The Life Insurance Corporation of India will comply with the Insurance Regulatory and Development Authority's norm on solvency by providing Rs 1,871 crore (Rs 18.71 billion) additional capital by this fiscal.
In the last 46 years of operation, the corporation was never required to provide for solvency margin. But after the IRDA regulation came into effect from 2000, LIC was asked to provide Rs 10,371 crore (Rs 103.71 billion).
"We have already provided about Rs 5,000 crore (Rs 50 billion) by 2001-02 and another Rs 3,500 crore (Rs 35 billion) last fiscal. We will provide the remaining Rs 1,800 crore (Rs 18 billion) by March end 2004," S B Mathur, chairman, LIC, told PTI in New Delhi on Friday.
IRDA has also asked LIC to provide another Rs 6,000 crore (Rs 60 billion) in the coming years. "But we feel it is not necessary," Mathur said, referring to the off-balance sheet reserves of over Rs 10,000 crore (Rs 100 billion) in the form of real estates.
The insurance monolith is expected to revalue its real estates in prime locations spread across the nation in the next 2-3 years, which would increase its off-balance sheet reserves further.
LIC has assets of over Rs 2,70,000 crore (Rs 2,700 billion), of which Rs 1,50,000 crore (Rs 1,500 billion) is in government securities.
The insurer is in the process of strengthening its financial position by closing down high assured return schemes as interest rates have fallen sharply in the last five years.
"Any policy, which is offering over 8 per cent return will be closed," Mathur said.
LIC has identified at least seven such schemes which have become unviable for the corporation in the soft interest regime. Earlier, the insurer had relaunched attractive schemes like Bima Nivesh and Jeevan Shree.
The decline in the sales of single premium policies would be offset by the growth in sales of New Jeevan Shree and the Varishtha Bima Pension Yojana, which has logged over Rs 2,000 crore (Rs 20 billion) in premium within two months of its launch.
The other pension schemes have yielded Rs 300 crore (Rs 3 billion) in the first five months.
"We are expecting 22-23 per cent growth in individual assurance schemes," Mathur said.
LIC expects an overall growth of 20 per cent in premium income at over Rs 11,600 crore (Rs 116 billion).
The insurer collected Rs 2,004.79 crore (Rs 20.05 billion), which was almost 90 per cent of the total premium collection of all insurers, in the first quarter.
LIC sold 30.03 lakh policies during the first quarter. In the second quarter, the insurer expects about Rs 3,500 crore (Rs 35 billion) mop up mainly due to the robust sale of Varishtha Pension Bima Yojana.