LIC’s equity strategy pays off with record profit of Rs. 33,000 cr

LIC has already booked net profit of Rs 33,085 crore on sale of equities so far this year as compared to Rs 18,371.47 crore profit in the entire previous fiscal, in a report.

LIC  purchased equities worth Rs 64,801 crore in the first nine months of the fiscal year up to the first week of January, as against Rs 40,510 crore in the same period last year, the report mentioned. In the previous fiscal year, the state-owned insurer purchased equities worth Rs 61,590 crore.

“After the lockdown started, and we were sure of cash flows to take care of claim settlements, we started buying equities as the stock markets crashed day after day in the aftermath of the pandemic,” the publication quoted LIC chairman MR Kumar as saying. “As contrarian players, we felt better days would come.”

Worth mentioning here is that benchmark equity indices plunged over 40% from January highs to a four-year low on March 24 when the government announced a nationwide lockdown that triggered a panic that earnings would collapse as businesses shuttered. Foreign investors, mutual funds and individual retail investors fled in March and April fearing the worst.

But LIC’s investment decision to sell during the earlier part of the year and the subsequent buying when others were fleeing proved beneficial with the insurer registering record-high profits while raising its stakes in many companies at the same time.

“This was a strategy to create future profits that would sustain solvency ratios and increase returns to policyholders,” Kumar added. “It worked and as of today, we have made our highest-ever profits.”

Profits booked by LIC this year are the highest ever in the history of the insurer. With the upward momentum in markets continuing, LIC’s profits for the full financial year are expected to double over the previous year according to company officials.