LIC DRHP Highlights: Jeevan Bima Nigam files DRHP; 25% of AUM in equities; check out key risks and other important dates

Thank you, readers! That's all from CNBC-TV18.com's live coverage on LIC’s draft red herring prospectus (DRHP) on February 13, 2022.

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LIC IPO | Know history of India's public sector insurance behemoth

LIC was established in 1956. In 1989, the LIC Mutual Fund was established as a trust. (Read more on LIC's history)

LIC IPO: An analysis of key strengths, weaknesses, opportunities and threats (SWOT) 

LIC is a market leader. It was established in 1956 under the Life Insurance Corporation Act. 

Though a market leader, LIC has of late lost market share to private sector rivals. The pandemic could affect its business. (Read more on LIC IPO)

LIC DRHP | Average ticket size of inidividual premium (non-single) at Rs 16,944

According to LIC's draft red herring prospectus, the company's average ticket size of individual premium (non-Single) stood at Rs 16,943.67 in the six months to September 30. 

LIC DRHP | Insurer's solvency ratio stood at 183.4% in April-September 

In the six months to September 30, LIC's solvency ratio stood at 183.37 percent, according to the DRHP. Solvency ratio is a key metric used to gauge a company's ability to meet its debt obligations in the long term.

LIC DRHP | Around 25% of Rs 39.6 lakh crore AUM in equities

LIC's assets under management (AUM) stood at Rs 39.56 lakh crore as of September 30, 2021.

That was more than 3.3 times the total AUM of all private life insurers in India and more than 1.1 times the entire Indian mutual fund industry’s AUM. (Read more on LIC financials)

LIC DRHP | PAT at Rs 2,974 crore in FY21 

LIC's consolidated profit after tax increased to Rs 2,974 crore in FY21, from Rs 2,627 crore in FY19. 

LIC IPO: Is it necessary for policyholders to have a demat account to apply for LIC IPO?

As per SEBI ICDR Regulations, no equity share can be issued by any company in physical form and the equity shares can only be issued in demat form.

If you are an LIC policyholder and are wondering the eligibility conditions for applying for the IPO, or have any other query about the mega share sale, find answers here: LIC IPO FAQs.

Newsbreak Confirmed | LIC DRHP mentions embedded value of Rs 5.39 lakh crore

CNBC-TV18 had earlier reported, citing sources, that the embedded value of LIC was likely at Rs 5.4 lakh crore. 

LIC IPO | 1/3rd of anchor investor portion to be reserved for domestic MFs

LIC IPO | Policyholders with lapsed policies can still apply for shares

LIC policyholders having a policy in lapsed condition can still be eligible for applying for shares of the state-run life insurer's IPO under the policyholder reservation portion. The policyholder reservation portion is yet to be finalised but will not exceed 10 percent of the total issue size.

“All policies which have not exited our records by way of maturity, surrender or by way of death of the policyholder are eligible for reservation under the Policyholder Reservation Portion,” according to LIC's draft red herring prospectus (DRHP).

As for policyholders who have applied for a LIC policy but are yet to receive the policy document, the following rule applies:

“To be eligible for reservation under the Policyholder Reservation Portion category, the policy should have been issued on or before the date of this Draft Red Herring Prospectus and should not have exited by way of surrender, maturity or death claim on the Bid/Offer Opening Date,” according to the DRHP. (Read more on LIC IPO)

LIC IPO | DIPAM Secretary Tuhin Kanta Pandey says insurer's embedded value at Rs 5.39 lakh crore as of September 30

LIC IPO DRHP | Key risks to know 

Here are some of the key risks highlighted by the state-run insurance major in its draft red herring prospectus (DRHP):

--Pandemic could adversely affect all aspects of LIC's business, including agents' ability to sell products, investment portfolio, operational effectiveness

--Any unfavourable publicity could have adverse effect on brand name, consequently adversely affect business

--Any adverse persistency metrics or adverse variation in persistency metrics could have a material adverse effect

--Segregation of LIC's Life Fund into two separate funds -- a participating policyholders’ fund and a non-participating policyholders’ fund -- (effective September 30, 2021) may adversely affect business

--A mismatch in actual claims experienced, other parameters from assumptions used in product pricing could have a material adverse effect

--Interest rate fluctuations may affect profitability

--A significant proportion of LIC’s total new business premiums are generated by participating products and single premium products; any regulatory changes or market developments that adversely affect sales of such products adversely effecting business

--Company's risk management policies, procedures, internal controls, risk management tools may not be adequate or effective (Check out the complete list of risks involved in LIC's IPO)

LIC IPO | DIPAM Secretary says insurer has 66% market share in new business upremium

Life Insurance Corporation (LIC) has 66 percent market share in new business premium with 283 million policies and 1.35 million agents, as of March 31, 2021, the Secretary of the Department of Investment and Public Asset Management (DIPAM) tweeted. 

LIC IPO DRHP | Government to sell 5% in LIC through OFS

LIC's total equity is around 632 crore shares. Up to 60 percent of the portion reserved for qualified institutional buyers (QIBs) may be allocated to anchor investors on a discretionary basis. One-third of the anchor investor portion will be reserved for domestic mutual funds. 

Though the reservation for policyholders has not been finalised by it cannot exceed 10 percent. The reservation for employees cannot exceed five percent. (Read more)