LIC is India’s largest life insurer. LIC may cut back investing in stocks as new premium growth gets blocked. It is suggested that a cut back an equity allocation by Rs. 10000 could be the lowest in a decade. LIC is reported to have invested Rs. 47000 crores equity in the financial year 2020. This amount is down 21% from the one it invested in the previous financial year. LIC may revise its equity investment target downwards by more than Rs. 10000 crores for the current year due to stalling new premium growth in the context of disruptions due to COVID-19 issues.
An overwhelming amount of Rs. 47,000 crores equity has been invested by LIC in the financial year 2020 which is but down 21% the amount relating to the last fiscal year. One of the world’s largest insurer- LIC has major investments in more than 100 privately held listed firms.
The state on the insurer had invested more than Rs. 59,115 crores during April to January period of the financial year 2019. Figures show that for both April and May the first-year premium collections have been 25-30% compared to last year. The entire scale of policies for LIC is contributed by individual agents on the ground.
These agents have not been able to reach the public for selling policies due to social distancing norms and the lockdown. If policies are not sold, the investable surplus will not come which will finally impact investment by LIC. Because of the current uncertain economic environment, the downtrend is likely to continue for at least more than 2-3 more quarters. By early July LIC is set to have an investment strategy committee meeting. The equity investment budget will be a topic of discussion LIC may be able to garner higher premium inflows because of their strategy. A higher investment in equities for financial 2021 will have resulted. This is in the context of businesses opening up in the likely lifting of the lockdown.
Due to the lockdown, the insurers have started feeling the insufficiency. During April of the current financial year, the insurers earned about 32% business premium which is down compared to that earned in April last year. In the present lockdown scenario, the premium collections for all insurers were down during March. The total earnings for the first-year premium registered more than Rs.8342 Cr. in March. This amount is more than 34% lower than the figure in March 2019. Typically considered to be a push product, the insurers including LIC depend on a network of agents, brokers, and bank branch officials to sell the products.
