LIC has $60 billion of unrealised equity gains

The Life Insurance Corporation of India’s (LIC) exposure in equities is ₹9,78,814 crore ($130.42 billion) as of September 2021, mentions the life insurance behemoth’s draft red herring prospectus (DRHP). The unrealised gains in the portfolio is around ₹4,47,946 crore ($59.68 billion), including dividends, translating into a yield of 280%, as of September 2021. Of its total exposure to securities, LIC has made gains of ₹35,987 crore, translating into an average annual yield of 13.69%. How much of the gains were made through dividends is not clear.

As per the DRHP, 90% policyholders’ equity investments were in stocks from the Nifty and BSE 200 indices. According to Crisil, as of September 30, 2021, the investments in listed equity represent around 4% of the NSE’s total market capitalisation. The insurer has also invested ₹2,866 crore in unlisted equities.

The total investments of the insurer stands at ₹39.5 lakh crore ($526.30 billion), of which equities make up for 24.78% of investments. Government securities form a chunk of the corporation’s investments with sovereign-backed papers making up for 37.45% with a value of ₹14.81 lakh crore. Unrealised gains from debt and fixed deposits stood at ₹1.03 lakh crore, translating into a yield of 7.6%.

The corporation’s investments include 49.24% of the outstanding shares in IDBI Bank and 45.24% of the outstanding shares in LIC Housing Finance. Though IDBI Bank and LIC Housing Finance are associates of the corporation, they were made using policyholders’ funds, mentioned the DRHP.

Besides equities, 37.50% is invested in central government securities, 24.61% in state government securities, 8.07% in corporate bonds, 3.07% in loans, 0.22% in money market instruments, 0.66% in approved securities, 0.72% in mutual funds, exchange traded funds and venture funds, and 0.37% in other investments (i.e., preference shares and investment properties).

Of the total AUM, 61.67% was held in participating policyholder investments, 37.02% was held in non-participating policyholder investments, 1.15% was held in unit-linked policyholder investments and 0.16% was held in shareholders’ investments.