Life Insurance Corporation of India (LIC), the country’s largest institutional investor, is planning to pump in at least Rs 75,000 crore in equities during the next financial year. This will be 25 per cent higher than the Rs 60,000 crore it invested in the stock markets this year.
During the current financial year, LIC had originally targeted to invest around Rs 50,000 crore in equities but the target was breached.
Against a target of around Rs.1,75,000 crore total premium income, the life insurer is likely to close the year with premium income of close to Rs 2,00,000 crore.
In 2008-09, FIIs had sold around Rs 48,250 crore in the equities space, while LIC had invested Rs.40,300 crore.
Earlier, FIIs invested 60-70 per cent of the institutional resources, while domestic institutions accounted for the rest. “With insurance companies led by LIC emerging as large investors in equity markets, perhaps for the first time the ratio will change, where over 60 per cent investment in the equity capital markets will come from domestic institutions. In the next two years, 75 per cent of the money will come from domestic institutional investors,”
Over a period of two years, LIC’s investment in equities has increased by over 86 per cent.
“Our investment is a function of how our policyholders want us to invest and how we are expected to invest as per the guidelines. For us, the bottom line is safety,” a senior LIC executive said.
LIC is known to be a long term player and more stable compared to FII or other domestic investors. It provides long term cushion to the market. This year, apart from allocating Rs 60,000 crore to equity papers, around Rs 35,000 crore is in corporate debt instruments, while another Rs.65,000-Rs 70,000 crore has been invested in government securities. The remaining 35,000 crore have been invested in other instruments and in infrastructure sector. While the details of investment the infrastructure sector were unavailable, the company is expected to fall short of the 15 per cent exposure norm for want of quality papers, a senior LIC executive said.
During the next financial year, company executives said, LIC’s total premium income was expected to go up by around 15 per cent, which will result in a total mop up of around Rs 2,30,000 crore. Of this Rs.75,000 crore will flow into equities, while details of other investment are still being finalised.
LIC expects its premium collection from new business to go up by 25 per cent. Between April and February, first premium income was estimated at Rs 54,320 crore.
(Excerpts from a News item from Business Standard, 30.3.2010)