LIC’s gains from equity investments improve 16.6%

“Our investment strategy is based on the regulations prescribed and we are mandated to invest 50% in government securities,” Kumar said on Tuesday.

LIC’s claims paid in FY22 stood at Rs 1.2 trillion, a spike of 19% y-o-y, mainly due to the residual impact of Covid and also due to payments made against maturity of several products.
LIC’s claims paid in FY22 stood at Rs 1.2 trillion, a spike of 19% y-o-y, mainly due to the residual impact of Covid and also due to payments made against maturity of several products.

Life Insurance Corporation (LIC) has made gains of Rs 42,000 crore from investments in the equity market in the financial year ended March 31, 2022. This is 16.6% more compared with the Rs 36,000-crore gains made in FY21, managing director Raj Kumar told reporters a day after the insurer announced its first quarterly results after listing. Of its total assets under management (AUM), 25% remains in equities, while the rest is allocated to bonds and other instruments. “Our investment strategy is based on the regulations prescribed and we are mandated to invest 50% in government securities,” Kumar said on Tuesday.

The management further said that LIC would focus on non-participating products in the future to boost growth. In FY22, 29% of the new business, in terms of premium, came from non-participatory products, while the sale of insurance policies contributed 7% to the new business. Going forward, LIC plans to focus on ULIPs (unit-linked insurance products), health insurance and group protection products. LIC’s claims paid in FY22 stood at Rs 1.2 trillion, a spike of 19% y-o-y, mainly due to the residual impact of Covid and also due to payments made against maturity of several products.

However, the company has created a Covid-19 reserve worth Rs 7,400 crore for pandemic-related claims. “Some residual impact of Covid-19 and payments made for maturity of four high-value products, with claims of more than Rs 5 lakh, led to high claims paid,” Kumar said. He further added that the worst of the pandemic is over now.

LIC’s yield on investments dropped to 8.55% in FY22 against 8.69% in FY21. “While investing the money of policyholders, the main concern of any life insurer is the protection of the invested money, rather than the return. An 8.55% return in a depressed market is very good. We do invest in corporate bonds, which give us a little higher yield. At the same time, we are also very aggressively investing in the equity markets,” Kumar said.

The insurer’s senior management, however, said that the numbers for the fourth quarter announced on Monday were not comparable with the numbers during the same period last year, as the company had started including quarterly numbers only from September 2021. Much to the Street’s disappointment, the insurer has also not disclosed its embedded value while disclosing its results.

While the quarterly numbers disappointed, for the full financial year 2021-22, LIC’s profit after tax rose 39% to Rs 4,043.12 crore from Rs 2,900.57 crore reported a year ago. Kumar said that the company was in the process of finalising the embedded value numbers. “As soon as the exercise is completed, LIC shall make the required public disclosures of the same,” he said. According to the offer documents filed by LIC ahead of its listing, its embedded value stood at Rs 5.4 trillion. Embedded value is one of the key indicators of an insurer’s corporate value.

LIC’s share price fell 3.05% to close at Rs 811.50 on the BSE.

Kumar said that as the company’s business grows further, it will require higher capital, which in turn will benefit the shareholders as the profits increase.

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