New Delhi: Public sector behemoth Life Insurance Corporation of India (LIC) has sold more stocks in 2017-18 to pay bonuses to policyholders.
LIC, which is a contrarian investor, has reported a 33 per cent rise in profit from sale of investments to Rs 28,527 in 2017-18. LIC had booked a profit of Rs 21,503 crore during 2016-17.
The benchmark BSE Sensex had given a return of 11.30 per cent during 2017-18. Interim bonuses paid to policyholders during the year rose 67 per cent to Rs 1,554.79 crore compared to Rs 929.49 crore in FY17.
“Most of the profits have come from equities. Also LIC holds older government securities at attractive price and holds them to maturity normally. We don't know of the sale of investments how much profit has come from equities but this portion would be higher. Also the margin from equities is higher compared to debt investments. LIC needs to maintain its past bonus rates and has sold more in FY18,” a former LIC official told FC.
For the fourth quarter ended March 31, 2018, profit on sale of investments rose by 13 per cent to Rs 7,330 crore compared to Rs 6,464 crore during the same quarter a year ago. Income from interest, dividends and rent was Rs 1.82 lakh crore during FY18 compared to Rs 1.64 lakh crore in FY17.
LIC reports its financial numbers after a lag and has recently declared its fourth quarter results.
As at March 31, 2018, LIC balance sheet increased to Rs 27.91 lakh crore compared to Rs 25.29 lakh crore during the previous year.
Bad loans a concern: In the last several years, in its life fund (traditional insurance premium), Rs 21,080.93 crore worth of loans given to various municipalities, state governments and corporate houses have turned bad and have been classified as loss, sub-standard and doubtful.
LIC has made a provision of Rs 16,020.07 crore on it. On the same lines, Rs 331 crore of loans given to companies have seen defaults with the Corporation completely providing for it. The pension fund had a book value of Rs 3,737.63 crore loan defaults for which LIC provided Rs 1,757.63 crore.
The gross NPA ratio of LIC’s debt portfolio steadily climbed to 6.23 per cent in FY18 compared to 4.73 per cent in FY17. The Net NPA ratio was 1.82 per cent in FY18 compared to 1.96 per cent in the previous year.
Business performance: According to Irdai data, LIC had recorded just 8 per cent rise in premium from new sales (first year premium) at Rs 134,551.68 crore in 2017-18 compared to Rs 124,396.27 crore in the previous year. In comparison, private players underwrote a first year premium of Rs 59,314.55 crore during FY18 compared to Rs 50,626.23 in FY17, a growth of 17 per cent.
Calls and text messages sent to LIC officials, including VK Sharma, chairman, were not answered.
