LIC may sell Rs 1,000 cr realty

The Life Insurance Corporation of India (LIC) has identified 70 properties which could be developed or sold on a commercial basis. The properties have internally been valued at about Rs 1,000 crore.

Addressing mediapersons in Chennai today, A K Shukla, chairman LIC, said: "Towards this, we have set up a real estate strategic business unit. We will be appointing an international real estate consultant shortly to make an external valuation." The plan is to develop or sell properties based on a commercial decision.

Shukla told Business Standard that it would ask the government to allow the corporation to take a commercial decision, which would depend upon the valuer's report.

Shukla said the corporation was revaluing its entire real estate assets according to market price and expected the process to be complete by end of 2005. The Insurance Regulatory and Development Authority (IRDA) permits revaluation of real estate every three years.

Currently, LIC gets less than 3 per cent of its returns from its realty which it plans to increase to 25 per cent following the revaluation.

"There is an urgent need to develop these properties, lest it results in encroachment. Furthermore, we want to ensure a higher yield," said Shukla.

The board has given its consent to develop 70 properties. The residential-commercial mix for the plan would depend on the city as well as individual property, said Shukla.

Meanwhile, the corporation will increase its equity exposure from eight per cent to 10 per cent. This will mean an additional investment of Rs 10,000 crore in equity. The total assets of LIC are estimated at over Rs 4.14 lakh crore, of which 65 per cent was invested in government securities.

Shukla said in the current year, having churned its equity portfolio, profit on the sale of investment would be more than 50 per cent higher than last year. The investment yield on corporation's investment currently stands at 8-9 per cent, higher than last year. This also reflects on its ability to announce a special bonus varying between Rs 5-50 to its policyholders to commensurate its 50th anniversary.

Shukla said the life insurance behemoth had regained 3 per cent market share in premium income and 2 per cent in terms of selling policies. This is mainly because of the growth recorded by the insurance industry, he added.

"We have set ambitious targets for the current fiscal: a 50 per cent growth in the first premium income and a 30 per cent growth in the sale of policies." LIC has clocked a first premium income was Rs 3,322.35 crore for the first quarter of 2005-06.