Page 10 - Insurance Times February 2022
P. 10

LIC of India




                                                                                       News













         LIC to take glide path for         that will be used to compute the mar-  from non-participating policies - in
                                            ket valuation of India's largest insurer,  which non-bonuses or surplus is shared
         surplus transfer                   said an official.                  with policyholders. The market valua-
         Ahead of the Life Insurance Corpora-                                  tion of LIC's listed insurance peers in
                                            The computation of the EV is key for
         tion of India's (LIC's) public listing, the  the launch of LIC's initial public offering  three-four times their EV. However, the
         finance ministry and the insurer have                                 valuation of LIC will be decided in con-
                                            (IPO) slated to be held in March, and
         approved gradually lowering the public  such an exercise has been undertaken  sultation with government-appointed
         sector outfit's distributable surplus to  for the first time since the life insurer's  merchant bankers, the people quoted
         its policyholders.                                                    above said. The government is pushing
                                            inception.
         From next year, LIC will distribute 92.5                              for a Rs. 15 trillion valuation, as per re-
                                            The EV is the sum of adjusted net worth
         per cent of its surplus to the policyhold-  and value of in-force business or esti-  ports.
         ers against 95 per cent at present, and
                                            mated future profits.              LIC will file the draft red herring pro-
         then bring the level down to the indus-                               spectus (DRHP) this month, which
         try norm of 90 per cent.           The EV has been shared with the De-  would include the insurer's EV. The gov-
                                            partment of Investment and Public As-
         The pie for the shareholders, including  set Management (DIPAM) as it pre-  ernment is looking to launch the IPO,
         the government, will go up to 10 per  pares for the IPO. The adjusted net  which is slated to be the largest the
         cent from 5 per cent at present.                                      country has ever seen, in March. The
                                            worth will be high as the policyholder  proceeds from the IPO would help the
         "Starting 2022-23, 92.5 per cent of the  fund would be bifurcated into partici-  government in meeting a chunk of its
         insurer's surplus will be transferred to  pating and non-participating funds, and  Rs. 1.75 trillion disinvestment target for
         the policyholders, and the remaining  official said.
         7.5 per cent to the shareholders, for  "The insurer also should get advantage  current fiscal.
         the next two years," an official said.  of equity gains it has made and, there-  The ministerial panel that includes
         After two years, the surplus transferred  fore, the valuation is expected to be  Union Finance Minister Nirmala
         to the policyholders will be brought  high. The non-participating fund will be  Sitharaman will give its final nod on the
                                                                               size of the IPO once it's finalised by the
         down to 90 per cent, he added.     bifurcated as on September 30, 2021,  DIPAM in consultation with intermedi-
                                            which will include these gains, leading  aries.
         LIC IPO: Actuary pegs              to a higher EV for the insurer in Sep-
                                            tember," he added.
         insurer's embedded value                                              LIC showcases its business
                                            Participating fund has receipts from
         at Rs. 4-5 trillion                participating policies - in which the dominance
         The Government-appointed actuary   insurer's profits and surplus is shared  Life Insurance Corp of India recently did
         has pegged the embedded value (EV)  with policyholders - and from which all  a hard sell to institutional investors from
         of the Life Insurance Corporation of In-  payments to policyholders are made. A  across the globe positioning itself as the
         dia at Rs 4-5 trillion, a key parameter  non-participating fund has all receipts  nimble giant growing fastest even while

          10  The Insurance Times, February 2022
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