IPO-bound LIC exhibits distribution strength to financial investors

Insurer already sourced 97% of FY22 new business premium till September

Initial public offering (IPO)-bound Life Insurance Corporation (LIC) is showcasing financial investors its dominant position in India’s life insurance market. As of November 2021, state-owned LIC has over 1.3 million individual agents, or over 55 per cent of the 2.39 million individual agents in India’s life insurance market, data from Life Insurance Council shows. LIC’s individual agents have sourced almost 97 per cent of its new business premium (NBP) in the first six months of FY22 from its products on a standalone basis.

Further, in FY21, these individual agents of LIC had sourced 94 per cent of its NBP from individual products.In FY20, this number stood at 95 per cent, and in FY19, it was 96 per cent.

Private life insurers cumulatively have 1.07 million individual agents as of November 2021, with ICICI Prudential having the most number of individual agents (197,949). It is followed by Kotak Mahindra Life with 122,274 agents, and HDFC Life with 111,819 agents.

The life insurance business in India has traditionally been an agency-driven business and almost all insurers heavily invest in their agency distribution network to drive sales. Lately, bancassurance and direct sales channels have started contributing significantly in sourcing business for life insurers. However, agency still remains the key driver of business.

Apart from a robust agency distribution network, the state-owned insurance company also has 72 bancassurance partners, comprising eight public sector banks, 42 co-operative banks, six private banks, 13 regional rural banks, and one foreign bank. It also has 175 alternative channel partners, of which there are 44 insurance marketing firms, 59 brokers, and 72 corporate agents.

Further, the insurance giant also boasts of 3,463 micro insurance agents.

Meanwhile, the fact that LIC is the largest asset manager in the country with Rs 36.7 trillion in assets under management (AUM) as of March 2021, is also being impressed upon the financial investors. This makes it one of the 10th largest insurers globally in terms of total assets.

Also, LIC is, perhaps, the largest institutional investor in the country, with government securities accounting for 37.8 per cent of its portfolio. State development loans (SDLs) account for 26.2 per cent and equity securities 21.7 per cent as of September 30, 2021.

Further, the insurer’s investment in equities is approximately over 7.6 per cent of the outstanding non-promoter market cap in India as of September 30, 2021.

In FY21, LIC booked a profit of around Rs 37,000 crore from its equity investments. In FY20, it had earned over Rs 25,500 crore. According to sources, LIC’s return on equity, on a standalone basis, stood at 81.7 per cent in FY21.

LIC has managed to bring down its net non-performing assets (NPAs), as well as gross NPAs, in 2020-21 (FY21) in its debt portfolio. LIC’s net NPAs stood at 0.05 per cent in FY21, compared with 0.79 per cent in FY20. Gross NPAs were 7.78 per cent in FY21 compared with 8.17 per cent in FY20. As of March 31, NPAs stood at Rs 35,129.89 crore, of a total portfolio of Rs 4.51 trillion, according to LIC’s annual report.

LIC’s profit after tax (PAT) went up 6.9 per cent to Rs 2,906.77 crore in FY21, its annual report showed. In FY20, LIC had reported a PAT of Rs 2,712.7 crore. LIC’s premium income grew to Rs 4.03 trillion in FY21 from Rs 3.79 trillion a year ago. Income from investments went up to around Rs 2.79 trillion in the last financial year (FY21) from Rs 2.35 trillion in FY20.