Shares of state-run Life Insurance Corporation (LIC) rallied over 2.5 per cent in early trade on Monday on reports that the company plans to pay dividends or issue bonus shares to shareholders. Stocks of LIC opened higher on Monday at Rs 606.90 on the NSE as against the previous close of Rs 592.70.
The state-owned insurer is reportedly planning to transfer nearly $22 billion from policyholders’ funds into a fund earmarked to pay dividends or issue bonus shares. The move is aimed to shore up both its own net worth and investor confidence, according to a Reuters report.
LIC was listed on the stock exchanges in May, but its stock has since dropped over 30 per cent.
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According to news reports, life insurance companies primarily sell two types of products: the first are ‘participating policies’ where profits are shared with customers and second are ‘non-participating’ or ‘non-par’ policies that have fixed returns. LIC parks the premium it collects from the non-par policies in a non-participating fund.
Transferring some of that into the shareholders’ fund is one way to shore up investor confidence as it would be an indicator of higher dividend payout in future, Reuters reported citing unidentified official sources.
Meanwhile, the LIC is planning to transfer nearly $22 billion from policy holders’ funds into a fund earmarked to pay dividends or issue bonus shares, citing sources Reuters said, as the country’s largest insurer aims to shore up both its own net worth and investor confidence.
The insurer listed on Indian stock exchanges in May, but its stock has since dropped by more than 35 per cent, wiping off nearly Rs 2.23 lakh crore in investor wealth. LIC is now looking to looking at steps to revive its share price, said a government official, who did not want to be named.
The company plans to transfer Rs 1.8 lakh crore ($21.83 billion), a sixth of the Rs 11.57 lakh crore lying in its non-participating fund, to its shareholders’ fund, according to an official aware of the matter.