Life Insurance Corp. of India (LIC), the country’s largest institutional investor, has booked a trading profit of at least Rs13,500 crore from the sale of equity holdings in the first half of the current financial year, as stocks scaled record highs.The figure marked a 23.8% increase over the Rs10,900 crore in trading profit that LIC earned in April-September 2016 through investment redemptions, two people with direct knowledge of the insurer’s investment earnings said.
Since the start of the financial year on 1 April, the BSE’s benchmark Sensex index has gained around 13.5% as investors shrugged off an unsettling transition to the goods and service tax (GST) and a delayed corporate earnings recovery, choosing instead to bet on India’s long-term growth potential.As households shifted their savings into financial instruments from traditional avenues such as real estate and gold, domestic mutual funds and insurance companies pumped Rs. 61,559 crore into Indian stocks during April-September.
Data from stock exchanges showed that the value of LIC’s holdings (in companies where it held at least a 1% stake) rose from Rs. 4.82 trillion in March to Rs5.02 trillion at the end of September.That accounts for about 60% of all equity investments held by Indian life insurance companies.“During the first half of the financial year 2017-18 LIC saw a healthy rise in premium collections. During the last quarter, the new business premium collections grew by at least 26%. The market has been rising, which enabled LIC to book more profits this time,” said one of the two people cited above.
The state-run insurer recorded a 24% year-on-year rise in its first-year premium income to Rs68,224.29 crore during April-September, according to Insurance Regulatory and Development Authority of India (Irdai) data.Indian markets have been mostly bullish during the year so far. In fiscal 2017-18 so far, the Sensex gained in 96 trading sessions and fell in 66 sessions, giving LIC more opportunities to book profits from equity investments as of Wednesday.“Most of the money made from profit-booking will be invested by LIC into the markets again. This will in turn improve prospects of better returns on funds of policyholders in the long run. In total, this financial year, LIC has an investible surplus of around Rs. 4 trillion,” added the first person.Apart from equities, the life insurer has invested at least Rs. 1 trillion in bonds so far during the financial year.
This number is always higher because the existing investments norms require an insurer to allocate at least 50% of total funds to government securities (G-secs).An email sent to LIC hadn’t elicited a response as of press time on Sunday.LIC’s profit booking is a positive signal for the market if the insurer’s exposure to equities is increasing at the same time, said Santosh Singh, head of research at Haitong Securities India Pvt. Ltd.“LIC may have booked more profits from equity investments due to positive markets but this will help only if LIC enhances its equity market exposure by investing the profits in the market again,” said Singh.Life Insurance Corp. of India is the largest investor in Indian markets with a balance sheet size of Rs24 trillion.“Traditionally, the maximum premium income comes in the last two quarters. So LIC expects even better numbers in the next two quarters, which may translate into higher market investments during the ongoing fiscal,” added the first person.
