LIC invests Rs 53,000 cr in equity markets

Chairman S K Roy says they have been net buyers this year since markets have been down

Life Insurance Corporation of India (LIC) has pumped Rs 53,000 crore in stocks (equity purchases) in the current financial year till date, compared to Rs 39,000 crore a year ago, said its chairman S K Roy. He said the firm had been a net buyer this year, since markets have been down.

"Profit-booking has been Rs 10,000 crore in this financial year till now. On the debt side, we have crossed Rs 1.5 lakh crore in government securities," he said.

He said this financial year had been a little challenging from operations point of view. "We are seeing green shoots and have grown faster than competitors in December in new premiums, which have further improved in January," he said.

Railways had signed a memorandum of understanding (MoU) with state-run LIC, to raise Rs 1.5 lakh crore over the next five years beginning April 2015. Roy said that they had disbursed Rs 2,000 crore in terms of this MoU. "Hopefully, there could be another tranche in the current financial year," he said.

In 2015, LIC slowly turned towards stocks, with higher investment and more participation in large issuances. Last year, in the Indian Oil Corporation issue, the insurer took nearly 86 per cent of the offer. It had invested in the share issues of Coal India and share sales in Steel Authority of India Ltd earlier.

While it has often been labelled a bailout agency of the government, LIC has maintained its decisions were taken on the merits of the company, the issue, and the pricing, and after detailed assessment by an internal team. As a contrarian investor, LIC tends to sell in a rising market and in a falling market, tends to buy.

With the launch of its unit-linked insurance product after almost two years, there will be a flow of funds from this portfolio to the market.

LIC had in January 2014 made a significant investment in State Bank of India's Qualified Institutional Placement, at about Rs 1,600 a share; and in the Coal India Offer for Sale earlier this year.

Officials said the company did invest heavily in government securities, as its product portfolio is largely traditional. With the Sensex showing an upside, the company would go to the market in a major way.

According to Insurance Regulatory and Development Authority of India rules, life insurers have to invest at least 25 per cent in central government securities. They may hold up to 15 per cent equity in a company.

Even earlier, LIC invested heavily in disinvestment exchange-traded fund.

Apart from its regular investments, LIC also participated in the government's divestment of stake in Bharat Heavy Electricals and Suuti (Specified Undertaking of UTI)'s stake sale in Axis Bank.

In FY14, LIC invested Rs 2.25 lakh crore, of which 15 per cent was in the equity segment. This was increased to about Rs 3 lakh crore in FY15. The company has been a long-term investor in the stock market, investing for at least eight years. LIC plans to raise its total corpus of investments, both equity and debt, to Rs 32 lakh crore by 2020.

In 2015, the insurer had launched their much-awaited online term product, which Roy said has seen sale of 6,000 products. Their unit-linked plan also saw sale of 10,000 policies.