| State-owned Life Insurance Corp. of India (LIC) booked a profit of at least Rs.25,567.57 crore in the first six months of 2012-13, data compiled by Mint shows. During this period, India’s benchmark equity index rose around 8%. LIC has equity investments worth at least Rs.3 trillion allocated across 800 listed firms. Of 24 life insurers, LIC is the largest with total assets worth at least Rs.13 trillion. During the first six months of the fiscal, LIC booked profits in at least 90 listed firms. |  |
The benchmark Sensex has risen 7.81% between April and September. In October, it rose further after the government cleared some key reform proposals and eased foreign direct investment restrictions in aviation and retail. LIC has booked profit in almost all frontline stocks, including Larsen and Toubro Ltd (L&T), Tata Steel Ltd, Tata Power Co. Ltd, Mahindra and Mahindra Ltd (M&M), Maruti Suzuki Ltd, ICICI Bank Ltd and HDFC Bank Ltd.
All these stocks have had a good run since April. Of these stocks, L&T, M&M, ICICI Bank and HDFC Bank outperformed the 30-share Sensex by a wide margin. During this period, the value of pure equity schemes managed by the Indian mutual fund industry rose close to 4%, fromRs.1.56 trillion to Rs.1.62 trillion. “LIC books profit whenever there is a fair appreciation in stocks. We realize that we play an important role in supporting the equity markets.
Our investments are mostly long-term and we have often managed to book profits even during market dips,” said an LIC official who declined to be named. “From the profits, we pay dividends and bonus, and our investment strategy is balanced in such way that we create maximum value for both policyholders and stakeholders,” An email sent to LIC’s spokesperson did not elicit a response till press time. The insurer has at least 300 million policies in force. In the first half of this fiscal, LIC collected premium of Rs.35,341.53 crore, marginally lower than Rs.36,721.39 crore during the same period a year ago. As the largest domestic institutional investor, LIC has been a key market mover.
During 2008 and 2011, when foreign institutional investors (FIIs) were pulling out of Indian stocks, domestic institutional investors, led by LIC, invested heavily in the market. In 2008, when FIIs sold Indian stocks worth Rs.53,796.9 crore in the wake of a global liquidity crisis, domestic institutions, which largely consist of life insurers, bought Indian equities worth Rs.72,966.78 crore. Similarly, in 2011, domestic investors bought Indian equities worth Rs.26,788.44 crore net of selling when FIIs were net sellers of shares worth Rs.34,17.7 crore.
The investment figures came down after India’s insurance regulator tightened norms for unit-linked insurance policies, or Ulips, from September 2010. The insurance regulator is expected to raise the investment limit in listed firms for all life insurers. At present, insurers cannot invest more than 10% in a listed firm.
However, LIC’s case has been different and, at the government’s behest, it has recently increased its holdings in several state-owned banks to help them increase their capital. An increase in investment limit will allow LIC to enhance its holdings and, in the process, provide more support to domestic markets. During the first six months of the fiscal, LIC invested at least Rs.45,000 crore in shares of listed firms.
During this period, the domestic institutions collectively sold stocks worth Rs.16,100.97 crore on a net basis, while FIIs bought Indian shares worth Rs.39,742 crore. During the current fiscal, LIC plans to invest at least Rs.2 trillion and of this roughly one-third or at least Rs.65,000 crore is planned to be invested in equity, according to another LIC official, who requested anonymity.
