Life Insurance Corp. of India (LIC) is expected to post a year-on-year decline of 40% in profit-booking on equity investments in 2015-16, as choppy markets take their toll on the country’s largest investor.
LIC is expected to book a profit of Rs.15,000 crore on equities in the year to 31 March, a five-year low, two persons directly familiar with LIC’s investment accounts said. They spoke on condition of anonymity as the figures are not yet in the public domain.
Lower profits from investments will hurt LIC’s valuation surplus—the excess amount available for distribution to shareholders and customers holding a with-profits policy, a contract that entitles them to a share in the profit of an insurance company.
After providing for present and future liabilities stemming from maturity and death claims, the profit is distributed among the with-profits policyholders in the form of bonus or dividends.
Since the government holds a 95% stake in LIC, the lower profit will also mean a lower dividend for the government.
