Key takeaways from LIC’s latest report card as it inches closer to mega IPO

Life Insurance Corp (LIC) of India is likely to file a draft red herring prospectus for its initial public offering in the next few days in an attempt to launch the share sale within the current financial year. 

The planned IPO is significant for several reasons. LIC is India’s biggest insurer—the government-owned company has a market share of 66% in the life insurance industry. This would also be India’s biggest ever IPO and make LIC India’s second or third biggest company by market valuation.

In addition, the IPO would help the government mop up a massive amount of money to bridge its wide fiscal deficit.

Finance Minister Nirmala Sitharaman had announced the IPO plan in February 2020, but the government had to shelve its plan in the wake of the coronavirus pandemic. The government has appointed 10 merchant bankers to arrange the IPO. These include Goldman Sachs, Citigroup, Nomura and SBI Capital Market Ltd.

The government is looking to raise as much as Rs 1 trillion, or $13.3 billion, by listing the insurer. The government plans to dilute 5-10% of LIC’s shares, valuing it anywhere between Rs 10-15 trillion ($133-200 billion). 

The planned Rs 1 trillion IPO is more than half the government’s disinvestment target of Rs 1.75 trillion for the current financial year. So far this fiscal year, the government has raised barely Rs 9,330 crore through disinvestment.

LIC has now come up with a report card that gives a glimpse of its latest financial performance. Here’s what the report card shows.

Key takeaways

1) LIC reported a profit after tax of Rs 1,437 crore for April-September 2021, up from Rs 6.14 crore a year earlier.

2) LIC’s new business premium growth rate was 554.1% in H1, compared with 394.76% a year earlier.

3) Total net premiums increased barely 1% to Rs 1.86 trillion in H1 from Rs 1.84 trillion a year earlier.

4) Income from investments grew Rs 15,726 crore, or about 11.8%, to Rs 1.49 trillion in H1 FY22.

5) Income from interest, dividends and rent grew to Rs 10,178 crore.

6) Income from profit on sale of investments increased to Rs 10,965 crore.

7) LIC’s share capital has been increased to Rs 6,325 crore in H1.

8) Total premium for individual life (non-linked) policies increased Rs 7,262 crore to Rs 1.13 trillion.

9) Total premium of group (non-linked) policies grew Rs 90 crore to Rs 66,295 crore.

10) LIC’s net retention ratio stood at 99.88% in H1.

11) Investments of policyholders have grown Rs 5.9 trillion to Rs 37.72 trillion in H1.

12) LIC’s solvency ratio stood at 183.37% in April-September 2021.