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LIC made Rs 42k crore gains via share sale in FY22, remains contrarian equity investor – Moneycontrol

LIC reported a net profit of Rs 4,043 crore for the full year of FY22 which is a 39 percent growth over FY21.

Life Insurance Corporation of India (LIC), India’s largest asset manager and also the biggest bailout balance sheet for the government, has raked in a cool Rs 42,000 crore worth of realised gains from selling its equity investments in FY22, managing director Raj Kumar said in a press briefing post release of quarterly results.

LIC remains a contrarian investor in the market, though. The gains made in FY22 are 16.6 percent more than the Rs 36,000 crore gains made in FY21 by the insurance behemoth. Kumar said that 25 percent of LIC’s asset under management is in equities and the rest in bonds and other instruments.

The life insurer’s yield on investments has declined for FY22, an indication that low-interest rates may have hit its bond portfolio. In the fourth quarter, the yield was 7.46 percent, excluding unrealised gains, down from 8.02 percent. If unrealised gains are included, the yield is 9.39 percent, a steep fall from 15.41 percent a year ago.

“Our investment strategy is based on regulations prescribed and the LIC Act. It is mandated that we invest 50 percent in g-secs (government bonds),” Kumar said. Investments into high-yielding state development loans have helped LIC to shore up its yield on investments, he added.

LIC reported a net profit of Rs 4,043 crore for the full year of FY22 which is a 39 percent growth over FY21. Kumar clarified that the quarterly net profit figure is not strictly comparable with the corresponding period in the previous year given that the insurer had not declared profits every quarter before it got listed.

LIC’s focus for FY23 would be to increase the share of non-participatory products in its portfolio to ramp up profitability, Kumar said. In FY22, just 29 percent of new business came from non-par products and only 7 percent of the policies sold were non-par. “The driver of our growth would be from non-par products going forward. In fact, we would be launching only non-par products this year,” Kumar said. Currently, LIC has 18 non-participatory policies. Non-par policies are those that do not provide a share in the insurer’s profits such as pure term plans, and unit-linked insurance products (ULIP). In total, LIC has more than 260 different policy products.

Further to drive growth, the insurer will rely heavily on its bancassurance tie-ups in addition to its unrivaled agency network.

Kumar stopped short of giving numerical forward guidance for FY23 although he reiterated that LIC is focused on keeping up growth levels and generating returns for policyholders.

LIC’s policyholders, many of them now investors too through the initial public offer of shares, are not a happy lot currently given the sharp value erosion in the stock market. Shares of LIC were down more than 2 percent on Tuesday as the quarterly performance failed to enthuse investors. With this, the stock is down 15 percent from the issue price of Rs 949 per share.