LIC’s primary role is to collect insurance premiums and provide returns on insurance and investments. However, some people have questions about LIC’s investment in the stock market. Does it actually invest our insurance money there? Learn the details.
The country’s largest insurance company, LIC (Life Insurance Corporation of India), has released its second quarter results. The company’s consolidated net profit increased by approximately 30.7 percent year-on-year. The company’s profit increased to ₹10,098 crore from ₹7,728 crore in the same period last year.
The company’s net premium income also increased, reaching ₹1,26,930 crore in Q2, compared to ₹1,20,326 crore in the same period last year, representing a 5.5 percent increase in revenue. However, LIC’s profit in the second quarter was approximately 8 percent lower than the first quarter of the current financial year.
Now let’s understand how LIC’s business operates and how it generates revenue.
LIC was established in 1956 when the government merged over 245 private insurance companies to form a government-owned insurance organization. The main work of LIC is to collect insurance premium from people and in return provide returns on insurance and investment.
LIC’s business is divided into three parts…
1. Life Insurance: This is LIC’s core business. People purchase insurance policies from LIC, such as life insurance, endowment plans, term plans, pension plans, and child policies. By paying monthly or annual premiums, LIC pays the sum assured upon policy maturity or in the event of death. This premium is the largest source of LIC’s income.
2. Investment Income: LIC invests millions of customers’ money in government bonds, the stock market, infrastructure projects, and companies. The interest, dividends, and capital gains earned on these investments are LIC’s second-largest source of income.
LIC’s investment portfolio exceeds ₹45 lakh crore, and LIC has invested this amount in major companies like Reliance, ITC, HDFC Bank, Infosys, TCS, and SBI.
3. Loan and Service Income: LIC also offers policy loans to its policyholders. The interest earned on these loans is additional income for LIC. In addition, LIC also earns income from certain services and fees (such as agent commissions or processing charges).
How does LIC generate profit?
LIC’s profit is the annual income it receives after deducting expenses (employee salaries, claim payments, and agent commissions). This profit is distributed between the government (which is LIC’s largest shareholder) and policyholders.
Meanwhile, people often wonder whether LIC invests in the stock market, so is it investing our insurance money or mutual funds? Let’s understand.
LIC has two major funds… Policyholders’ Fund – This is the money that customers deposit as premiums for their insurance policies. LIC invests this money under government regulations. According to the Insurance Regulatory and Development Authority of India (IRDAI), LIC is required to invest a certain portion of its investments in various sectors. According to the regulations, more than 50% is invested in government bonds, 15–20% in corporate bonds, approximately 20–25% in the stock market, and 5–10% in infrastructure and social projects. This means that LIC invests only 20–25% of its investments in the stock market, with the remaining funds invested in safer avenues.
LIC has a separate subsidiary, LIC Mutual Fund, which runs mutual fund schemes (such as the LIC MF Large Cap Fund, LIC MF Flexi Cap Fund, etc.). However, its funding comes from investors (mutual fund investors), not from insurance policyholders.
Question: Does LIC invest insurance money in the stock market?
Answer: Yes, approximately 20–25% of the money is invested in stocks.
- Question: Does mutual fund money go to LIC?
- Answer: No, LIC Mutual Fund is a separate entity.
- Question: Does the government regulate this investment?
- Answer: Yes, IRDAI and the Ministry of Finance monitor it.
