Value of new business margins have potential to improve, says Nirmal Bang
For first half of FY22, LIC reported a value of new business (VNB) margin of 9.3 percent compared to FY21 VNB margin of 9.9 percent. Absolute value of VNB stood at Rs 4,167 crore for FY21 (Rs 1,583 crore for 1HFY22).
LIC’s VNB margin is on the lower side when compared to private sector peers. The VNB margin also reflects the par dominated product mix. However, a meaningful scale up in the non-par products can improve margins going ahead substantially. The company highlighted that it will be focusing strongly on non-par products going ahead and on the term insurance particularly.
As of September 2021, LIC reported embedded value (EV) of Rs 5.4 lakh crore, a huge jump from Rs 95,600 crore as of FY21. The increase in EV is driven by change in the company’s surplus distribution policy which entails paying 10 percent of Par surplus and 100 percent of non-par surplus to shareholders. This shall come into effect in a phased manner by FY25. Note that upto March 2021, LIC had one fund and the valuation surplus from both the par and non-par businesses were distributed between policyholders and shareholders in the proportion of 95/5 percent.
LIC IPO updates:
The initial public offering of country’s largest life insurance company Life Insurance Corporation of India has subscribed 1.12 times, receiving bids for 18.16 crore equity shares against offer size of 16.2 crore equity shares.
The portion set aside for policyholders portion has been subscribed 3.4 times, staff 2.52 times, and retail investors subscribed 1.03 times, while QIBs bid for 40 percent shares of their allotted quota and NII lapped up 52 percent of their portion.
Manoj Dalmia-Founder and Director-Proficient Equities:
LIC IPO looks appealing because it has a large market share and a good distribution network of agents.LIC recorded a premium income of Rs 5.7 trillion in FY20 and had written premiums worth Rs 3.8 Trillion .One can invest in an IPO keeping a long term view as there is still some stake sale left.One can even book profits if keeping a short term view for listing gains.
LKP Securities on LIC IPO: India’s life insurance industry is expected to grow rapidly, owing to a relatively underpenetrated market and expanding awareness, which presents a multi-year growth opportunity. LIC has been providing life insurance in India for over 65 years and is the countrys biggest life insurer, with a significant brand value advantage. There are concerns about losing market share to private players and having lower profitability and revenue growth when compared to private players.
However, we believe that LICs distribution advantage, increasing sales mix of direct and corporate channels, and a gradual shift to high margin Non- participating products could be possible drivers for LICs future growth, negating lower than industry growth rates. At the upper price band, the stock is priced at 1.1x of its 2QFY22 Indian Embedded value (Market capitalization/Embedded value: Rs 6 trillion/Rs 5.39 trillion), which is at a significant discount to its listed peers. Currently listed insurance companies trade at Market capitalization/EV multiple of ~2.8x. LIC has a marquee anchor list of investors and we recommend subscribe to the LIC IPO.
LIC IPO | Life insurer’s rising appetite for passive investment products
The Life Insurance Corporation (LIC) of India is stepping up its investments in passive products like exchange-traded funds, the life insurer’s draft papers for its initial public offering show. LIC on February 13 filed its draft red herring prospectus with the Securities and Exchange Board of India, seeking the regulator’s approval to bring the largest ever IPO to the Indian primary market.
The state-run insurer invested Rs 12,221 crore in exchange-traded funds (ETFs) in the first six months of the current financial year, higher than the Rs 10,062 crore it invested in all of 2020-21, the DRHP shows. The quantum of funds invested in passive products has increased nearly four times over the past two and a half years. In 2018-19, LIC invested Rs 3,080 crore in ETFs.
LIC IPO updates:
The initial public offering of country’s largest life insurance company Life Insurance Corporation of India has subscribed 1.1 times, receiving bids for 17.76 crore equity shares against offer size of 16.2 crore equity shares.
The portion set aside for policyholders portion has been subscribed 3.33 times, staff 2.42 times, and retail investors subscribed 100 percent, while QIBs bid for 40 percent shares of their allotted quota and NII lapped up 50 percent of their portion.
RBI’s unexpected rate hike will have limited impact on LIC IPO: Jigar Mistry of Buoyant Capital
In an interview with CNBC TV-18, Nilesh Sathe, a former member of Irdai, and Jigar Mistry, co-founder of Buoyant Capital, share their perspectives on the recent issues surrounding India’s biggest…
LIC IPO updates:
The initial public offering of country’s largest life insurance company Life Insurance Corporation of India has subscribed 1.08 times, receiving bids for 17.53 crore equity shares against offer size of 16.2 crore equity shares.
The portion set aside for policyholders portion has been subscribed 3.28 times, staff 2.38 times, and retail investors subscribed 99 percent, while QIBs bid for 40 percent shares of their allotted quota and NII lapped up 49 percent of their portion.
How to evaluate LIC IPO and other insurance companies?
An aggressive growth focus like private insurers could also increase value of LIC’s future business
LIC IPO updates:
The initial public offering of country’s largest life insurance company Life Insurance Corporation of India has subscribed 1.07times, receiving bids for 17.26 crore equity shares against offer size of 16.2 crore equity shares.
The portion set aside for policyholders portion has been subscribed 3.23 times, staff 2.32 times, and retail investors subscribed 97 percent, while QIBs bid for 40 percent shares of their allotted quota and NII lapped up 48 percent of their portion.
LIC IPO: Rate hike causes grey market premium to plummet by 30%
Market watchers expect it to recover in a day or two
LIC IPO updates:
The initial public offering of country’s largest life insurance company Life Insurance Corporation of India has subscribed 1.04 times, receiving bids for 16.81 crore equity shares against offer size of 16.2 crore equity shares.
The portion set aside for policyholders portion has been subscribed 3.14 times, staff 2.23 times, and retail investors subscribed 94 percent, while QIBs bid for 40 percent shares of their allotted quota and NII lapped up 48 percent of their portion.
