On late Sunday evening (February 13, 2022), the state-owned life insurance giant, LIC filed the Draft Red Herring Prospectus (DRHP) with the Securities and Exchange Board of India (SEBI). SEBI approval for LIC IPO came on March 9. This is one of the biggest IPOs to hit the Indian markets and many investors have been waiting for the DRHP to be released. This brings us to the most pertinent question in the minds of most investors – should I invest in the LIC IPO? The LIC IPO DRHP is very comprehensive. Today, we will try to offer some interesting and important snippets from the document to help you make a decision.
Here are some interesting points from the DRHP filed for LIC IPO:
LIC’s DRHP showed that the insurance company currently has Rs 21,539 crore of unclaimed funds. Unclaimed amount refers to the money that policyholders could have claimed on events (Such as completing the policy period, and health benefit claims) but so far haven’t.
LIC policyholders can check if they have any unclaimed amounts by visiting LIC’s website and navigating to the ‘Unclaimed Policy Dues’ section.
LIC is the fifth-largest life insurer in the world in terms of Gross Written Premium (GWP). Also, it is the tenth-largest life insurer in the world in terms of total assets.
Number of ongoing life insurance policies: It has around 286 million (28.6 crores) in-force life insurance policies of individuals
Size of LIC’s AUM: LIC has total Assets Under Management (AUM) of Rs.39,55,892.92 crore. This is:
As of September 30, 2021, the Embedded Value of LIC was Rs. 5,39,686 crore.
Embedded Value is the standard of valuing any insurance company. It is calculated by adding the present value of future profits from in-force policies to the Net Asset Value (NAV) of its capital and surplus.
Also, read What to know before applying for LIC IPO?
LIC is the largest asset manager in India as mentioned in the LIC IPO DRHP.
This is an important aspect for an insurance company. Here are two important factors to keep in mind with respect to the operating expenses of LIC:
LIC has reported negative cash flows for the last three years. This can be attributed to its rising operating expenses. The total expenses (including commissions paid to agents) have shown a constant rise from 2019 to 2021. In fact, the total expenses for the six months of FY2022 were Rs18,906.36 crore. These expenses resulted in the LIC reporting negative cash flows at Rs11,114.3 crore.
Another noteworthy observation is the substantial reduction of cash flows from Rs.67,899.5 crore in 2019 to Rs. 26,050 crore in 2021.
While LIC is still the largest player in the life insurance space, it has lost market share over the last few years. Here are some numbers:
Additionally, LIC experienced a drop in the sales of individual policies too. Apart from other factors, the pandemic-induced lockdowns played a role in the drop in LIC’s market share.
LIC experienced an increase in claims of death during the pandemic.