{"id":127613,"date":"2022-02-17T07:02:03","date_gmt":"2022-02-17T12:02:03","guid":{"rendered":"https:\/\/44.250.171.167\/?p=127613"},"modified":"2022-10-05T06:09:34","modified_gmt":"2022-10-05T10:09:34","slug":"lic-ipo-top-5-takeaways-for-investors-from-drhp","status":"publish","type":"post","link":"https:\/\/alphastreet.com\/india\/lic-ipo-top-5-takeaways-for-investors-from-drhp\/","title":{"rendered":"LIC IPO: Top 5 takeaways for investors from DRHP"},"content":{"rendered":"\n<div class=\"wp-block-media-text alignwide is-stacked-on-mobile\"><figure class=\"wp-block-media-text__media\"><img loading=\"lazy\" decoding=\"async\" width=\"119\" height=\"59\" src=\"https:\/\/alphastreet.com\/india\/wp-content\/uploads\/2022\/02\/LIC-logo.png\" alt=\"\" class=\"wp-image-127663 size-full\"\/><\/figure><div class=\"wp-block-media-text__content\">\n<p>LIC is the largest life insurer in India. 5th largest Life insurance company by Gross written premiums and the 10th largest by assets globally.<\/p>\n\n\n\n<p>It has 9L people in&nbsp;just their sales force which is more than the total employees of the industry!<\/p>\n\n\n\n<p>LIC&#8217;s AUM is 3.3x of the total AUM of all private insurers combined and 1.1x AUM of the entire MF Industry<\/p>\n\n\n\n<p>16.2x higher than 2nd largest SBI Life!<\/p>\n<\/div><\/div>\n\n\n<h4><span style=\"font-weight: 400;\"><strong>Market Shares:<\/strong>\u00a0<\/span><\/h4>\n<ul>\n<li><span style=\"font-weight: 400;\">64.1% &#8211; terms of premium (GWP)<\/span><\/li>\n<li><span style=\"font-weight: 400;\">66.2% &#8211; new business premium (NBP)<\/span><\/li>\n<li><span style=\"font-weight: 400;\">74.6% &#8211; in no. of individual policies issued<\/span><\/li>\n<li><span style=\"font-weight: 400;\">81.1% &#8211; in terms of no. of group policies issued\u00a0<\/span><\/li>\n<li><span style=\"font-weight: 400;\">55% &#8211; number of individual agents in India<\/span><\/li>\n<\/ul>\n<h4><span style=\"font-weight: 400;\"><strong>Type of products:<\/strong>\u00a0<\/span><\/h4>\n<ul>\n<li><span style=\"font-weight: 400;\">LIC is only into non-linked products<\/span><\/li>\n<li><span style=\"font-weight: 400;\">40% of the private sector\u2019s book is in linked products.<\/span><\/li>\n<li><span style=\"font-weight: 400;\">Linked products\u2019 returns are tied to the performance of debt and equity markets and are also savings-cum-protection products<\/span><\/li>\n<\/ul>\n<h4><span style=\"font-weight: 400;\"><strong>Strengths:<\/strong>\u00a0<\/span><\/h4>\n<ul>\n<li><span style=\"font-weight: 400;\">No other life insurer anywhere globally enjoys such a large market share as LIC\u00a0<\/span><\/li>\n<li><span style=\"font-weight: 400;\">The trust in the brand \u2018LIC\u2019 is evidenced by the 282.58 million in-force policies under individual business being serviced in India as of 6MFY22<\/span><\/li>\n<li><span style=\"font-weight: 400;\">Scale of LIC leads to much better-operating expense ratios: years\/decades before private players challenge LIC on this aspect<\/span><\/li>\n<li><span style=\"font-weight: 400;\">Strong asset management capability: largest asset manager in India (3.3x total private life insurers AUM and 1.1x of total MF industry)<\/span><\/li>\n<\/ul>\n<h4><span style=\"font-weight: 400;\"><strong>Formidable Agent network:<\/strong>\u00a0<\/span><\/h4>\n<ul>\n<li><span style=\"font-weight: 400;\">FY21 &#8211; Individual agents sold 15.3 policies each on an avg v\/s 3.9 policies by individual agents of the best performing of the top 5 private players and the average of 1.6 policies by the median of the top 5 private players<\/span><\/li>\n<li><span style=\"font-weight: 400;\">Average NBP per agent is 3.5x the median of the top five private players &amp; 1.3x the best among them.<\/span><\/li>\n<\/ul>\n<h4><span style=\"font-weight: 400;\"><strong>Risks:<\/strong>\u00a0<\/span><\/h4>\n<ul>\n<li><span style=\"font-weight: 400;\">Losing market share: LIC holds a 64% share by the total life insurance premium. It grew at 9% CAGR from FY16-21 (Private insurers grew 18% CAGR)<\/span><\/li>\n<li><span style=\"font-weight: 400;\">New business premium (NBP) has grown at 15% CAGR in the past 5 years with LIC and private insurers growing at 14% and 18% CAGR, respectively.<\/span><\/li>\n<li><span style=\"font-weight: 400;\">Digital concerns &#8211; Just 36% of individual renewal premiums were collected digitally, compared to 90%+ for private players<\/span><\/li>\n<li><span style=\"font-weight: 400;\">Death Claims settlement ratio is among the lowest in the industry<\/span><\/li>\n<li><span style=\"font-weight: 400;\">Active Agents reduced from 11L to 9L (6MFY22, could be due to Covid)<\/span><\/li>\n<li><span style=\"font-weight: 400;\">Dependence on sales agents is very high! \u2013 96% of NBP came from individual sales agents as of 6MFY22<\/span><\/li>\n<li><span style=\"font-weight: 400;\">Bancassurance channel was just 2.3% of NBP (6MFY22)<\/span><\/li>\n<li><span style=\"font-weight: 400;\">Infused 4743 Cr into IDBI Bank using policyholder funds (OCt 2019) &#8211; Company says IDBI doesn&#8217;t need more funds, but we all know what may happen in future<\/span><\/li>\n<li><span style=\"font-weight: 400;\">Bailed out HAL and BDL IPOs in 2018<\/span><\/li>\n<li><span style=\"font-weight: 400;\">LIC had infused Rs 21,600 crore for 51% in IDBI Bank. In 2019, another 4743 Cr was infusion and then bailed out IPOs as well. The DRHP itself states that the promoter i.e. Govt of India may ask them to carry out actions that may be against Shareholder interests<\/span><\/li>\n<\/ul>\n<h4><span style=\"font-weight: 400;\"><strong>Conclusion:<\/strong>\u00a0\u00a0<\/span><\/h4>\n<ul>\n<li><span style=\"font-weight: 400;\">LIC VNB margin in FY21 &#8211; 9.9% , in 6MFY22 &#8211; 9.3% (Normalized @ 12%)<\/span><\/li>\n<li><span style=\"font-weight: 400;\">For other insurers, the VNB margins are 20-25%!<\/span><\/li>\n<li><span style=\"font-weight: 400;\">One needs to be conservative with the price to embedded value (P\/EV) multiple one pays for LIC given the continuous market share loss.<\/span><\/li>\n<\/ul>\n<p><strong>Note: Globally insurers of this size trade at 1-2x P\/EV max!<\/strong><\/p>\n<p><strong>Track the latest IPO updates, follow <a href=\"https:\/\/twitter.com\/aditya_kondawar\" target=\"_blank\" rel=\"noopener\">Aditya Kondawar<\/a><\/strong><\/p>","protected":false},"excerpt":{"rendered":"<p>LIC is the largest life insurer in India. 5th largest Life insurance company by Gross written premiums and the 10th largest by assets globally. It has 9L people in&nbsp;just their sales force which is more than the total employees of the industry! LIC&#8217;s AUM is 3.3x of the total AUM of all private insurers combined [&hellip;]<\/p>\n","protected":false},"author":8,"featured_media":27126,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"jetpack_post_was_ever_published":false,"footnotes":"","jetpack_publicize_message":"","jetpack_publicize_feature_enabled":true,"jetpack_social_post_already_shared":true,"jetpack_social_options":{"image_generator_settings":{"template":"highway","default_image_id":0,"font":"","enabled":false},"version":2}},"categories":[392,1,5748,10444],"tags":[8233,8248],"class_list":["post-127613","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-earnings","category-finance-stocks","category-ipo","category-others","tag-insurance-services","tag-ipo"],"jetpack_publicize_connections":[],"jetpack_featured_media_url":"https:\/\/alphastreet.com\/india\/wp-content\/uploads\/2019\/04\/IPO-1.jpg","jetpack_likes_enabled":false,"jetpack-related-posts":[{"id":143066,"url":"https:\/\/alphastreet.com\/india\/lic-q3fy23-net-profit-rises-to-6334-crores\/","url_meta":{"origin":127613,"position":0},"title":"LIC Q3FY23 net profit rises to 6334 crores","author":"Chirag Gupta","date":"March 1, 2023","format":false,"excerpt":"State-owned Life Insurance Corporation (LIC) reported a manifold increase in its net profit in the December quarter (Q3) of financial year 2022-23 (FY23), aided by a transfer of INR 5,670 crore from non-participatory to shareholders\u2019 accounts. Its net profit in Q3 stood at INR 6,334.19 crore, compared with INR 234.91\u2026","rel":"","context":"In &quot;Earnings&quot;","block_context":{"text":"Earnings","link":"https:\/\/alphastreet.com\/india\/category\/earnings\/"},"img":{"alt_text":"earnings preview","src":"https:\/\/i0.wp.com\/alphastreet.com\/india\/wp-content\/uploads\/2019\/04\/Earnings-preview-1.jpg?resize=350%2C200&ssl=1","width":350,"height":200,"srcset":"https:\/\/i0.wp.com\/alphastreet.com\/india\/wp-content\/uploads\/2019\/04\/Earnings-preview-1.jpg?resize=350%2C200&ssl=1 1x, https:\/\/i0.wp.com\/alphastreet.com\/india\/wp-content\/uploads\/2019\/04\/Earnings-preview-1.jpg?resize=525%2C300&ssl=1 1.5x, https:\/\/i0.wp.com\/alphastreet.com\/india\/wp-content\/uploads\/2019\/04\/Earnings-preview-1.jpg?resize=700%2C400&ssl=1 2x, https:\/\/i0.wp.com\/alphastreet.com\/india\/wp-content\/uploads\/2019\/04\/Earnings-preview-1.jpg?resize=1050%2C600&ssl=1 3x"},"classes":[]},{"id":173061,"url":"https:\/\/alphastreet.com\/india\/icici-prudential-amc-ipo-explained\/","url_meta":{"origin":127613,"position":1},"title":"ICICI Prudential AMC IPO Explained","author":"Chirag Gupta","date":"December 15, 2025","format":false,"excerpt":"ICICI Prudential AMC doesn\u2019t really need a sales pitch. It\u2019s one of the oldest names in India\u2019s mutual fund industry, with roots going back more than three decades. The journey began in 1993, when the ICICI group entered a market that was still in its infancy. 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