State-run insurer Life Insurance Corporation of India (LIC) booked record equity trading profits of Rs25,000 crore in 2017-18, up from Rs19,000 crore a year ago, said two people aware of the matter.
The state-owned insurer is finalizing its annual accounts and these will be published in May.
LIC held equity assets (including shares and mutual funds) worth Rs5 trillion at the end of December, and the trading profits approximate 5% of assets under management. In 2015-16, LIC had booked Rs11,000 crore profit from equities trading.
“The stock market was mostly buoyant during the year and LIC got enough selling opportunities,” said one of the people cited earlier.
During financial year 2018, the 30-share bellwether of BSE Ltd, the Sensex, gained 11.30%.
Except for the March quarter, the market recorded gains in all the quarters during the financial year. The Sensex lost 3.20% or 1,088.15 points during the quarter ended on 31 March.
LIC’s record profit booking is a positive signal for the market if the insurer enhances its market exposure at the same time. LIC bought equities worth some Rs80,000 crore, said the person cited earlier.
Record profit booking by LIC will mean the insurer will not only be able to credit better bonuses to with-profit type of policy holders and pay better dividends to the government, but also be able to pump in more money into the markets. And, if LIC invests more money into the market, it improves the liquidity and the market goes up—which, in turn, improves the NAV for unit-linked investment policy (ULIP) holders.
“Secondary market was good. The primary market too was better than last year, which gave LIC a lot of opportunities to buy. Excluding share purchases in initial public offerings (IPOs) and divestment issues by the government during the financial year, LIC bought equities worth Rs60,000-65,000 crore,” said this person.
The state-run insurer also collected record new business premium at around Rs45,000 crore during the financial year, said the two people. Till December-end, the life insurer had collected Rs2.24 trillion in total premium (including single and renewal premium). The firm had a total balance sheet size of Rs27.9 trillion at the end of December.
The two persons cited above did not wish to be named because the financial figures are not public and are yet to be formalized by the LIC board of directors.
“LIC investing in markets when they are on the upswing helps sustenance of positive sentiments for a longer period of time. It is good for stability rather than growth.” said Kamlesh Rao, managing director and chief executive of Kotak Securities. “Money going into markets from insurance companies has increased significantly. ULIP premiums have seen robust growth for the past two-three years and a chunk of this money goes to the markets.”