LIC’s equity investment target cut by a third

MUMBAI: Life Insurance Corporation ( LIC), the first port of call for the government to save a slumping equity market, has cut its equity investment target by a third this fiscal as an increasingly hazy economic environment leads to a decline in sale of insurance policies.

The insurer, which controls three-fourths of the life insurance industry, will this year investRs 40,000 crore, down from the Rs 60,000 crore it planned at the beginning of the fiscal when economic outlook was rosy. The nation's biggest institutional investor has bought shares worth Rs 20,000 crore this year and will invest the rest over the next four months, said a senior executive who did not want to be identified. But even with the reduced outlay, it has been able to buy as many shares as it did last year since many of its favoured stocks, such as Reliance Industries, Tata Motors and IDFC, have halved in value.

"The fall in equity investment is due to the drastic change in public behaviour," said the executive. "Last year, Ulips (unitlinked insurance plans) sold like hot cakes. After the lock-in was increased from three to five years, they have lost their sheen. We have been investing up to 20% of total income in equities. This is not the case anymore."

Investors are staying away from insurance and mutual funds as layoffs and shrinking profitability of companies have increased the sense of gloom and uncertainty in the economy. New business premium - the measure of growth for insurance companies - fell 20% to Rs 55,738 crore in April-October, from Rs 69,708 crore a year earlier, data from the industry regulator shows.

Source: EconomicTimes