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Will mutual funds subscribe to LIC IPO? Looks likely, going by their past behaviour

LIC IPO will not be the first listed insurance company for mutual funds to invest in. Already Rs 30,000 crore or 1.5% of the overall equity AUM is invested in shares of seven listed insurance companies.

April 28, 2022 / 08:25 PM IST
Insurance services is a key sector in any emerging economy and India is no different. At a crucial juncture of Life Insurance Corporation (LIC) floating its initial public offer (IPO), many of you would be contemplating the idea of investing in the shares of LIC. It is interesting to know that there are seven insurance companies promoted by public sector entities as well as private sector entities listed on Indian stock exchanges. According the red herring prospects filed by LIC for its IPO, the National Financial Literacy and Inclusion Survey (NCFE- FLIS) 2019 tell us that only 27 percent of Indian population is financially literate, indicating a huge gap and potential for the financial services industry. Mutual funds understand this large growth runway for the insurance industry and hence have been investing in shares of various insurance companies. Per the latest data as of March 31, 2022, MF have invested about Rs. 30,000 crore or 1.5% of the overall equity AUM in the stock of seven insurance companies. Data is as of Mar 31, 2022. Source: ACEMF. Here is the list:
Insurance services is a key sector in any emerging economy and India is no different. At a crucial juncture of Life Insurance Corporation of India (LIC) floating its initial public offer (IPO), many of you would be contemplating the idea of investing in the shares of LIC. It is interesting to know that there are seven insurance companies promoted by public sector entities as well as private sector entities listed on Indian stock exchanges. According to the red herring prospectus filed by LIC for its IPO, the National Financial Literacy and Inclusion Survey (NCFE- FLIS) 2019 tells us that only 27 percent of Indian population is financially literate, indicating a huge gap and potential for the financial services industry. Mutual funds understand this large growth runway for the insurance industry and hence have been investing in shares of various insurance companies. Per the latest data as of March 31, 2022, MFs have invested about Rs 30,000 crore or 1.5% of the overall equity AUM in the stock of seven insurance companies. However, their stock performance over the last few years has not been up to the mark. Data is as of Mar 31, 2022. Source: ACEMF. Here is the list:
Promoted by the largest public sector bank – State Bank of India and global financial services behemoth BNP Paribas Cardif, SBI Life Insurance Company (SBI Life), is one of the larger life insurance companies in India offering both linked and non-linked products. As on December 31, 2021 the company reported solvency ratio of 2.09 times compared to 2.34 times a year before. The stock is one of the constituents in bellwether index Nifty 50.
Promoted by the largest public sector bank – State Bank of India - and global financial services behemoth BNP Paribas Cardif, SBI Life Insurance Company is one of the larger life insurance companies in India offering both linked and non-linked products. As on December 31, 2021 the company reported solvency ratio of 2.09 times compared to 2.34 times a year before. The stock is one of the constituents in bellwether index Nifty 50.
Promoted by ICICI Bank, a leading non-life insurer - ICICI Lombard General Insurance Company (ILGIC) is on the buy list of many institutional investors. The company has a solvency ratio of 2.46 times as on March 31, 2022 compared to 2.9 times a year before. The stock is one of the constituents of Nifty Next 50 Index.
Promoted by ICICI Bank, leading non-life insurer ICICI Lombard General Insurance Company (ILGIC) is on the buy list of many institutional investors. The company had a solvency ratio of 2.46 times as on March 31, 2022 compared to 2.9 times a year before. The stock is one of the constituents of Nifty Next 50 Index.
HDFC Life Insurance Company (HDFCLife) is promoted by Housing Development Finance Company. In September 2021 HDFCLife announced the acquisition of Exide Life Insurance Company. The company has solvency ratio of 176 percent for FY22 compared to 201 percent for previous year. The stock is one of the constituents in bellwether index Nifty 50.
HDFC Life Insurance Company (HDFCLife) is promoted by Housing Development Finance Company. In September 2021 HDFCLife announced the acquisition of Exide Life Insurance Company. The company has a solvency ratio of 176 percent for FY22 compared to 201 percent for previous year. The stock is one of the constituents of bellwether index Nifty 50.
ICICI Prudential Life Insurance Company (IpruLife) is a joint venture between ICICI Bank and Prudential Corporation Holdings. The company has a market share of 7.3 percent market share for FY2022. One of the early entrants in the life insurance business in India, the company has been a preferred investment for many long term institutional investors in India. Solvency ratio stood at 204.5 percent for FY 2022 compared to 216.8 percent for the previous year. The stock is one of the constituents of Nifty Next 50 Index.
ICICI Prudential Life Insurance Company (IpruLife) is a joint venture between ICICI Bank and Prudential Corporation Holdings. The company had a market share of 7.3 percent for FY22. One of the early entrants in the life insurance business in India, the company has been a preferred investment for many long term institutional investors in India. Solvency ratio stood at 204.5 percent for FY22 compared to 216.8 percent for the previous year. The stock is one of the constituents of Nifty Next 50 Index.
Star Health & Allied Insurance Company (StarHealth), is the most recent entry into the listed insurance companies in India. The company is promoted successful investor Rakesh Jhunjhunwala along with other promoters. The company offers health, accident and travel insurance products to individuals and corporates. The company had a solvency ratio of 1.8 times as on December 31 2021.
Star Health & Allied Insurance Company (StarHealth) is the most recent entry into the listed insurance companies in India. The company is promoted by successful investor Rakesh Jhunjhunwala along with others. The company offers health, accident and travel insurance products to individuals and corporates. The firm had a solvency ratio of 1.8 times as on December 31 2021.
The New India Assurance Company, promoted by Government of India is the only listed non-life public sector general insurance company in India. It offers products across the retail and corporate lines. It has a solvency ratio of 1.83 times as on December 31, 2021 compared to 2.15 a year ago.
The New India Assurance Company, promoted by government of India, is the only listed non-life public sector insurance firm in India. It offers products across the retail and corporate lines. It had a solvency ratio of 1.83 times as on December 31, 2021 compared to 2.15 a year ago.
General Insurance Corporation of India (GICRe), is a public sector re-insurance company with promoter holding of 85 percent. The company has maintained 60 percent market share in the Indian reinsurance market. It skipped payment of dividend for the financial year 2020-2021 with a view to conserve a capital.Solvency ratio of the company stood at 1.8 times for Q3FY22 compared to 1.53 times for the same quarter previous year.
General Insurance Corporation of India (GICRe) is a public sector re-insurance company with a promoter holding of 85 percent. The firm has maintained 60 percent share in the Indian reinsurance market. It skipped payment of dividend for the financial year 2020-2021 with a view to conserve capital. Solvency ratio stood at 1.8 times for Q3FY22 compared to 1.53 times for the same quarter previous year.
All you need to know before applying for LIC's Mega IPO (Illustration: MoneyControl)
All you need to know before applying for LIC's Mega IPO (Illustration: MoneyControl)
Dhuraivel Gunasekaran
Nikhil Walavalkar
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