The gross investments of Life Insurance Corporation of India (LIC) will exceed Rs 5 lakh crore in FY21, said its chairman, MR Kumar, in an exclusive interview to Moneycontrol. This will be an all-time high for the country’s largest insurer.
Kumar said that as of January 31, 2021, the life insurer has made a gross investment of Rs 4,44,919 crore which is a 14.2 percent year-on-year rise. This includes debt and equity investments. Here, equity investments total to about Rs 72,000 crore.
In the same period last year, LIC had gross investments of Rs 3,89,552 crore.
"We ended FY20 with Rs 4.38 lakh crore investments and this year (FY21) it will cross Rs 5 lakh crore," he added.
IPO-bound LIC plays a big role in the equity and debt markets since it is the country's largest institutional investor. LIC buying and selling stocks in the equity market also has an impact on the stock indices.
Record profit booking in equities
The insurance major has also booked record profits from its equity investments in FY21.
"In the initial month when the market was plummeting, we kept buying. Post July, we started selling. We have made an equity profit of Rs 34,968 crore so far and this has helped in the solvency process," Kumar said.
In FY20, LIC had booked profits of Rs 18,371.47 crore from its equity investments. It had bought Rs 61,590 crore worth of equities in FY20, meaning that the insurer has already exceeded last year's figure with two months remaining in this financial year.
While investing in the equity markets, LIC follows a 'contrarian' investment strategy, which is 'sell' when the sentiment is bullish and 'buy' when the mood is bearish. LIC invests in stocks across sectors ranging from banking, insurance, consumer goods, retail, aviation, capital goods and automobiles.
The policyholder funds of LIC are invested into both equity and debt instruments. Being a long-term business, a larger portion of the funds are invested into government securities and other guaranteed instruments.
Since LIC is heading for an initial public offering (IPO) in FY22, its investments are under special focus. It is also among the country's largest institutional investors in the equity markets. The BSE Sensex rose from 28265.31 on April 1, 2020, to 46285.77 on January 31, 2021.
Remote working for equity team
Kumar explained that when the Coronavirus outbreak and lockdown was announced, the initial challenge was how to conduct equity market operations without being physically present in offices.
"We allowed people who do stock market operations to work from home. Then we also initiated an equity centre at Bengaluru. That is being tested on and off and anytime it is required, market operations can be conducted from there," he added.
In the equity segment, life insurers, including LIC, can hold up to 15 percent equity stake in companies. LIC holds 51 percent in IDBI Bank due to a special exemption given by insurance regulator IRDAI or the Insurance Regulatory and Development Authority of India.