Page 36 - Life Insurance Today January 2018

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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
Life Insurance Corporation of India,
in the first half of the current financial year, as
stocks scaled record highs. The figure marked t h e
a 23.8% increase over the Rs 10,900 crore in country's
trading profit that LIC earned in April-Septem- lar g e s t
ber 2016 through investment redemptions, domestic
two people with direct knowledge of the insurer's investment earnings said. equity in-
ve s t o r,
Finance Ministry confirms LIC's Rs. 1.5L-crore railway has said that it has decided to bring
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 year.
tively nullifying the Irda's concerns and de- The insurer made about Rs. 12,374
mand for sovereign guarantee for the in- crore on sales of equities during this
vestment. period.
LIC had signed a memorandum of under- VK Sharma, Chairman, LIC of India,
was quoted as saying: "We are
standing two years ago to invest in the rail-
contrarian (when it comes to invest-
ways through bonds issued by the Indian
Railway Finance Corporation (IRFC). But since this would take LIC's exposure to ment). Market (equity) is at peak.
We will be selling whenever we
more than 25% of IRFC's net worth - it has to keep the investment within that
limit in any company involved in infrastructure, debt and equity included -the have an opportunity…We will keep
on doing routine sale and purchase,
insurance regulator demanded explicit government guarantee for the bonds and
but we will not be aggressive in buy-
a gazette notification classifying these as special securities, like oil bonds.
ing equities." LIC will keep booking
The finance ministry has now issued an order, clarifying that the IRFC bonds profits on its Rs.5.71 lakh crore eq-
can be treated as approved security for investment above the exposure limits. uity holdings, Sharma added.
It 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.

36 January 2018 Life Insurance Today

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