Active Stocks
Fri Mar 01 2024 15:59:51
  1. Tata Steel share price
  2. 150.00 6.46%
  1. State Bank Of India share price
  2. 769.30 2.67%
  1. Tata Motors share price
  2. 977.20 2.78%
  1. ITC share price
  2. 409.50 0.74%
  1. ICICI Bank share price
  2. 1,086.90 3.18%
Business News/ Companies / News/  LIC may invest less in stocks as premium growth stalls
BackBack

LIC may invest less in stocks as premium growth stalls

LIC has been traditionally called upon by the government to use its deep pockets to rescue privatization plans and even support the stock markets during major sell-offs

LIC may cut its equity investment target to about ₹30,000 crore for this year.Premium
LIC may cut its equity investment target to about 30,000 crore for this year.

Life Insurance Corp. of India (LIC), the country’s largest buyer of stocks, may cut its equity investment target to about 30,000 crore for the current year, the lowest in a decade, as new premium growth declined amid coronavirus-related disruptions, two people directly aware of the insurer’s internal discussions said.

LIC invested around 47,000 crore in stocks in the year to March, a 21% decline from the previous fiscal year, according to official data.

The state-owned insurer has been traditionally called upon by the government to use its deep pockets to rescue privatization plans and even support the stock markets during major sell-offs. A sharp drop in new premium collections because of lockdown-related disruptions has, however, left India’s largest insurer with less investible surplus.

To be sure, growth in new premium collections will likely increase as India reopens its economy after the two-month stringent lockdown. But it is uncertain whether premium collections will reach pre-covid levels as millions of people have been left jobless.

“For April and May, the first year premium collections have been 25-30% lower than the previous year. For LIC, almost the entire sale of policies comes from individual agents on the ground. Due to social-distancing norms and the lockdown, these agents are not able to reach the public for selling policies. Unless policies are sold, the investible surplus will not come, which in turn is impacting investments by LIC," one of the two people cited earlier said, requesting anonymity.

LIC is one of the world’s largest insurers and has major investments in more than 100 publicly traded companies. In 2018, LIC invested around 24,000 crore in IDBI Bank to rescue the distressed lender.

“The downtrend is likely to continue for 2-3 quarters because of uncertain economic environment," the person said. “LIC is scheduled to have an investment strategy panel meeting by early July. The equity investment budget will be decided then. If the lockdown is lifted and commercial activities resume, LIC may be able to garner higher premium inflows, which may result in a higher investment in equities by LIC for FY21."

Insurers are being squeezed as premium collections have taken a hit, data showed. in April, LIC collected new business premium of 3,581.65 crore, 32% less than the 5,267.94 crore collected in the year-ago period.

Premium collections for all life insurers fell in March. Private life insurers collected a total first-year premium of 8,342.73 crore in March, a 34% decline from a year ago, according to India’s insurance regulator. Typically, insurers depend on a network of agents, brokers and bank officials to sell products. However, sales targets have remained unmet due to mobility restrictions.

Unlock a world of Benefits! From insightful newsletters to real-time stock tracking, breaking news and a personalized newsfeed – it's all here, just a click away! Login Now!

ABOUT THE AUTHOR
Anirudh Laskar
Anirudh Laskar is a senior editor at Mint, with 17 years of experience. He has reported on significant corporate matters including large mergers and acquisitions, India's emerging e-commerce sector and regulatory issues in the financial services industry. Based out of Mint’s Mumbai bureau, Anirudh has worked with Business Standard and The Telegraph before joining Mint in 2009.
Catch all the Corporate news and Updates on Live Mint. Check all the latest action on Budget 2024 here. Download The Mint News App to get Daily Market Updates & Live Business News.
More Less
Published: 04 Jun 2020, 01:06 AM IST
Next Story footLogo
Recommended For You
Switch to the Mint app for fast and personalized news - Get App