IPO-bound LIC eyes 8-10% of total premium from bancassurance channel in next 5 yrs

IPO-bound Life Insurance Corporation Of India (LIC) is planning to strengthen its bancassurance channel and is eyeing 8-10% of its total premium from the same in the next five years.

“Of our total premium, now only around 3% comes form bancassurance channel. Our objective is to take it to at least 8-10% in the next five years. Our focus will be more on bancassurance,” a company source told FE.

“Our agency channel will continue to be strong,” the person said, adding every year LIC grows its agency channel by around 10%.

The state-owned insurance behemoth, in its Red Herring Prospectus, said for the nine months period ended December 31, 2021, bancassurance partners procured Rs 916.99 crore of its new business premium (NBP) for its individual products in India, which was 2.56% of the company’s new business premium for individual products and Rs 1,489.66 crore of its new business premium for group products. This was 1.65% of the company’s NBP for group products in the country.

As on December 31, 2021, the company had 70 bancassurance partners in the country.

In India, LIC has the largest agent network of 1.33 million individual agents as on December 31, 2021, which accounted for 55% of the total agent network in the country and was 6.8 times the number of agents of the second-largest life insurer.

For the overall Indian market, the share of new business generated for individual life insurance through bancassurance channels increased from 24% in fiscal 2016 to 29% in fiscal 2021. Private players have relatively higher dependence on bancassurance for new business, with their share increasing from 52% in fiscal 2016 to 55% in fiscal 2021.

“While the agency channel will remain the bedrock of distribution for most life insurers, with accelerated digital adoption and technological advancements, life insurers in the next few years will focus on improving productivity and efficiency by focusing on using an omni-channel strategy and leveraging both digital and physical sales methods,” LIC said in its Red Herring Prospectus.

Talking to reporters during an IPO press conference here, LIC managing director Siddhartha Mohanty said the government did not go for a fresh issue of shares for LIC but instead opted for dilution of its stake as the corporation is cash-rich with healthy solvency.

The proposed IPO has received interests from “multiple” anchor investors — both foreign and domestic. The government plans to dilute 3.5% of its stake in LIC to raise between Rs 20,000 crore and Rs 21,000 crore.

LIC has fixed the price band at Rs 902-949 per equity share for the issue. The share sale is through an offer-for-sale (OFS) of up to 221.3 million equity shares and will open on May 4 and close on May 9.