Life Insurance Corporation of India Files for Biggest Indian IPO

The Life Insurance Corporation of India (LIC), the country's largest life insurer with a market share of 64.1 per cent in terms of premiums, has filed its draft red herring prospectus (DRHP) for an initial public offering (IPO).

The issue, with a face value of Rs 10 each per equity share, will be a comprehensive offer-for-sale (OFS) of up to 316,249,885 equity shares by the President of India through the Ministry of Finance, Government of India ("selling shareholders"). The offer also includes no more than a 5% reservation for its eligible employees and no more than 10% for its policyholders.

LIC was created on September 1, 1956, when 245 private life insurance companies in India were merged and nationalised. From its founding till 2000, it was India's only life insurance company. Based on its size, market relevance, and domestic and global interconnection, IRDAI classified it as a Domestic Systemically Important Insurer ("D-SII") in September 2020.

Adjusted net worth ("ANW") and value of the in-force business ("VIF") are the components that makeup embedded value, with ANW consisting of free surplus ("FS") and required capital ("RC"). As of September 30, 2021, the embedded value of LIC is Rs 5.40 trillion.

According to the Brand Finance report, LIC’s brand is the third strongest and tenth most valuable worldwide insurance brand. The present value of earnings tied to a brand's reputation is the value of a brand.

LIC had an asset under management (AUM) of Rs 39.74 trillion as of September 30, 2021, which was more than three times the total AUM of all private life insurers in India, approximately 16.2 times the AUM of the second-largest player in the Indian life insurance industry, and 1.1 times the entire Indian mutual fund industry.

In terms of market share, LIC had the highest gap in life insurance gross written premiums (GWP) compared 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.

As of September 30, 2021, the insurance behemoth had a 66.2 per cent market share in terms of new business premium (or NBP), a 74.6 per cent market share in terms of individual policies issued, an 81.1 per cent market share in terms of group policies issued, and a 55 per cent market share in terms of individual agents.

The 282.58 million in-force policies under individual businesses being handled in India as of September 30, 2021, demonstrate the trust in the LIC brand.

In addition, LIC has a sizable market share in health insurance and annuities. In terms of GWP, it had a market share of 46.9% and 53.6% of health insurance supplied by life insurance carriers in India for Fiscal 2020 and Fiscal 2021, respectively.

With 32 individual and 10 group products, LIC caters to a wide range of market segments. Individual products include microinsurance and items specialised for certain market niches, such as women's and children's products.

In India, LIC issued approximately 21 million individual policies in Fiscal 2021, accounting for nearly 75% of new individual policy issuances. The industry's second-largest player, with a 5.9% market share in Fiscal 2021, issued 1.66 million individual policies.

As of September 30, 2021, LIC had 2,048 branch offices and 1,554 satellite offices across India, covering 91 per cent of the country's districts. In addition to its life insurance business in India, it has branches in Fiji, Mauritius, and India.

The company has subsidiaries in Bahrain (with operations in Qatar, Kuwait, Oman, and the United Arab Emirates), Bangladesh, Nepal, Singapore, and Sri Lanka in the life insurance industry.

LIC's total income increased by 9.00 per cent to Rs. 703,732.43 crore in fiscal 2021, compared to Rs. 645,640.91 crore in fiscal 2020, owing to higher net earned premiums and investment income, while net profits increased by 9.73 per cent from Rs. 2710.48 crore in FY20 to Rs. 2974.14 crore in FY21. Total income for the six months ended September 2021 was Rs 336,972.92 crore, with a profit after tax of Rs 1,504.01 crore.

The Indian life insurance industry generated a total premium value of Rs. 6.2 trillion in fiscal 2021, up from Rs. 5.7 trillion in fiscal 2020. The industry's total premium climbed at an 11 per cent compound annual growth rate (CAGR) in the five years leading up to Fiscal 2021. Credit rating agency CRISIL predicts a 14–15 per cent compound annual growth rate (CAGR) over the next five years, bringing the total to Rs. 12.4 trillion by Fiscal 2026.

Kotak Mahindra Capital Company Limited, Axis Capital Limited, BofA Securities India Limited, Citigroup Global Markets India Private Limited, JM Financial Limited, J.P. Morgan India Private Limited, Goldman Sachs (India) Securities Private Limited, ICICI Securities Limited, Nomura Financial Advisory and Securities (India) Private Limited, and SBI Capital Markets Limited are the book-running lead managers for the issue.