Life Insurance Corp. of India (LIC) booked a profit of ₹12,000 crore from equity investments in the five months between April and August, three people aware of the matter said, as markets shot up following the crash in March.
The development could lead to higher bonuses for policyholders and better valuation for the upcoming initial public offering of the country’s largest insurer.
Thanks to the windfall, the first half of the fiscal year may turn out to be the best ever for LIC, which is India’s largest institutional investor with assets worth around ₹34 trillion, the people cited above said on condition of anonymity.
“This profit booking of ₹12,000 crore is 10-12% higher than last year’s number for the same period when even markets were better than this year. Possibly, this is the best ever profit booking for LIC in just five months, especially considering the fact that during April and May, LIC was not selling any equity; it was only buying into equities. The profit-booking happened from sales only during June, July and August," one of the three people said.
“LIC has sold shares worth around ₹21,000 crore since April and has bought equities of around ₹32,000 crore so far. Most profit-booking came from the sale of stocks that had appreciated beyond LIC’s estimated gains. Only a few stocks that were bought in the March quarter market lows have been sold after June when the markets started going up and those stocks gained," the second person added.
In the June quarter, LIC sold shares worth ₹5,182 crore in at least 25 companies and the insurer has stakes in at least 351 listed firms, as per Capitaline data. The insurer increased its holdings in at least 56 listed firms during the June quarter when the equity market was trading lower.
The profit booking also expands LIC’s investible surplus to deploy in the equity markets, which could provide key support to the country’s domestic markets.
In the past 10 fiscal years, the life insurer has been booking a profit of ₹18,000-25,000 crore from equity sales every year. In FY19, LIC had an equity profit booking of around ₹23,600 crore—lower than the ₹25,650 crore profit in fiscal 2018. In fiscal 2018, for the first six months, LIC booked a profit of around ₹13,000 crore.
In July, LIC’s new business individual single premium was 69% higher at ₹3,305.95 crore against ₹1,961 crore in July 2019.
Between April and July, this grew 13.5% to ₹6,961.19 crore against ₹6,134.96 crore in the year earlier.
LIC’s overall new business premium in April-July was slightly lower at ₹15,170.95 crore against ₹15,311.87 crore a year ago.