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• Off late , there is a lot of discussion going on
online , print and visual media regarding LIC’s
investment decisions. We know that it is
creating a lot of doubt and confusion among
our field force and policy holders.
• What is the real picture? Is there any room
for worry to the policy holder? Are we
handling policy holders’ money with
responsibility? Let us analyze….
Why does LIC invest its life fund?
• LIC holds policyholder’s money in its Life Fund, which
we have to pay as and when claims arise
• The capital available with LIC is essentially premia paid
by its policyholders. LIC invests this capital in order to
generate enough surpluses to fund claims, death
benefits and maturity proceeds to policyholders and
their beneficiaries.
• LIC is committed to safeguard policyholders money and
return their savings with decent returns.
• The judicious investment of money ensures that
money grows, inflation is checked and policyholder
gets best returns on his investments.
Who makes investment decisions?
• LIC's investments are guided by various regulations and
guidelines. We make our investment decisions on the
basis on the Insurance Act, IRDA investment regulations,
investment policy approved by the board of LIC,
investment committee guidelines and our standard
operating procedures.
• All our investment decisions are subject to approval of
IRDAI and scrutinized by our owner, the Govt. of India.
• The investment department is divided into three verticals
-- monitoring and accounting, risk management and
research and investment operations, which is the most
important of the three. These verticals function under
the three Managing Directors of LIC.
The Big Daddy
• LIC is the largest investor in the financial
sector and the biggest holder of liquid funds.
• Govt. depend on LIC for long term financial
investments since LIC holds funds for longer
• LIC has always come to rescue of Govt. owned
entities and is having investments in almost all
business majors.
Where does LIC invest Policy
Rs. Lakhs % to total investments
Govt. securities and Govt. 13,99,27,460.86 62.50%
guaranteed Bonds
Other approved Securities 24,62,831.75 1.10%
Shares 3,99,75,105 17.58%
Preference 3,925.79 0.0017%
Mutual Funds 1,71,036.24 0.07%
Debentures/Bonds 79,94,336.25 3.57%
Real Estate 11,32,046.27 0.50%
Infrastructure/ social 1,94,73,024.71 8.70%
Provision for doubtful 22,84,363.53 1.02%
Total investments 22,38,87,271.75 * Source- LIC Annual
Report 2017
THE BREAKDOWN LlC holdings in PSBs
Top 10 LIC Holding
Shms % 01 Value Holding (%)
{in mn nos) holding {f crore) Corporation Bank 22.54
lTC 1,155 14.4 39,085
Indian Overseas Bank 14.23
Reliance lnds 295.6 9.1 27 ,593
United Bank of India 14.19
SBI 875.1 11.3 21,692
Larsen & Tou bro 15 3.2 16.5 20,803
Dena Bank 13.12
O N GC 699.6 8.2 16,110 - Bankoflndia 12.53
IC IC IBanI< 535.7 9.2 14,308 - 5tat e Bank of India 12.26
Coa l India 421.4 6.7 13,949- Bank of Maharashtra 10.85
lnfosys 127.1 5.5 13,721 -
-- ===-------­
Punjab & Sind Bank=== 10.49
TCS 47.7 2.4 11,350 - Central Bank 10.04
NTPC 827.4 10.0 10,846- Bank of Baroda 9.96
Altered for Niftyso;s take as perSHP as onSep201s;Va lue asNov 16 UnJ·on Bank of lnd
1 9.47
Source:capltaline Compiled by BS Research Bureau
Syndicate Bank 8.34
(In f crore) FYB FY14 FY15 FY16 UCO Bank 6.84
LIC's tota l investment 2 lakh 2.25 lakh 3 lakh 4 1a kh• Vijaya Bank 1&1:M
Equity 40,000 4 2,000® 45,000- 46,000 45,000 +
Canara Bank
Premium 76,490 90,644.57 78303 47109
•Estimated basedon cur rent trends; @Approximately;nPremlum collected betweenAprilI, A ndhraBan k
2015-0ctober 31,2015 Source: Company,life Insurance council
lOBI Bank
Companies where LIC increased stake in March quarter

ani Tra
Amb indtree

Coal I ia
Co (I ia} I& atural Gas
l Oracle nancial Se ces re
R.eddys la es dil nd es
Gateway Grid Of nd
Granules lnd r&Ga ne& ea
Care Sun callnd
nd es Swan Ene
ind n Petro u Tech ahindra
industan lever ltratech Ce ent
I Bank Yes
CRA. Zee inme Ente
lndiabul ng nance oskar nes
ra a Gas
Source: Ace Equity
Why doesn’t Gov t. issue bonds i
nstead of
funding through LIC money?
• “Technically, the ability of LIC to fund the obligations is
determined by the performance of its investment portfolio.
Practically though, all these obligations are sovereign obligations
of the Government of India (GOI). In a curious way, but effectively,
it isn’t ver y different from GO I raising money via a bond
from the public and investing that money to (say) infuse capital
into IDBI Bank. The primary difference is in the balance sheet
treatment — a bond issuance by GOI would land up in the Union
Budget, while fund infusion by LIC is “off budget ” in nature.
the best, most transparent way of doing things, but given various
constraints, not an option that would kill. Irrespective of how the
underlying portfolio performs, LIC (and by proxy, GOI) is liable to
pay up the committed claims of policyholders. For policyholders,
this means they have taken no more than sovereign risk — the
highest quality credit risk that a domestic investor can invest in.”
Will LIC ’s investment decision s
Three tier protection for policy
holders’ m oney
• Money invested in LIC is guarded by Three Tier


• According to Section 37
of LIC Act 1956, all
liabilities, including
accrued bonuses ,are
Guaranteed by the
Government of India as
to payment in Cash.
• Thus money given to LIC
is money entrusted with
Govt. of India.
Solvency Margin
• Solvency Margin is a statutory requirement whereby the
insurer is obliged to maintain minimum 150% of assets
over liabilities at any point of time to ensure Solvency

• This ensures that in any case of liquidation the investors

will receive their money

• LIC maintains a Solvency Margin of 1.55%, i.e., our Assets

are 1.55 times of our liabilities.
Re insurance is a risk sharing mechanism adopted
by insurers while underwriting large risks
The risk is shared with the reinsurance company,
which ensures the payment of large liabilities
LIC reinsures all risks above Rs. 40 lakhs with
GIC Re, India’s reinsurance company.

Thus in any event LIC is not in a position to pay

off a large claim, the re insurer will pay off the
... .
All in tments in th
Sta Owned insu r
Is Thus 100 safe
And 1uarant d
Be insured, Be Assured
• We have built India for the past 61 years….
• And we will continue…
• We know India better…..
• Reference:
IRDAI Annual Report
LIC of India Valuation Report
The Economic Times
Various web sites

Compiled and prepared by-