Version 14.1 by Asif Farooqui on 2022/04/25 19:52
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4
5 = Summary =
6
7 * The Life Insurance Corporation of India was created on 1st September, 1956
8 * LIC had 5 zonal offices, 33 divisional offices and 212 branch offices
9 * The total number of Agents on Roll is 12,08,826 as on March 2020
10 * LIC's IPO Likely To Open On May 4
11
12 [[image:LIC0.jpg||height="539" width="719"]]
13
14 = Company Overview =
15
16
17 The Parliament of India passed the Life Insurance Corporation Act on the 19th of June 1956, and the Life Insurance Corporation of India was created on 1st September, 1956, with the objective of spreading life insurance much more widely and in particular to the rural areas with a view to reach all insurable persons in the country, providing them adequate financial cover at a reasonable cost.{{footnote}}https://licindia.in/Top-Links/about-us/History{{/footnote}}
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20 LIC had 5 zonal offices, 33 divisional offices and 212 branch offices, apart from its corporate office in the year 1956. Since life insurance contracts are long term contracts and during the currency of the policy it requires a variety of services need was felt in the later years to expand the operations and place a branch office at each district headquarter. Re-organization of LIC took place and large numbers of new branch offices were opened. As a result of re-organisation servicing functions were transferred to the branches, and branches were made accounting units. It worked wonders with the performance of the corporation. It may be seen that from about 200.00 crores of New Business in 1957 the corporation crossed 1000.00 crores only in the year 1969-70, and it took another 10 years for LIC to cross 2000.00 crore mark of new business. But with re-organisation happening in the early eighties, by 1985-86 LIC had already crossed 7000.00 crore Sum Assured on new policies.
21
22
23 **Subsidiaries**
24
25 * LIC Pension Fund Limited
26 * LIC Cards Services Limited
27
28 **Foreign Joint Venture Co**
29
30 * Life Insurance Corporation (International) B.S.C. (c), Bahrain
31 * Life Insurance Corporation (Nepal) Ltd
32 * Life Insurance Corporation (Lanka) Ltd
33 * Kenindia Assurance Company. Ltd
34 * Saudi Indian Company for Co-operative Insurance
35 * Life Insurance Corporation (LIC) of Bangladesh Limited
36
37 **Foreign Wholly Owned Subsidiary**
38
39 * Life Insurance Corporation (Singapore) Pte. Ltd
40
41 [[image:LIC1.jfif]]
42
43
44 == Products ==
45
46 LIC India has a broad, diversified product portfolio covering various segments across individual products and group products
47
48 * Insurance Plan
49 * Pension Plan
50 * Unit Linked Plans
51 * Micro Insurance Plans
52 * Withdrawn Plans
53 * Health Plans
54
55 **Group Schemes**
56
57 * Pension & Group Schemes
58 * Gratuity Plus NAV
59
60 [[image:LIC2.png]]
61
62
63 == Industry Overview ==
64
65 == Structural Reforms in India ==
66
67 According to the World Bank’s Global Findex Database 2017, the global average of adult population with a financial services account (either with a bank, financial institution, or mobile money providers) was approximately 69% in 2017. India’s financial inclusion has improved significantly between 2014 and 2017, with the adult population with bank accounts rising from 53% (as per Global Findex Database 2014) to 80% in 2017 with concentrated efforts by the government to promote financial inclusion and the proliferation of supporting institutions. That said the rise in the number of bank accounts has not translated into a corresponding increase in the number of transactions and fruitful usage of those accounts. As per the World Bank’s Global Findex Database 2017, 40% of the accounts did not make any deposit or withdrawal in the past year (2016).
68
69
70 **Pradhan Mantri Jan Dhan Yojana (PMJDY)**
71
72 This scheme, launched in August 2014, is aimed at ensuring that every household in India has a bank account which can be accessed from anywhere and be used to avail all financial services such as savings and deposit accounts, remittances, credit and insurance affordably. PMJDY focuses on household coverage compared with the earlier schemes that focused on coverage of villages. It aims to extend banking facilities to all within a reasonable distance in each sub- service area (consisting of 1,000-1,500 households) across India. As on March 31, 2021, 422 million PMJDY accounts had been opened, of which, 66% were in rural and semi-urban areas, with total deposits of Rs. 1,455 billion.
73
74
75 **PMJJBY (Pradhan Mantri Jeevan Jyoti Bima Yojana)**
76
77 This scheme, launched in May 2015, is aimed at creating a universal social security system, targeted especially at the poor and under-privileged. PMJJBY is a one-year life insurance scheme, renewable from year to year that offers a life cover of Rs. 0.2 million for death due to any reason and is available to people in the age group of 18 to 50 years (life cover up to 55 years) at a premium of Rs. 330 per annum per member. This scheme is offered/administered through LIC and other Indian private life insurance companies.
78
79
80 **PMSBY (Pradhan Mantri Suraksha Bima Yojana)**
81
82 This scheme, launched along with PMJJBY in May 2015, is aimed at creating a universal social security system, targeted especially at the poor and under- privileged. PMSBY is a one-year accidental death and disability insurance cover, renewable from year to year that offers an accidental death and full disability cover of Rs. 0.2 million (Rs. 0.1 Million for partial disability). This cover is available to people in the age group of 18 to 70 years at a premium of Rs. 12 per annum per member. The scheme is being offered by public sector general insurance companies or any other general insurance company that is willing to offer the product on similar terms with necessary approvals.
83
84
85 [[image:lic3.png]]
86
87
88 **India is the Fifth Largest Insurance Market in Asia and Has Exhibited Consistent Growth in Insurance Premiums**
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90 Based on life insurance premium, India is the tenth largest life insurance market in the world and the fifth largest in Asia, as per Swiss Re’s sigma No 3/2021 report for July 2021. The size of the Indian life insurance industry was Rs. 6.2 trillion based on total premium in Fiscal 2021, up from Rs. 5.7 trillion in Fiscal 2020. The industry’s total premium has grown at 11% CAGR in the last 5 years ending in Fiscal 2021. New business premiums (NBP) grew at 15% CAGR during Fiscals 2016 to 2021, to approximately Rs. 2.78 trillion. In fact, in Fiscal 2021 – a year impacted by the COVID- 19 pandemic, the NBP of the industry rose by 7.5%. Within the NBP, group business premium grew at approximately 15.4% CAGR from Fiscals 2016 to 2021, whereas individual premium rose approximately 14% CAGR during the same period.
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92
93 **Total premium to cross Rs. 12 trillion by Fiscal 2026**
94
95 CRISIL Research forecasts the total premium for life insurers to grow at 14-15% CAGR over the next five years. At this level of premium, life insurance as a proportion of GDP is projected to reach 3.8% by Fiscal 2026, up from 3.2% in Fiscal 2021. NBP is expected to grow at a CAGR of 17-18% during the same period ending Fiscal 2026. Further in the long term, life insurance NBP is expected to grow at robust growth of 14-16% CAGR between Fiscal 2021 to Fiscal 2032.
96
97
98 == Business Overview ==
99
100 LIC has been providing life insurance in India for more than 65 years and is the largest life insurer in India, with a 64.1% market share in terms of premiums (or GWP), a 66.2% market share in terms of New Business Premium (or NBP), a 74.6% market share in terms of number of individual policies issued, a 81.1% market share in terms of number of group policies issued for Fiscal 2021, as well as by the number of individual agents, which comprised 55% of all individual agents in India as at March 31, 2021. LIC had the highest gap in market share by life insurance GWP relative to the second-largest life insurer in India as compared to the market leaders in the top seven markets globally (in 2020 for the other players and in Fiscal 2021 for LIC). (Source: the CRISIL Report). According to CRISIL, this is owing to its enormous agent network, strong track record, immense trust in the brand ‘LIC’ and LIC’s 65 years of lineage. LIC is ranked fifth globally by life insurance GWP (comparing LIC’s life insurance premium for Fiscal 2021 to its global peers’ life insurance premium for 2020) and 10th globally in terms of total assets (comparing LIC’s assets as at March 31, 2021 with other life insurers’ assets as at December 31, 2020).
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103 LIC is the largest asset manager in India as at September 30, 2021, with AUM (comprising policyholders’ investment, shareholders’ investment and assets held to cover linked liabilities) of ₹39,558,929.24 million on a standalone basis, which was (1) more than 3.3 times the total AUM of all private life insurers in India, (2) approximately 16.2 times more than the AUM of the second-largest player in the Indian life insurance industry in terms of AUM, (3) more than 1.1 times the entire Indian mutual fund industry’s AUM and (4) 18.5% of India’s annualised GDP for Fiscal 2022. As per the CRISIL Report, as at September 30, 2021, LIC’s investments in listed equity represented around 4% of the total market capitalisation of NSE as at that date.
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106 LIC dominant in group insurance with approximately 80% market share In terms of segments, the share of group NBP in total NBP has increased from 58% in Fiscal 2016 to 62% in September 30, 2021. LIC continues to dominate the group NBP segment with 78% market share for Fiscal 2021. On the other hand, private players have increased their market share in individual NBP from 44% in Fiscal 2016 to 50% in Fiscal 2021 and further to 56% in September 30, 2021 Customers can also approach its branch offices and satellite offices and purchase products through its intermediaries. As at September 30, 2021, LIC had 2,048 branch offices and 1,554 satellite offices in India.
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109 LIC’s individual policies are primarily distributed by its individual agents. In Fiscal 2019, Fiscal 2020, Fiscal 2021 and the six months ended September 30, 2021, individual agents were responsible for sourcing 96.69%, 95.73%, 94.78% and 96.42% LIC’s NBP for its individual products in India, respectively.
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112 As at March 31, 2019, March 31, 2020, March 31, 2021 and September 30, 2021, LIC had 1.18 million, 1.21 million, 1.35 million and 1.34 million individual agents in India, respectively. As at March 31, 2021, LIC’s individual agency force accounted for 55% of the total agent network in India and was 7.2 times the number of individual agents of the second largest life insurer in terms of agent network. The number of LIC’s individual agents in India increased at a CAGR of 7% between March 31, 2019 and March 31, 2021, compared to the next best player’s agency force CAGR of 5% during the same period.
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115 LIC has the most productive agent network in the Indian life insurance sector by both NBP and policies sold. As per the CRISIL Report, in Fiscal 2021, LIC’s individual agents had an average NBP of ₹412,934 per agent compared to the average NBP of ₹322,442 per agent for the best performing of the top five private players and ₹124,892 per agent for the median of the top five private players. In Fiscal 2021, LIC’s individual agents sold 15.3 policies per agent on average compared with the average of 3.9 individual policies sold by the individual agents of the best performing of the top five private players and the average of 1.6 individual policies sold by the individual agents of the median of the top five private players.
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118 (% class="wikigeneratedid" %)
119 [[image:LIC4.webp]]
120
121 = Financial Highlights =
122
123 During the year 2019-20, the Corporation under Individual New Business, has procured 2,18,96,220 Policies with a First Year Premium Income of ₹ 51,227.83 Crore. The achievement to budget in NOP was 87.58 % and in FYPI 90.67 %. ₹ 13,202.35 crore premium earned under 1,68,779 policies of Pradhan Mantri Vaya Vandana Yojana. In Agency recruitment, the Corporation registered a net addition of 29,597 agents.{{footnote}}https://licindia.in/getattachment/Bottom-Links/annual-report/LIC-Annual-Report-2019-20.pdf.aspx{{/footnote}}
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126 During the Financial Year 2019-20, the Bancassurance and Alternate Channel (B&AC) completed 2,45,475 policies and garnered ₹ 1,534.88 Crore of First Year Premium Income (FYPI). The Percentage share of B&AC First Premium Income to Total First Premium Income (Individual Assurance) was 3.73% during the year
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129 Currently, the channel has tie-ups with 10 Public Sector Banks, 6 Private Banks, 16 Regional Rural Banks, 43 Cooperative Banks and 1 Foreign Bank. We also have 69 Other Corporate Agents & 115 Insurance Marketing Firms (IMFs) on roll. During the year, 4 new Banks, 7 Other Corporate Agents & 38 Insurance Marketing Firms (IMFs) were appointed.
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132 Bank partners contributed 87.36% of Policies and 94.77% of FYPI of the total Bancassurance and Alternate Channel business by completing 2,14,447 policies and ₹ 1,449.98 Crore of FYPI. Other Corporate Agents completed 24,555 policies with ₹ 40.65 Crore of FYPI. Brokers completed 1,418 policies with ₹ 27.60 Crore FYPI. IMFs completed 5055 policies with ₹ 16.65 Crore of FYPI. IDBI bank was the Top bank on both policy and premium count with 66751 Policies and 699.03 Crore TFPI with 242 Bank Branches procured ₹ 1 Crore and above TFPI, while 387 Bank Branches, procured TFPI between ₹ 50 Lacs to ₹ 99 Lacs, during the year
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134
135 The total number of Agents on Roll is 12,08,826 as at 31.03.2020 as against 11,79,229 as on 31.03.2019. The number of Active Agents is 10,80,809 as at 31.03.2020 as compared to 10,69,816 as on 31.03.2019.
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137
138 (% style="width:808px" %)
139 |(% style="width:230px" %)**₹ in million**|(% style="width:200px" %)(((
140 **For the Six months ended**
141
142 **30-Sep-21**
143 )))|(% style="width:122px" %)**31-Mar-21**|(% style="width:116px" %)**31-Mar-20**|(% style="width:137px" %)**31-Mar-19**
144 |(% style="width:230px" %)Total Assets|(% style="width:200px" %)40,434,596.70|(% style="width:122px" %)37,464,044.68|(% style="width:116px" %)34,141,745.74|(% style="width:137px" %)33,663,346.17
145 |(% style="width:230px" %)Total Revenue|(% style="width:200px" %)15,197.24|(% style="width:122px" %)29,855.71|(% style="width:116px" %)27,309.56|(% style="width:137px" %)26,449.96
146 |(% style="width:230px" %)Profit After Tax|(% style="width:200px" %)15,040.13|(% style="width:122px" %)29,741.39|(% style="width:116px" %)27,104.78|(% style="width:137px" %)26,273.78
147 |(% style="width:230px" %)Earnings per Share FV Rs 10|(% style="width:200px" %)2.38|(% style="width:122px" %)4.7|(% style="width:116px" %)4.29|(% style="width:137px" %)4.15
148 |(% style="width:230px" %)Net Asset Value per share|(% style="width:200px" %)12.68|(% style="width:122px" %)10.38|(% style="width:116px" %) |(% style="width:137px" %)
149
150 = LIC IPO =
151
152 **LIC's IPO Likely To Open On May 4, But Exact Timelines Post April 27**
153
154 April 25, 2022; LIC's IPO is likely to open on May 4 and close on May 9, according to sources, who said the exact timelines will be confirmed post April 27th.{{footnote}}https://www.ndtv.com/business/lic-ipo-likely-to-open-on-may-4-and-close-on-may-9-sources-2919445{{/footnote}}
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156
157 The Life Insurance Corporation's (LIC) long-awaited public issue offer is likely to open on May 4 and close on May 9, according to sources, who said the exact timelines would be confirmed post-April 27.
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160 The exact date ranges and other details of the LIC's initial public offering (IPO) will be confirmed next week, the sources added.
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163 That comes on the heels of the LIC board approving a cut in its IPO issue size to 3.5 per cent from 5 per cent, according to sources on Saturday.
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166 The government is now expected to sell 3.5 per cent of its stake in LIC for ₹ 21,000 crore, subject to the approval of the capital markets regulator Securities and Exchange Board of India, SEBI.
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169 That would value the insurance behemoth at 6 lakh crore.
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171
172 A significant cut in valuation from a previous estimate of around ₹ 17 trillion for the 66-year old company.
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175 The draft red herring prospectus filed with the SEBI and approved showed the government had proposed a sale of its 5 per cent equity.
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178 Still, despite that setback and lowering of the company's valuation, it would be India's most significant to date.
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181 Indeed, the public issue size of the insurance behemoth at the lowered ₹ 21,000 crore will be larger than the amount mobilised from the IPO of Paytm in 2021 was the largest ever at ₹ 18,300 crore, followed by Coal India (2010) at nearly ₹ 15,500 crore and Reliance Power (2008) at ₹ 11,700 crore.
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184 The stake sale was initially planned to be launched in March 2022, but the Russia-Ukraine crisis derailed those plans as stock markets were highly volatile.
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187 Previously, the government was expecting to garner over ₹ 60,000 crore by selling about 31.6 crore or 5 per cent stake in the life insurance firm to meet the curtailed disinvestment target of ₹ 78,000 crore in 2021-22.
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190 [[Comments>>path:javascript:void(0);]]But the drastic lowering of ambitions for the IPO would be a setback for the government and challenge its fiscal balances as the disinvestment was positioned and aimed at replenishing the state's coffers.
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192
193 **Government appoints Kotak Mahindra, JP Morgan, Goldman Sachs, others as intermediaries.**{{footnote}}https://www.moneycontrol.com/news/business/ipo/lic-ipo-government-appoints-kotak-mahindra-jp-morgan-goldman-sachs-others-as-intermediaries-7445791.html{{/footnote}}
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196 September 09, 2021; The central government on September 8, appointed intermediarie-Kotak Mahindra Capital Company, Goldman Sachs India Securities, JP Morgan India, ICICI Securities, and others for listing and partial disinvestment its equity shareholding in Life Insurance Corporation of India(LIC) via initial public offering.
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199 LIC has appointed Kotak Mahindra Capital Company, Goldman Sachs India Securities, JP Morgan India, ICICI Securities, JM Financial, Citigroup Global Markets India, Nomura Financial Advisory and Securities (India), Axis Capital, DSP Merrill Lynch, and SBI Capital Markets as book running lead managers, says a circular on DIPAM website.
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202 Hyderabad-based KFintech has been appointed as registrar and share transfer agent. Meanwhile, Mumbai-based Concept Communications has been chosen as advertising agency.
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205 Earlier on September 2, the government for the second time sought bids for legal advisors for the listing of Life Insurance Corporation (LIC), which is expected to be the largest public offering in the Indian history.
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208 The Department of Investment and Public Asset Management (DIPAM) said the last date for the bids is September 16. DIPAM Secretary Tuhin Kanta Pandey recently said he expects the LIC listing to take place in the current fiscal year (2021-22).
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211 During the Budget speech for FY22, the government announced an ambitious divestment target of Rs 1.75 lakh crore. Most of this amount is expected to be mopped up through the LIC IPO and privatisation of a number of companies including Air and Bharat Petroleum Corporation (BPCL).
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214 **LIC issue size could range from Rs 53,500 crore to Rs 93,625 crore; issue price may be Rs 1,693-2,962 per share **{{footnote}}https://www.moneycontrol.com/news/business/ipo/lic-ipo-issue-size-could-range-from-rs-10-7-18-7-lakh-crore-issue-price-may-be-rs-1693-2962-per-share-8087611.html{{/footnote}}
215
216 **February 16, 2022**; A simple arithmetic pegs LIC’s issue size at upwards of Rs 50,000 crore with a per share value in the range of Rs 1,600 to Rs 2,900.
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219 Here is how the math flows. LIC’s embedded value as on September 30, 2021 has been estimated at 5.39 lakh crore. Currently, private insurance companies trade at a multiple of 3-4 times embedded value.
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222 However, embedded value is only an estimation of value based on several assumptions and the multiple attributed to an insurer could vary based on several qualitative factors.
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225 Considering its size, and dominant position in the market with 66 percent market share in new business premium, its growth rate may not match up to some of the nimble footed private insurers.
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228 A range of embedded value multiple between 2-3.5 throws up a valuation for the corporation ranging from Rs 10.7 lakh crore to Rs 18.7 lakh crore. Based on the total equity capital of 632 crore share, the issue size for a 5% offer for sale works out to Rs 53,500 crore to Rs 93,625 crore.
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231 The per share price thus works out to Rs 1693 to Rs 2962. Against this, the government’s average cost of acquisition of shares stood at Rs 0.16 as LIC went through a capital rejig ahead of the IPO.
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234 LIC’s initial capital, when it was incorporated, was Rs 100 crore. Since LIC was a collective, and not envisaged as a public limited company, there were no shares allotted. To transform the corporation into a corporate structure with shareholders ahead of the public issue, the original capital of Rs 100 crore infused by the government during the inception of the corporation was converted into share capital by allotting shares of face value Rs 10 for an equivalent amount.
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237 In September 2021, the corporation then allotted an additional 62.24 crore equity shares at the same face value against the free reserves outstanding in LIC's book as on March 31, 2020.
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240 Then again, another 560 crore equity shares of the same face value was allotted against the retained share of surplus of the government of India for fiscal years 2020 and 2021. LIC’s total capital now stands at Rs 6,324 crore.
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243 LIC’s valuation at 2.5 times embedded value corroborates with the government’s pared down target for disinvestments for FY22. This appears to be in line with what big institutional investors may be willing to pay for a company that will continue to be pre-dominantly owned by the government. The government revised its disinvestment target for the current fiscal to Rs 78,000 crore, of which Rs 12,000-odd has been garnered so far during the fiscal.
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246 Besides, the muted expectations on the valuation LIC and the proposed issue size has to be viewed in the light of the current state of market where foreign investors have been continuously selling. A large issue size only means more selling from domestic mutual funds that would want to sell down existing position to make room for allocation to LIC, fuelling additional volatility in the market.
247
248
249 = References =
250
251 {{putFootnotes/}}
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