LIC Q3 profit soars, first-year premium rises as insurer gears up for IPO

The government may have missed its date for the planned initial public offering (IPO) of Life Insurance Corp (LIC) of India, but it has nevertheless gone ahead and published the insurance behemoth’s third-quarter results for the period ended December 2021. 

These new numbers were filed by the government as part of an updated draft red herring prospectus (DRHP). The new DRHP, filed with the capital markets regulator the Securities and Exchange Board of India (SEBI) is an update to the document filed in February, which had given the financial details till September. 

So, what do the Q3 numbers say?

LIC’s December quarter profit stood at Rs 234.9 crore compared with Rs 90 lakh in the same quarter last year.

The first-year premium for the life insurer rose to Rs 8,748.55 crore from Rs 7,957.37 crore in the same quarter last year. Renewal premium came in at Rs 56,822.49 crore, up from Rs 54,986.72 crore in the year-ago quarter.

LIC's total premium edged 0.78% higher to Rs 97,761.20 crore compared with Rs 97,008.05 crore.

But why has the IPO been put off?

Initially, the IPO was supposed to come before the end of the current financial year. But the government postponed it till the end of April or May, owing to the massive volatility in the global financial and stock markets, including in India, in the wake of the Russian invasion of Ukraine, which has sparked fears of a wider conflict across Europe. 

Till when does the government have to come up with the IPO?

The DRHP was filed on February 12, so the government has until May 12 to come up with the IPO. If it cannot do so, it will have to file fresh papers with the market regulator. That could further delay the process. 

Recently, disinvestment secretary Tuhin Kanta Pandey said that there was strong investor interest for the state-run company's offering, but Centre will proceed with the IPO only when it was confident of successful listing.

How many shares will the government sell and for how much?

The government will sell about 31.6 crore shares, or a 5% stake, in the insurance behemoth, which is estimated to fetch around Rs 60,000 crore to the exchequer. 

How valuable really is LIC?

LIC's embedded value, which is a measure of the consolidated shareholders value in an insurance company, was pegged at about Rs 5.4 lakh crore as of September 30, 2021, by international actuarial firm Milliman Advisors. Although the DRHP does not disclose the market valuation of LIC, as per industry standards it would about three times the embedded value.