India’s largest-ever IPO is almost here! The government has started the process for the country’s largest initial public offering (IPO) which will launch mostly in March, submitting preliminary documents with regulators for a share sale by state-owned insurance behemoth Life Insurance Corp of India. LIC has been providing life insurance in India for more than 65 years and is the largest life insurer in India. LIC accounts for approximately 2/3rd of the market share in terms of both GWP and NBP in the life insurance industry for Fiscal 2021, driven by its individual agent network especially in rural areas, wide range of products, and a sense of trust created by the brand LIC among individuals.
LIC is the largest asset manager in India as at September 30, 2021, with more than 3.3 times the total AUM of all private life insurers in India, approximately 16.2 times more than the AUM of the second-largest player in the Indian life insurance industry in terms of AUM, more than 1.1 times the entire Indian mutual fund industry’s AUM and 18.5% of India’s annualised GDP for Fiscal 2022. (Source: the CRISIL Report).
The size of the Indian life insurance industry was 6.2 trillion on a total-premium basis in Fiscal 2021, up from 5.7 trillion in Fiscal 2020. The industry’s total premium has grown at 11% CAGR in the five years ended Fiscal 2021. CRISIL Research forecasts the industry’s total premium to grow at 14-15% CAGR over the next five years, to reach close to 12.4 trillion by Fiscal 2026.
What’s in it for the policyholders?
With 1.35 million registered agents, LIC has 283 million policyholders and is the country’s biggest agent network. According to the filing, the business will reserve a set number of shares for policyholders in the IPO, not to exceed 10% of the offer size, while the amount held for workers will not exceed 5% of post-offer equity share capital. As of March 2021, LIC employed 114,498 individuals.
The business has deployed sales professionals to encourage policyholders – many of whom are first-time investors in stocks – to create demat accounts and link their PAN cards with them in order to participate in the IPO. The Last date to link PAN with policy number is 28 February 2022.
LIC IPO Key Data
- Number of Equity Shares held – 6,324,997,701
- Offer for Sale: 316,249,885 Equity Shares
- Claim Settlement Ratio (FY21): 98.3%
- Persistency Ratio (Individual products for Total Premium) FY21: 79.0%
- Solvency Ratio (FY21): 1.76 times
- Market Share in New Business Premium (FY21): 66.2%
- Market Share in Total Premium (FY21): 64.1%
- Return on Equity (FY21): 81.7%
- Embedded Value (Rs. Crore): 5,39,686
LIC Product Portfolio
Individual products comprise (i) participating insurance products and (ii) non-participating products, which include (a) savings insurance products; (b) term insurance products; (c) health insurance products; (d) annuity and pension products; and (e) unit linked insurance products.
Group products comprise (i) group term insurance products, (ii) group savings insurance products; (iii) group savings pension products; and (iv) group annuity products.
LIC Competitive Strengths
- Fifth largest life insurer globally by GWP and the largest player in the fast growing and underpenetrated Indian life insurance sector
- Trusted brand and a customer-centric business model
- Harnessing technology capabilities to support customer connect and drive operating efficiencies
- Largest asset manager in India with an established track record of financial performance and profitable growth
- Presence across India through an omni-channel distribution network with an unparalleled agency force
- Robust risk management framework
- Highly experienced and qualified management team, distinguished Board and strong corporate governance framework
Source: LIC IPO DRHP