Life Insurance Corp. of India (LIC) the largest domestic institutional investor in the country has a record Rs 37,000 crore profit from equity investment in the previous year (2020-21).
This figure is 44.4 per cent higher than the state-owned insurance profit which was Rs 25,625 crore in the previous financial year. As of now, it is the highest in the company’s 65-year history.
The company invested Rs 94,000 crore in equity markets in FY21. It manages assets worth Rs 34 lakh crore
“We booked maximum profit by churning the equity portfolio, depending on available opportunities and also to maintain a long-term high-performing portfolio. The sale has been across sectors and driven by our focus on generating reasonable profits and available market opportunities,” managing director Mukesh Kumar Gupta said in an email reply to Mint.
LIC’s Strong Performance Of The Equity Market
The non-linked portfolio, which includes traditional life insurance policies, generates the majority of LIC’s profits. With this, the company’s policyholders will receive higher bonuses and returns on their investments and also pay higher dividends to the government.
The stock markets’ strong results, which rebounded sharply after hitting a four-year low in March of last year, helped LIC book a record profit.
“We take advantage of emerging market opportunities to enter and exit companies to generate profits as well as to create a strong equity portfolio to give reasonable returns over a long-term horizon,” Mint newspaper quoted LIC managing director Mukesh Kumar Gupta as saying in an e-mail reply.
Primarily invested in infrastructure, real estate, financial services, consumer durables, automobiles, metals and mining, electronics, entertainment, and services, many of which were severely impacted by the COvid pandemic.
It was also able to book record income on its investment as stock markets recovered in the second half of the previous fiscal.
It has now moved its attention to new industries where it previously had only a minor presence in the pre-covid period.
LIC Has Been Reducing Investment In These Sectors
According to a Mint report, LIC significantly reduced its exposure to the infrastructure market, which is one of the worst-affected. It is also seen that LIC’s infrastructure spending has decreased from Rs 24,000 crore in March 2020 to just Rs 4,100 crore now.
Since most IT firms’ businesses are down due to the demand slowdown in the US and Europe, with offices shutting down, LIC’s investment in the IT and software sector has dropped from Rs 55,000 crore in March 2020 to Rs 11,600 crore now.
LIC is currently investing heavily in the pharmaceutical industry, which is also one of the main beneficiaries of the ongoing pandemic. LIC’s pharmaceutical investment has increased to over Rs 37,000 crore from Rs 17,700 crore in FY20.
LIC increased its investment in the FMCG industry from 15,000 crore in March to about 50,000 crore now, as demand for FMCG products increased due to people rushing to buy more personal and home care products.