LIC – An Insurer or An Investor Now?
3 min read
The story of insurance is probably as old as the story of mankind. Life Insurance came to India from England in the year 1881. In 1912, Life insurance companies act, and the Provident fund act were passed which led to discrimination between foreign and Indian companies and putting Indians at a disadvantage.
After 44 years, LIC of India was created on 1st September 1956 with initial capital of 5Cr from GOI with the objective of spreading life insurance much more widely and in particular to the rural areas with a view to reach all insurable persons in the country, providing them adequate financial cover at a reasonable cost
LIC started off with 200Cr of new business in 1957 to crossing over 1000Cr in 1969-70 to reaching over 7000Cr sum assured on new policies in 1985-86
Key Facts:
2048 branches in India
Individual agent base of 1,537,064
342 Corp agents, 109 referral agents, 114 brokers and 42 banks
International presence in 14 countries
Market leader in Fiji, Bahrain and Nepal, also emerged as the 3rd largest player in UAE
LIC has been considered as the ‘White Knight’, why?
• Paid over 10,000Cr to the gov in disinvestment of the shares of NMDC and NTPC in 2010
• Bought 84% of the shares in ONGC by paying Rs 12,749Cr since IPO shares were faltering
• Picked 71% of the shares of Steel Authority of India
• Bought 5.94% in BHEL in 2014 for Rs 2,685Cr making its total stake to 14.99%
• In 2015, invested Rs 7000Cr in Coal India by picking 1/3rd of IPO
• Helped IOC by paying over Rs 8000Cr with 86% of the shares in 2015
• In 2017, GIC of India and New India assurance company shares were bought at Rs 8000Cr and Rs 6,500Cr respectively
• March 2018, 70% of shares in the IPO of Hindustan Aeronautics Ltd paying Rs 2,900Cr
• In Jan 2019, LIC acquired 51% in IDBI which helped them with capital support of Rs 10,000Cr- Rs 13,000Cr
LIC’s NPA have doubled from Rs 12,213Cr in 2014-15 to Rs 25,241Cr in 2017-18
As on March 31, 2018, it had total investments of Rs 25,15,549 crore. 81.75% (Rs 20,56,324 crore) in government securities, approved securities, infrastructure, and social sector. While 18.25% (Rs. 4,59,225 crore) has been invested in equity and preference shares.
In these difficult times, were companies are filing for bankruptcy due to COVID-19, LIC sold over 2.19Cr policies in FY19-20 making its highest number of policies in last 6 years and with premium collection of more than Rs 55,000Cr
• LIC grew at 25.17% with its new business premium as compared to FY18-19
• Private insurers grew at 11.64% against the previous year• 75.90% of Mkt share in number of policies as on 31st Mar 2020
• LIC settled 2.03Cr maturity, money back claims and annuities up to Mar 2020 RBSA advisors have estimated value of LIC at Rs 9.90 lakh Cr- Rs 11.50 lakh Cr.
LIC’s new premium growth vs private players growth was double with 52% and 27% respectively for Apr-July 2019.
To mitigate the hardship being faced by policy holders in payment of premium due to corona virus pandemic, LIC gave a grace period of 1 month to all the people whose premium were due in March and April.
LIC of India has assured its policyholders that the death claims arising due to COVID-19 shall be treated at par with other causes of death and payments shall be made on an urgent basis. 16 policies have been settled under COVID-19 death claims.
• FY19-20- 7.5 lakhs death claims settled with only 0.75% remaining outstanding
Will LIC of India be White Knight for many more?
