Page 9 - Insurance Times January 2018 Sample

LIC of India

News

LIC books Rs. 13,500 cr trading profit in Apr-Sep LIC to be less aggressive
Life Insurance Corporation of India, has booked a trading profit of at least Rs in investing in equities
13,500 crore from the sale of equity holdings
in the first half of the current financial year, as Life Insurance Corporation of India,
t h e
stocks scaled record highs. The figure marked
a 23.8% increase over the Rs 10,900 crore in country's
trading profit that LIC earned in April-Septem- largest
ber 2016 through investment redemptions, two domestic
people with direct knowledge of the insurer's investment earnings said. equity in-
ves t o r,
has said that it has decided to bring
Finance Ministry confirms LIC's Rs. 1.5L-crore railway
down its aggressive investment in
funding equities. LIC had invested in Indian
Life Insurance Corporation of India can now go ahead with its proposed Rs 1.5 stocks worth Rs.39,224 crore be-
lakh crore funding of the Indian Railways, tween April and September this year,
with a finance ministry clarification effec- more than twice that in the past
tively nullifying the Irda's concerns and de- year. The insurer made about Rs.
mand for sovereign guarantee for the in- 12,374 crore on sales of equities dur-
vestment. ing this period.

LIC had signed a memorandum of under- VK Sharma, Chairman, LIC of India,
standing two years ago to invest in the rail- was quoted as saying: "We are
contrarian (when it comes to invest-
ways through bonds issued by the Indian
ment). Market (equity) is at peak.
Railway Finance Corporation (IRFC). But since this would take LIC's exposure to
more than 25% of IRFC's net worth - it has to keep the investment within that We will be selling whenever we have
an opportunity…We will keep on do-
limit in any company involved in infrastructure, debt and equity included -the ing routine sale and purchase, but
insurance regulator demanded explicit government guarantee for the bonds and
we will not be aggressive in buying
a gazette notification classifying these as special securities, like oil bonds.
equities." LIC will keep booking prof-
The finance ministry has now issued an order, clarifying that the IRFC bonds can its on its Rs.5.71 lakh crore equity
be treated as approved security for investment above the exposure limits. It holdings, Sharma added.
didn't offer any government guarantee on the bonds, but said the bonds were Compared to a decade ago when LIC
covered by Section 2(3) of the Insurance Act under which the repayment is dwarfed every other domestic insti-
charged on the revenue of the railway ministry. The railway ministry's revenue, tution, today the Indian market is
in turn, is backed by budgetary allocation. mature with counter-balances to LIC
The charge on the central government revenue is more than a government in the form of mutual funds, EPFO,
guarantee, as it amounts to express intention of the government to pay out NPS and insurance companies. Do-
the obligation, whereas payment against guarantee will happen only when the mestic MFs manage over Rs.7 lakh
guarantee is invoked, the finance ministry said. crore of equity money.
The Insurance Times, January 2018 9

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