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MUMBAI : Life Insurance Corp. of India (LIC), which is working on the biggest public share sale in the country, booked record stock market profit of over 10,000 crore in the April-June period, two people aware of the matter said.

State-owned LIC, the largest insurer in the country, is also the biggest domestic investor in Indian markets, buying shares worth 94,000 crore in FY21 to reach a total stock market investment of 8 trillion at the end of the fiscal year.

“Being a contrarian investor, LIC has the advantage of booking profits from shares that were bought many years back when there was hardly any other insurer. This is possibly the highest June-quarter profit," said a LIC official, one of the two people cited above. “We have sold shares worth around 20,000 crore in the first quarter of this tough year of the pandemic, from which a profit of more than 10,000 crore was made," the person said seeking anonymity.

In the quarter ended 30 June, when the second wave of the covid pandemic lashed India with daily new cases at one point crossing 400,000, markets surged over 6%, helping LIC book large profits. The record profit-booking is also expected to help the government attract more investors to the mega-IPO in the works.

In April-June last year, LIC booked a profit of a little over 7,000 crore. Between April and October 2020, LIC had booked around 15,000 crore as profits in the capital market.

In the June quarter, LIC cut its stake in Housing Development Finance Corp. Ltd by 3,149 crore, based on Thursday’s closing price. The insurer also sold shares of HDFC Bank Ltd, Biocon Ltd and Hero Motocorp Ltd during the June quarter. LIC also sold shares in many other listed firms, but the shareholding patterns of only 17 such firms have been updated so far.

LIC’s profits primarily come from the sale of shares in its large non-linked portfolio, including traditional life insurance policies.

LIC plans to invest over 5 trillion in FY21, the two people cited above said on condition of anonymity. Half of this will go into government securities, 15% into infrastructure-related instruments and 35% into equities, non-convertible debentures, mutual funds and commercial papers.

“Typically, 15-20% goes into equities," said the second person.

This means LIC may invest 75,000 crore to 1 trillion in equities this fiscal.

The insurer, which has adopted a massive digitalization drive, is targeting a premium income growth of at least 20% this fiscal, even though lockdown curbs have restricted physical meetings between prospective policyholders and agents. “In the initial stage after the covid second wave hit, sales were getting sluggish again like last year. The agents then made huge efforts to push sales through online media, and it worked," the second person said.

With over 1.2 million agents on the ground, this channel has traditionally been LIC’s main source of premium income, and as a part of the digitalization strategy, almost the entire agency channel has adopted digital media to sell, renew and service policies.

“This will ensure LIC’s growth estimates and profits remain intact before the insurer comes up with what is expected to be the country’s biggest-ever IPO," said the second person.

LIC’s record profit essentially means three things. One, the insurer will be able to pay better bonuses and returns; two, it expands LIC’s investible surplus, which can provide vital support to stock markets at uncertain times; and, three, the ability to generate such profits may attract new customers and ensure better dividends for the government

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