New Delhi: The country’s largest insurer by premiums collected, Life Insurance Corp. of India Ltd, or LIC, plans to invest Rs50,000 crore in the stock markets this fiscal, exceeding its total equity exposure of Rs40,800 crore in 2008-09.
“The company will make total investment of Rs1,75,000 crore (Rs1.75 trillion) this year, with Rs50,000 crore in equities, Rs60,000 crore in government securities and another Rs50,000 crore in debt and the remaining in mutual funds, fixed deposits and other asset classes,” said Thomas Mathew T., managing director of LIC, on the sidelines of a press conference on Wednesday. “In the last two months, the company has invested around Rs8,000 crore in equities and Rs6,000 crore in the debt market.”
He added that LIC was mainly looking to invest in infrastructure-related stocks.
For traditional policies, Insurance Regulatory and Development Authority, or Irda, guidelines mandate life insurers to put 50% of their investible funds in government securities and 20% in infrastructure companies, leaving 30% to be invested in equities, corporate loans, mutual funds, fixed deposits and commercial papers. In unit-linked insurance plans, or Ulips, where the returns are market-linked, investments are done according to the investors’ choice.
According to industry body, Life Insurance Council, domestic life insurers invested almost as much in Indian equities as foreign investors pulled out in the previous fiscal. Life insurers collectively invested around Rs58,000 crore in the stock markets in 2008-09, while foreign institutional investors (FIIs) sold Rs47,345 crore in equities. During the same period, mutual funds invested Rs7,000 crore in the stock markets.
The Bombay Stock Exchange’s benchmark Sensex index has gained 76% since 9 March, after posting its worst decline of 52% in 2008.
“Life insurance companies have given a good support to the stock markets,” said S.B. Mathur, secretary general of Life Insurance Council and a former chairman of LIC. “Infrastructure investment has also increased by 26% to Rs1,15,762 crore over last year.”
The life insurance industry registered a 10% fall in new premium income in the previous fiscal compared with 2007-08, led by slumping demand for Ulips. LIC’s new premium income fell 23% from the previous year to Rs18,070 crore. Life insurers collected a combined Rs44,688 crore in new premium income in the year gone by.
Mathew said LIC is expecting a growth rate of 35% this year in new business premiums to Rs48,000 crore. “The company is looking at 60-40 balance of product mix, with 60% in Ulips and 40% in traditional products.”