Policyholders who missed out on allotment will pick up LIC shares: MR Kumar

We will ramp up digital channels and make tactical tweaks on equity investments to please policyholders, said M R Kumar

Life Insurance Corporation (LIC) of India debuted on the bourses on Tuesday and closed about 8 per cent below their discount. M R KUMAR, chairperson, LIC, speaks to Subrata Panda about the listing of the insurance behemoth, plans in terms of products and distribution strategy, and how LIC intends to increase profitability. Edited excerpts:

How do you view the discount at which the shares got listed?

Markets were very jittery. We were not expecting a big listing. It will pick up as we go along. I am sure a lot of people, especially policyholders who missed out on the allotment, will pick up the shares. I don’t see any reason why it should be tepid for too long.

How prepared is LIC to meet all disclosure norms, now that the listing has happened?

We are prepared. We have also recruited people from the market. We have a chief financial officer from the market. The head of investor relations is from the market. We have the systems in place. We have a good information technology infrastructure. We have no issue giving disclosures. In fact, our red herring prospectus was one of the best disclosure documents, I am told.

Foreign institutional investor (FII) participation was low in the IPO.

That is due to the broad global sentiment. It has really tested the Indian markets. Look at it the other way. Without FIIs, could any other IPO have managed this? The policyholder’s quota being subscribed 6x made a huge difference.

What is the plan when it comes to product mix?

We have introduced a few non-participating (par) protection and guaranteed products. They have picked up quite well in the last quarter of last year. We have plans to sell these products quicker and also introduce some new ones. We can’t force any product because everything hinges on customer needs. We would like to push guaranteed return plans with good profitability because that will drive up our value of new business margins. In the same breath, I will say if people want to take par products because of the bonuses, we are not going to stop selling these. Par has always been our strength. We will also get into the non-par segment.

How are you looking to scale up your bancassurance and digital distribution channels? 

We will have a separate digital marketing channel. We are going to ramp up business on the bancassurance front. We have the highest number of bank outlets — more than 60,000. Bancassurance is an area we have not tapped into. Banks find it easier to sell non-par products. We have not spoken to any large banks as yet. We are trying to find out whether we can have separate digital platforms. We have posted two additional executive directors on the bancassurance channel.

Has anything been finalised on the IDBI Bank front on how much you can hold?

The Reserve Bank of India and the Insurance Regulatory Development Authority of India have given us time to bring down stake in the bank. We are still within that time limit. There is no hurry. It’s a call for the government to take in terms of disinvestment of IDBI Bank. Once that call is taken, we will see what we have to do.

How do you plan to arrest loss in market share to private peers?

Market share is a function of growth. If I grow faster than the sector, I will get back the share. But my base is huge. Even if I grow somewhat slower and lose market share, it doesn’t matter as long as I am growing. If you look at countries with government companies, they have shed more than 50 per cent market share in a decade. We are still at 63 per cent. I don’t see why we cannot get it back. But even if we stay there with good growth, that, too, would be useful.

We have gained market share in the past two months. It’s not a one-sided story. We will regain market share in some months. The last two years of the pandemic were brutal and perhaps we lost some market share there because of the inability of the agents force to reach the customer. We have arrested that by going digital in that space as well. We will be able to arrest this and probably it will settle at 62–63 per cent.

Once we get into the other space (non–par products), I think there is enough room for growth. Policyholders and shareholders will be looking at how fast the entity is growing rather than the market share. Basically, growth will be the focal point.

What will be your investment strategy?

We are contrarian investors and we will continue to be. Now we may have to be more contrarian or take further risks to offer better customer returns. This is not a good time for the markets. Even in 2020 when markets crashed because of the pandemic, we were net-buyers. When the markets started going up, we were net-sellers. This is something that is built into LIC’s DNA. We are not going to let go of that. Within this framework, we will tweak a little to get better returns.

How will you ensure better profits because this will be closely watched?

If you look at the surplus distribution or the total surplus generated two years ago at roughly Rs 53,000 crore, 5 per cent was going to the government, the rest to policyholders. That will become 90:10. On the other hand, if we sell more non-par products, it will be 100:0. If we look at 100:0 from that perspective, let’s say of the Rs 53,000 crore, 20 per cent comes from non-par, then that entire part is profit. We have to move towards that. We have non-par products, but perhaps the percentage is low. Once we start increasing that base, profits will happen. 

There will be change in the LIC management. How will the transition happen?

LIC has a very strong pipeline of people. I am in my 40th year in the Corporation. There have been people in the Corporation for 30–35 years who are ready to take on the challenge.

April was a good month for LIC. How do you see the year panning out?

I would not give too much importance to it because the base was low. If we can ensure the same growth trajectory for the first quarter, then it’s going to be a great year.