LIC debut: To declare quarterly numbers today

India's largest insurer will declare its quarterly results for first time

On Monday, when Life Insurance Corporation of India (LIC) Chairman V K Sharma meets the press to declare the country’s largest life insurer’s quarterly numbers, it would be the first time it would be doing so in its six-decade history.  

So far, LIC’s annual report, too, is posted on its website without much publicity after it gets government approval.

What has led to this change in strategy? 

According to sources, the public sector insurer wants to send India Inc and stock market participants a strong message that it is a dominant insurer and the country’s largest institutional investor.  

Its investment corpus of Rs 22.1 lakh crore in March 2016 is bigger than the entire mutual fund (MF) industry’s January 2017 assets of Rs 17 lakh crore. The 23 other insurers had an investment corpus of around Rs 8 lakh crore at the end of FY16. 

LIC has substantial stakes - of over 10% - in 49 companies, which include market heavyweights such as Larsen & Toubro, ITC, Tata Steel, Bharat Heavy Engineering, Hindalco, and Mahindra & Mahindra. 

By its stake size, it can play a decisive role in any corporate battle like in the one between Ratan Tata and ousted chairman Cyrus Mistry, where it voted in favour of the former. At the beginning of the tussle, both parties had made a representation to the insurer, asking for its support. 

The Insurance Regulatory and Development Authority of India’s (Irdai) 2015-16 annual report also throws up some interesting data. Despite a fall in the insurance behemoth’s market share by around 50 basis points over 2014-15, LIC still had 72.61% market share of the life insurance industry. It incurred commission expenses of Rs 15,500 crore, whereas the entire private sector paid fees of only Rs 4,766 crore. No wonder, there is palpable excitement amid experts and questions why the insurance giant has decided to get more transparent. 

Says J N Gupta, former Securities and Exchange Board of India executive director, and co-founder and managing director of Stakeholders Empowerment Services, a proxy advisory firm: “Given the fact that LIC is bigger than the entire MF industry taken together, it is a huge step in terms of transparency. In the past, LIC would simply put up its annual numbers on the website. With this move, the organisation and the government are giving a signal that they believe in transparent governance.” 

The government has been pushing for transparency in government-owned insurance companies. It has recently cleared the listing of four general insurance companies – United Insurance, National Insurance, Oriental Insurance and New India Assurance. It also plans to list General Insurance Corporation of India, or GIC Re.

A possible listing of LIC, which is not on the government’s immediate agenda, would be a different ball game altogether. With its dominant market share and strength in terms of shareholding in big companies, it is likely to attract premier valuations. As Finance Minister Arun Jaitley had said in LIC’s diamond jubilee celebrations in September 2016: “If LIC is listed, it would be the most valued company in the country, with the highest valuation as well as one of the largest across the world.”  

Many experts are taking this as a signal it could be the insurer’s baby step towards achieving the goal of listing at the bourses a couple of years later.

Code for insurers

“A significant move on the part of LIC to share and disclose financial performance, it could be, as one may guess, lead to the government taking the equity to the market and broad-basing the shareholding. But irrespective of its intent, it is a welcome move,” says Ashvin Parekh, managing partner, Ashvin Parekh Advisory Services LLP. LIC officials did not respond to Business Standard’s queries.   

Gupta also believes this move comes at a good time, as the Irdai is on the verge of deciding the stewardship code for insurers in India. There are a number of proposals, including how insurers should have policies on regularly monitoring investee companies, intervention in their investee companies, collaboration with other institutional investors, to preserve the right of policyholders and voting, and disclosure of voting activity.

The insurance regulator had also asked insurers to provide a periodic report to their ultimate beneficiaries (policyholders) of how they have discharged their responsibilities, in an easy-to-understand format. “From almost being a black box when no one had any idea about things going on, it is moving towards being more responsible. This will further improve the policyholders’ confidence in the insurer,” added Gupta.

LIC in numbers

*  Assets of Rs 22 lakh crore in FY16; entire insurance industry had Rs 30 lakh crore
 

* Market share of 72.6% of life insurance 
 

* Collected premia of Rs 2.66 lakh crore vs Rs 1 lakh crore collected by 23 other players in 2015-16
 

* Paid dividends of Rs 2,497 crore to the Centre in 2015-16

What's at stake?
Holdings of LIC in major companies
	Holding (%)
Corporation Bank	18.9
Larsen & Toubro	15.7
BHEL	14.3
ITC	14.3
Axis Bank	13.9
Tata Steel	13.6
Tata Power	13.0
Punjab National Bank	12.5
Hindalco	11.4
ICICI Bank	10.9
Mahindra & Mahindra	10.3
As of Dec 2016
Sources: Capitaline, stock exchange filings
Compiled by BS Research Bureau