State-owned insurance giant Life Insurance Corporation of India (LIC) booked a record INR 37,000 crore profit from share sales in 2020-21, the highest in its 65-year history, as the stock market reached record highs. The latest profit is a 44.4% jump against its ₹25,625 crore profit from stock sales in fiscal 2020. It has emerged as the strongest and the tenth most valuable insurance brand globally.
As the insurance industry deals with the fallout from the COVID-19 pandemic, the total rating of the top 100 most profitable insurance brands has dropped by 6%. LIC’s brand value, on the other hand, rose by nearly 7% to $8.65 billion.
Worth mentioning here is that LIC is the largest domestic institutional investor in the country. The company invested Rs 94,000 crore in equity markets in FY21. It manages assets worth Rs 34 lakh crore. It has been the government’s biggest financial backer, especially in its divestment programs. LIC’s profits primarily come from the sale of shares in its large, non-linked portfolio, which includes traditional life insurance policies.
The record profit increases LIC’s ability to pay better bonuses and returns to policyholders and better dividends to the government; expands LIC’s investible surplus which can support stock markets at uncertain times, and helps attract new customers due to its ability to generate such profits.
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Sectors, including infrastructure, real estate, financial services, consumer durables, automobile, metals and mining, hardware, entertainment, and services, have been badly hit by coronavirus. This has limited the upside for the stocks of companies from these sectors. Traditionally, in these sectors, LIC has been predominantly investing most of its funds from its investible surplus. LIC has been reducing investment in these sectors and shifting focus to new sectors where it used to have a small exposure in the pre-covid era.
According to Mint research, LIC has cut its exposure drastically in the infrastructure industry, one of the worst-affected sectors. LIC’s investment in infrastructure came down from ₹24,000 crores in March 2020 to just ₹4,100 crores now. In the IT and software sector, LIC’s investment has come down from ₹55,000 crore in March 2020 to ₹11,600 crore now, since businesses of most IT firms are down due to the demand slowdown in the US and Europe, with offices closing down.
On the other hand, the pharmaceutical industry, which has gained due to the pandemic, has attracted LIC the most as an investor. Its investment in pharma is now at over ₹37,000 crores against ₹17,700 crores last year. As demand for FMCG products shot up with people rushing to buy more personal and home care products, LIC has increased investment in the FMCG industry from ₹15,000 crores last March to around ₹50,000 crores now.