Interesting Facts about LIC

Life Insurance Corporation of India (LIC) has filed a Draft Red Herring Prospectus (DRHP) with SEBI for IPO on February 13. It is likely to open in March 2022. The Government of India is to offload 5% stake which is 3,16,249,885 (3.16 Crore) shares of LIC out of it 100% stake. Every investor and policyholder is curious and eagerly waiting for this IPO.
Whenever we think about insurance what comes in our mind is LIC. Obviously, it has created a brand image among most of us for insurance. Everyone know about LIC as insurance company, but it is beyond than that. Following are some of the interesting facts about LIC:

Existence

LIC is the largest, oldest almost 6 decades (59 years) & most profitable insurance company in India. It is bigger than all other 24 Indian private insurance companies together. It is the only government insurance company in India.

Formation

There were about 245 loosely regulated insurance companies in India before independence. Out of 245 companies, 154 were life insurance companies, 16 were foreign companies and 75 where provident companies. In 1956, Government of India merge these companies and Life Insurance Corporation of India (LIC) was formed.

Slogan

LIC’s slogan “योगक्षेमम् वहाम्यहम” is in Sanskrit which is derived from Bhagavad Gita, represents ‘Your Welfare is Our Responsibility’.

Bollywood

Abhishek Bachchan and Amrish Puri where LIC agent before entering movies. Amitabh Bachchan and LIC come together to promote Urja Event for solar energy to light up unelectrified homes.

Market Share

In the year 2001, LIC’s market share in insurance was 100%. Today, there are 24 other private life insurance companies in India. Despite this, LIC has a market share of 61%. It has also lowest mis-selling complaints ratio.

Biggest IPO

In India, Paytm was the biggest IPO till date which was around 18,000 crore. Whereas, LIC is to dilute only 5% of its equity through IPO which is around 60,000 crores.

Valuation

After LIC’s listing, it may become the 3rd largest company in the terms of market capitalization after Reliance and Tata Consultancy Services (TCS) in Indian stock market. From this, you can estimate the valuation of LIC.

Profit

For FY2021, LIC has made a record profit of Rs.46,187 crore. In the first 6 months of FY2022, LIC has booked profit worth Rs.29,102 crore.

Employment

LIC is also one of the biggest employers in India. It has a Pan India network in 91% districts of India. It employs more than 1,14,000 employees and 13,50,000 agents. Importantly, 95% of LIC policies are sold through agents. On the other hand, entire 24 other private insurance players have total 11,00,000 employees. Overall, LIC gives 5.5% of the premium as commission to agents.

Customer Base

LIC has massive customer base of nearly 29 crore policyholders. If we tried to make a country of LIC policyholders, it will be the 4th most populated country in the world.

Retention Ratio

LIC have a very poor retention ratio for its policyholders. As per IRDA data, 37% policyholders stop paying premium after 1st year. Moreover, it loses 62% policyholders after 5 years.

Sovereign Guarantee

Government has a sovereign guarantee to settle claims in case of default by LIC. Hence, many people prefer LIC over private insurance companies even the premium of its term plan is costlier than private insurance.

Assets to GDP

LIC’s total assets are more than GDP of 85% countries in the world. On March 2021, LIC’s assets was more than 37,00,000 Crore which is more than Pakistan (21,00,000 Crore), Bangladesh (26,25,000 Crore) & Sri Lanka’s (6,07,500 Crore) GDP.

Institutional Investor

LIC is more of an investor rather than a life insurance company. It is the biggest institutional investors in FY2021. Its investment is nearly 4% of Indian stock market. 20% of LIC’s total investment are in equity market. Also, LIC is the single largest owner of government securities. It owns nearly 19% of the total government securities.
On September 30, 2021, LIC’s investment was 37.5 % in Central Government Securities, 24.61% in State Government Securities, 24.78 in Equities and 8.07% in Corporate Bonds.

Asset Under Management

LIC’s total Assets Under Management (AUM) is 3.3 times (3X) than the assets of all 24 private insurance companies together. Also, in comparison with entire Indian mutual fund industry it is still 1.1 times (1.1X).

Returns

Profit and interest comes from equity and bonds goes to policyholders in the form of a returns and bonus. Almost 95% profit is distributed to policyholders & remaining 5% goes to owner i.e., Government of India.

Global Brand

LIC was the 3rd strongest and 10th most valuable global insurance brand in 2021. Furthermore, globally it has ranked 5th in terms of life insurance premium.

Global Presence

LIC has a global presence in different countries with a joint venture or its subsidiaries. As of today, it has presence in Singapore, UK, Mauritius, Fiji, Bangladesh, Abu Dhabi, Kuwait, Oman, Dubai, Sri Lanka, Qatar, Nepal & Saudi Arabia.

Unclaimed Amount

In September 2021, LIC has 21,450 crore of unclaimed amount. Unclaimed amount means policyholder has fail to claim their policies after maturity or their family members have forgotten to claim amount after insured person’s death.

The LIC has invited its policyholders to link PAN card with LIC policies before 28th February, 2022. LIC policyholders to get 10% quota & also discount in IPO. For that, policyholders are required to open a Demat a/c to apply IPO.