profits from its equity investments in the April-December 2016 period.

While LIC reports detailed figures for the financial year, this was the first time that the public sector insurer declared key numbers for the April-December period. The public sector insurer said going forward it would disclose financial performance on a quarterly basis.

The public sector life insurer said its total equity purchases stood at Rs 39,000 crore for the nine months ending December 2016. In 2015-16, it had invested around Rs 64,000 crore in equities. On the other hand, it invested Rs 1.83 lakh crore in government securities and state development bonds in this period.

“Our investment in equities was subdued this year deliberately because markets went up too much. LIC has been a contrarian; the primary duty of LIC is to protect the hard-earned income of policyholders,” V K Sharma, chairman, LIC, said. 

Sharma said the insurer booked net profit of Rs 16,000 crore in equity markets for the April-December 2016 period against Rs 9,600 crore in the same period last year.

“It is incidental that we earn from our investments. We are not a trader in the market; we are long-term investors,” he said.

Its total assets also grew by 12.81% to Rs 24.42 lakh crore in April-December 2016, from Rs 21.65 lakh crore in the previous year.

Backed by robust growth in the single premium segment, LIC posted a 12.43% growth in total premium income to Rs 1.45 lakh crore in the nine-month ended December 2016 from Rs 1.29 lakh crore in the same period last year.

Individual single premium income grew 176.38% to Rs 18,500 crore in April-December 2016 from Rs 6,693 crore a year ago. Group single premium segment saw a 26.05% growth at Rs 48,156 crore as against Rs 38,203 crore over the same period.

“We had targeted Rs 31,000 in income from new business premium for this financial year (FY17). We have already crossed that. We hope to touch Rs 35,000 crore by March 2017,” Sharma said.

The state-owned life insurer’s gross total income grew 15.76% to Rs 3.37 lakh crore against Rs 2.92 lakh crore.

Referring to investments in public sector undertakings (PSUs), the LIC chairman said, “We want to buy PSU stocks but sometimes we don’t get them. It happened in Bharat Electronics, where we had applied for 60%,” said Sharma.

“This proves that the market is getting deeper and there are many players. So, it is irrelevant that LIC is the only buyer for PSU stocks,” he added.

He added that LIC would participate in PSU divestment, but emphasised that shareholders’ money needs to be protected. “How much stake we take will depend on the situation. There have been times when we have taken 100% and sometimes we have not taken any stake,” Sharma added.

About taking up issue of corporate governance in companies where it has investments, Sharma said that LIC focused on better governance within (insurance company) as well as in companies that it invests in. “LIC is sensitive to policyholders’ money but we have no business to run others’ businesses,” the chairman said.

He declined to respond on a possible listing of the insurance behemoth except to say: “We are a statutory corporation and reply to listing can be given only in the Parliament.”

LIC is set up under the Life Insurance Corporation Act and is not a corporate body under the Companies Act. The Act would need to be amended to bring it under the Companies Act before it gets listed on the bourses. In 2004, when this issue of listing had cropped up, the LIC management had shot down the proposal saying the corporation was not short of capital.

A report by consultancy firm Deloitte on LIC’s financial health had recommended the dilution of the government's holding in the insurance giant, as part of the restructuring of the state-owned life insurance entity.