The Government of India on Sunday filed a draft of documents (DRHP) with capital markets regulator SEBI to bring the Initial Public Offering (IPO) of Life Insurance Corporation of India (LIC) into the market. The embedded value of the company has been pegged at Rs 5.39 lakh crore ($72 billion). The embedded value is a major measure of future cash flows in life insurance companies. In such a situation, before coming to the market of the company's IPO, let us know some key things about it.
assets
As of September 30, 2021, LIC's assets under management (AUM) stood at Rs 39.56 trillion. This was more than three times the total AUM of all private life insurance companies in Asia's third-largest economy. LIC, the largest domestic institutional investor, has invested 25% of its AUM inequities.
competition
LIC has been able to maintain its market share at 66% even amidst competition with private companies. However, new business is growing at a slower pace than some other companies. LIC's gross written premium grew by 6.30% in the year ended March 2021, while that of SBI Life grew by 24% and that of HDFC Life by 18%. LIC's new business margin was 9.90% as compared to SBI Life's 20% and HDFC Life's 26.10%.
Policyholders and Agents
LIC has 283 million policyholders and the largest agent network in the country with 1.35 million registered agents. In the IPO, the firm will also earmark a certain percentage of shares for policyholders, which will not exceed 10% of the offered size while the share reserved for employees will not exceed 5% of the equity share capital. By the end of March 2021, LIC employed 114,498 people.
risk
In the draft prospectus, the insurance giant has flagged certain risks, such that it may require additional capital in the future and cannot guarantee that it will be able to deposit that capital "on acceptable terms or at all". . According to the filing, LIC may also need to infuse additional capital in IDBI Bank, which could put further pressure on its balance sheet.
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