LIC MD Mukesh Gupta speaks to Anil Singhvi, says profit booking from sale of equities in fiscal was Rs 29,000 cr, highest ever for insurer

State-run insurer Life Insurance Corporation of India (LIC) has created a wealth of a whopping Rs 29,000 cr till now in this year from the stock markets. It aims to invest Rs 5 lakh cr withing this finacial year. The company is planning to bring a public issue. In chat with Zee Business Editor Anil Singhvi, the Managing Director (MD) Mukesh Guta spoke candidly about company's plans and much more. Edited Excerpts:         

Q1: How much profit LIC has booked in the current financial year?

Ans: LIC has always been a contrarian and long term investor. We invest our funds for long term. Accordingly, we invest in stocks which have value for long term.  Not only sale of equity we are buyers’ also. Our equity portfolio is increasing substantially. This year we have booked record profit of Rs. 29000 crores from sale of equities, which is the highest ever in the 64 years history of the Corporation. We are confident that we will create new records in this fiscal.

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Q2: What is the secret or the strategy behind booking such huge profits in the current fiscal  Are you selling by taking a view on the market or  otherwise ?

Ans:  We are a contrarian investor with a bottoms up approach of taking a view at Company level. We have in-house investment research team and an active approach to equity investment. We study the long term valuations, short term movements and utilise the available opportunity in the market. At LIC, buying & selling of equities is a continuous process and we utilise the opportunities in the market to book profits as well as to buy equity.

Q3: What will be your strategy regarding further investments in the coming days. What would be the quantum of debt and equity purchases?

Ans: We have invested Rs. 3,58,000 crores in the current year, out of which we have invested Rs. 63,000 crores in equities. In the remaining period we would be investing between Rs. 1,50,000 to 1,75,000 crores. Normally, our investment in equities is between 15-20% and rest is in debt. However, this will depend on the market conditions. Our total gross investment in the current year will be approximately Rs. 5,00,000 crores, which will be 14-15% more than the last year’s total investment.

Q4: What are your preparations regarding IPO of LIC and when can we expect  it to come?

Ans: The process of disinvestment is being handled by DIPAM (Department of Investment and Public Asset Management). In this regard some advertisements regarding engagement of actuarial firms have been published by DIPAM as well as LIC. We have floated RFP for actuarial software for calculation of embedded value. The work of IPO is under progress. The timelines for LIC’s IPO will be decided by DIPAM and Government of India.

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#ZBizExclusive | इस साल LIC ने अब तक बाजार से की 29 हजार करोड़ की रिकॉर्ड कमाई.. #NewsParViews में मैनेजमेंट ने कहा- इस साल पांच लाख करोड़ के निवेश का लक्ष्य

पूरा इंटरव्यू यहां देखें- https://t.co/1yQjqMwj58#LIC #IPO #MukeshGupta @LICIndiaForever pic.twitter.com/HKmUQGsQjb

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  Q5: What are your plans and strategies regarding IDBI bank?

Ans:  We invest for long term value creation. Our investment in IDBI bank was done keeping in mind the long term value. I am happy to share that IDBI bank has registered profits in the last three quarters, consecutively. There is reduction in net NPAs of the bank. We are hopeful that RBI will come out with its decision of announcing the exit of IDBI bank from PCA. The decision on disinvestment in IDBI will be based on the guidelines of the Regulator, value creation & profitability for our policyholders and such decision will be taken as & when we see the right opportunity. For the time being we shall stay invested and we hope that the turn-around in IDBI bank will continue and the bank will earn profits in the coming days. You might be aware that the IDBI bank had recently come out with QIP for additional capital and the same was success and we hope that the bank will soon come out of the PCA.

Q6: Traditionally a major chunk of LIC’s new business is procured through agents. Because of corona whether there was any setback in new business as the movement of agents was restricted?

Ans: The lockdown was imposed towards the end of the fiscal 2019-20. In the first quarter of the current fiscal we registered de-growth in First Year Premium (FYP)

Almost 90% of our new business comes from agents and during lockdown physical movement of our field force was adversely affected. After the lockdown was lifted partially in July, new business performance started improving. In the second quarter of the current fiscal there was growth in individual business to the tune of 4.17 %.

As on 30th November there is miniscule overall de-growth of 3.76 % in FYP as compared to de-growth of 18.45 % in the first quarter.  In individual business we continue to show positive growth of almost 5% in FYP.

Corona virus has taught us new things and people have realised that life insurance is necessary and it has been accepted by the people that life insurance is at par with ‘Roti, Kapdaa & Makaan’.

Because of corona, digital technology has gained prominence. Our employees started ‘Work from Home’ leveraging our extensive IT network. Last month we have launched digital app ‘ANANDA (Atma Nirbhar Agents Newbusiness Digital Application)’ for agents. Through this app the customer can complete the entire process of buying life insurance, paperless. This app is becoming popular and we hope that in the coming days we shall show good growth in new business and will close this financial year with double digit growth in First Year Premium Income.

Q7: In the current year many private companies have revised their term insurance premium rates. In January when the insurers will renew their contracts with the reinsurer, whether LIC will increase its term insurance premium rates?

Ans:  We have launched Tech-term and Jeevan Anmol plans last year. Private insurance companies have increased their term insurance premium rates whereas we did not revise our premium rates. Even today our Tech-term plan is available at competitive rates and we have no imminent plans to revise our premium rates. However, you will agree that premium rates are dependent on mortality rates & experience and reinsurance rates. Our decision will be based on them. As of now, there is no communication from our reinsurer for revision of term insurance premium rates.

Q8: How much cash do you have for investment? Since people are apprehensive that correction will come in the market and LIC will be one organisation to watch in such falling market, what are your comments?

Ans:  As a matter of strategy we keep investing our inflows in a continuous manner .Whatever cash we receive we invest in the market and do not keep anything as reserve.   Our future investments will depend on our cash flows and the investment opportunities that arise.  We try to ensure maximum value creation for our policy holders.

I would also like to place on record the good work done by our employees & agents during the ‘new normal’, triggered by the corona pandemic. I also thank our esteemed policyholders & other stakeholders who appreciated & welcomed our digital initiatives & relaxations during the pandemic period and reposed their trust and confidence in LIC.