LIC 3.0 to be listed, nimble and agile, say M R Kumar & K R Ashok

If there is any capital requirement, we will have to approach not only the government but all shareholders, said Kumar

Ahead of the much-anticipated initial public offering (IPO) of Life Insurance Corporation (LIC) of India, M R KUMAR, chairman of the corporation, and K R ASHOK, chief actuarial, spoke to the media on the various issues germane to the insurer and the forthcoming IPO. Edited excerpts:

Will policyholders feel short-changed because of a change in the surplus distribution ratio? 

Kumar: Policyholders' interests will be taken care of. There was a single unified fund all along. We did not do it like the private sector. The time was ripe for us to realign with the industry. We were following the 95:5 surplus distribution model, but the industry went back to 90:10 some time ago. Once we started the embedded-value exercise, the Department of Investment and Public Asset Management brought in Milliman Advisors to determine the embedded value. It was a humongous exercise. More than 250 million policies were involved. To run them through the process, we purchased software from FIS Singapore.

Ashok: The amendment makes LIC in consonance with other players. After the transition period (by 2024-25), we will be perfectly aligned with the private players.

What happens if you need capital for growth in the foreseeable future?

Kumar:  We don't require capital right now. If there is any capital requirement, we will have to approach not only the government but all shareholders, who will be part of the family by then.

What will you do to increase profitability?

Kumar: With the change in surplus distribution, profitability will increase. It’s a question of how the product mix changes, penetration, more coverage, and getting into sectors we have been missing out on. That should take care of the profits.

Ashok: For life insurance companies, profit comes from the product itself. Given the strategy LIC is adopting to move in a focused way to non-par products, the higher margins associated with such products should take care of the profits.

How are you planning to expand on the bancassurance model?

Kumar: We are very strong in the agency channel. This is a channel which is very difficult to replicate. On the bancassurance side, we have been making progress over time. In terms of generating volumes (premiums), we are the third or fourth, but in terms of percentage, it is low because our base is quite high. We have tie-ups with nearly 58,000 bank branches. This is higher than any other private insurance company. There is a lot of headroom for taking that leap.

In terms of product mix, we are working on several products, both par and non-par. We might have differentiated products for bancassurance like the rest.

Will the evolving geopolitical situation have some impact on foreign investor participation?

Kumar: We are monitoring the situation very closely. We are keen on having the listing in March.

Any update on policyholders linking their permanent account number (PAN)?

Kumar: There was a lot of interest. The time for policy-buying for policyholder reservation got over on February 13. But there is still time to link your PAN and to open your demat account. Roughly, we must have linked more than 6–7 million policies with PAN cards. 

What is the timing of the issue? What will change for LIC after listing?

Kumar: We would like to get this done this fiscal year and that is what we have been saying all along.

When we nationalised life insurance, it was LIC 1.0. When the market opened up, we did well despite competition. That was LIC 2.0. Now we will see LIC 3.0 – a listed life insurance company. It will mean that we will be having a family of shareholders with us, whose requirements we need to cater to, and be agile and nimble. We hope to deliver excellent results to our policyholders and our shareholders.

How much profits from the equity markets has LIC made this year?

Kumar: In 2020-21, we had equity profits of Rs 37,000 crore. In the current year as of November, we have reached Rs 40,000 crore.