LIC Saudi JV plans float

The Life Insurance Corporation of India (LIC) will embark on an initial public offering (IPO) for its proposed joint venture foray in Saudi Arabia to raise a little over Rs 40 crore.

Indo-Saudi Insurance Company, a four-way partnership between LIC, LIC International-Bahrain, the New India Assurance Company and Al Hokair group, will come out with an IPO prior to the launch of the new composite insurance company. The joint venture will offer life and non-life insurance 'Takaful' products.

Indo-Saudi Insurance will start with a capital base of 100 million Riyadh, equivalent to about Rs 114 crore. "We need to go public with the joint venture as per the local laws," said D K Mehrotra, managing director, LIC.

The Indian state life insurer, its Bahrain offshore company and New India will each hold 10.1 per cent stake in the composite insurance company, thereby, investing a little over Rs 10 crore in the entity. The local promoter, Al Hokair group, will have a 29 per cent stake.

This will be the first foreign venture to take off following the central government permitting LIC to retain 50 per cent of the dividends for investment in foreign operations.

In March this year, the government decided to part-fund LIC's expansion overseas, infusing about Rs 280 crore for the same.

"Getting a licence for Saudi Arabia is not easy and since New India was equally keen to set up operations there, we decided to go jointly and float a composite insurance company," Mehrotra said.

The insurance company will have to design special products to meet the local regulations, which insist on Takaful, Islamic insurance.

Takaful is described as cooperative insurance, wherein policyholders contribute a certain sum of money to a common pool. Each member pays the insurance premium to help those that need assistance.

The idea behind Takaful is not to profit, of derive any benefits at the cost of others. Instead, they eliminate uncertainty in terms of premium and compensation, stated industry sources.

LIC International, Bahrain already sells some policies in Riyadh, which would now booked under the new joint venture company in Saudi Arabia. Nevertheless, the existing offshore company will continue to operate as a standalone entity, said Mehrotra.

Meanwhile, LIC is also exploring foreign expansion plans in New Zealand and Australia, where there is a lot of demand from Indian expatriats.