LIC explores investments in fintech, health insurance sectors
What's the story
Life Insurance Corporation of India (LIC) is considering investments in health insurance and financial technology (fintech) sectors. R Doraiswamy, the CEO and Managing Director of LIC, said these potential moves would help the company maintain its market leadership in India's life insurance sector. The decision comes after the Indian government raised ₹31,552 crore through an offer for sale (OFS) at LIC.
Market response
OFS reflects market's confidence in LIC: Doraiswamy
Doraiswamy said the OFS reflects the market's confidence in LIC. He added that it is now their responsibility to meet these expectations.
With the completion of this OFS, they have achieved their 10% public shareholding target.
The government has been talking about a longer gap of 18-24 months before the next stake sale to reduce supply overhang and improve price discovery.
Stock strategy
Addressing below-par stock performance
Doraiswamy acknowledged that LIC's stock has mostly traded below its IPO price, attributing it to a low public float. To address this, the company issued 1:1 bonus shares and increased dividend yield.
He also said they are focused on increasing non-participating business share and improving margins.
Despite a sharp improvement in Value of New Business (VNB) margins, Annualized Premium Equivalent (APE) growth has lagged the industry due to market volatility affecting ULIP purchases.
Business performance
Annuity business and fintech investments update
Doraiswamy said the annuity business has been weak due to remittances and liquidity issues. However, he expects ULIPs to improve as market conditions stabilize.
On fintech investments, he said LIC is undergoing a major technology transformation and is open to investing in fintech or insurtech companies that need growth capital and offer good value as an investment opportunity.
Investment strategy
On health insurance, bancassurance, and IDBI Bank stake sale
Doraiswamy said LIC is still evaluating opportunities in health insurance but there is no urgency.
The company wants to ensure that the claims settlement ratio doesn't affect its brand reputation.
On bancassurance, he said it has grown from less than 3% in 2022 to over 8%, including digital channels, and could go beyond 10%.
He also addressed IDBI Bank's proposed sale, saying their partnership with IDBI will continue regardless of stake ownership.
Regulatory impact
Proposed trail-based commissions won't affect LIC much, says Doraiswamy
Doraiswamy said LIC has always kept distribution costs within permissible limits and has even reduced or realigned commission structures over multiple years.
He said they won't be affected much by the proposed trail-based commissions and changes to distribution costs.
However, he added that they are looking at strengthening agents who will stay with LIC for a longer period through consistent performance.
Investment approach
On current investment strategy and market outlook
Doraiswamy said LIC, which has assets under management of around ₹60 lakh crore, takes a contrarian approach to investments.
They buy during dips and book profits when the market rises.
He also said they have invested a good amount in fixed-income securities due to favorable high-interest rates.
Despite geopolitical uncertainties making it hard to predict market direction, Doraiswamy remains optimistic about both equity and debt opportunities at present.