LIC-IDBI Bank deal: Large exposure to PSUs hurts insurer returns

Insurer's stock portfolio has underperformed the Sensex

Life Insurance Corporation (LIC) has bailed out several public sector companies — the acquisition of a majority stake in loss-making IDBI Bank being the latest — but these investments have resulted in the underperformance of the insurer’s equity portfolio.

The country’s largest insurer, which has large shareholdings in public sector undertakings (PSUs) and public sector banks (PSBs), has not been able to beat the benchmark BSE Sensex index.

The value of LIC’s equity portfolio (adjusted for incremental investment in the intervening period) is up around 65 per cent since March 2012 against doubling of the Sensex during the period. Also,