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Informist, Friday, Nov. 8, 2024

 

--LIC: In talks with 5-6 banks for bond forward rate agreement 

--CONTEXT: Comments by LIC management at post-earnings press conference 

 

NEW DELHI – Life Insurance Corp. of India Ltd. plans to enter the bond forward rate agreement market "very soon" with the company in talks with five to six banks regarding the same, the company's management said at a post-earnings press conference on Friday. LIC reported a 3.8% on year fall in net profit for the quarter ended September at INR 76.21 billion.

 

"We are going live very soon," LIC's management said at the press conference. "We are roping in 5-6 banks who are active in this segment," the management said but did not disclose the names of the banks. Bond forward rate agreements are trades in which banks buy long-term gilts with an agreement to sell these to insurance companies at a later date, on a cash-settled basis. The market for these agreements, which are traded over-the-counter and not officially reported, has now swelled to around INR 3 trillion, according to bond market participants. Foreign banks have dominated the bond forward rate agreements segment in recent years, but domestic banks have entered the space over the past two years.  

 

When asked what quantum of its assets under management LIC is planning to tie to bond forward rate agreements, the company said "it depends upon the availability and the quality of the contracts that we can get in". LIC's overall debt assets under management were INR 37 trillion as on Sept. 30, the management said. 
 

"We are going to take a very calibrated approach in this segment as we are just starting it," LIC's management said. "We will have to see the depth in the market to the extent it is possible and available and depending upon the interest rate outlook that we will have from time to time." 

 

Shares of LIC on Friday ended 1.6% lower at INR 914.65 on the National Stock Exchange.  End

 

Reported by Shubham Rana

Edited by Vandana Hingorani 

 

 

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