State-owned giant Life Insurance Corporation of India (LIC), whose balance sheet has been used for many bailouts, made its stock market debut on Tuesday, May 17, at a discount to its offer price. That doesn’t seem to have dampened the spirits of LIC Chairman M R Kumar, who said global market sentiment had clouded the listing, and chose to focus on the robust response the initial public offering (IPO) received from policyholders. LIC will focus on increasing returns for its policyholders, Kumar said. The insurance behemoth will try to arrest its market share loss, ramp up its digital channels and make tactical tweaks on equity investments to please policyholders, he told reporters on the sidelines of a listing event. Edited excerpts:
LIC has listed at a discount….
Markets are also jittery and we were not expecting it to pick up. I am sure lot of policyholders who had missed out in the IPO will pick up LIC from the market now. I don’t see why it (share price) should be tepid for too long.
How prepared is LIC for the additional disclosures required from a listed company?
We are quite prepared. We have recruited people in the marker. We have a CFO (chief financial officer) from the market, we have a head of investor relations who has joined us. We have systems in place and IT (information technology) systems in place. In fact, our RHP (red herring prospectus) was quite exhaustive. The regulator expects embedded value disclosure yearly. We want to issue quarterly also. I think the first update would be in June.
What are your plans in terms of the policy portfolio?
We have already introduced non-participating and guaranteed products. We have some new products in the offing. We would like to push plans that guarantee returns to drive up our profitability margins. But participatory products have always been our strength and we won’t ignore them.
LIC has been losing market share for many years. Do you see this getting arrested at some point?
Market share is a question of growth, if I grow faster than industry I can grab market share. But my base itself is quite huge, so even if I grow slightly slower and lose market share, it should not matter. The key point is the business is growing. I don’t see why we can’t get it back. But even if we stay there, we have good growth.
What action plan do you have to arrest the market share?
As I said, we have also gained in February and March. It is not a one-way street. Last two years were bad because of COVID. Because of the inability of agents force to reach the customer. We have arrested that by giving them an app. I see that, going forward, we will be able to arrest market share loss. It will probably settle at 62-63%. We won’t lose anymore. There is enough room for growth.
You are the biggest asset manager in the country and investors invariably take exposure to the equity market through exposure to LIC. What would you say to investors?
Our equity portfolio is small in the overall portfolio but that’s is where you make and lose money. We have been contrarian and we continue to be so. We may become more contrarian and see how we can benefit. We need to see how we can gain returns for our customers. So the return per se will come more from equity than fixed income. We are not going to take risks, though. Thanks to COVID, we had time to prepare our strategy. There is no change in investment or dividend policy as such. We need to look at whether we need to tweak it to gain more returns. It is in-built in the DNA of LIC. We have to look at profitability very closely now.
Have you seen any repercussions after the dividend sharing ratio became 90:10 from 95:5 for participatory policyholders?
The regulation changed in 2012. In that sense, we have given policyholders bonuses as per 95:5 until now. For 10 years, people have continued to get 95%. We are not trying to short-change policyholders. We will ensure that whatever bonuses they have been getting is maintained or even increased. In a couple of years, even though the percentage goes down, the quantum of bonus goes up.
Foreign Institutional Investor (FII) participation has been very low in the issue. Your thoughts…
That has been due to global sentiment which has really tested Indian investors. The way to look at it is, without FIIs, could any other issue have managed this? We saw six times (the demand for shares) from policyholders. That is huge.
Will you focus on your agency and digital channels simultaneously?
We have good infra for digital. We will have digital marketing channel separately. We want to ramp up the banccasurance channel. We have not tapped this channel fully. We are working out whether we can have a separate digital platform to help banks. We are strong on the agency channel and we are not going to ignore it. We now have younger people joining us, 42% of our agents are millennials. They see the potential of the insurance market. We will focus on this. But at the same time, we are not going to let up on our digital efforts.
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