Page 10 - Insurance Times February 2022

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