Life Insurance Corp., expected to file for an initial public offering soon, has decided to reduce the share of surplus it distributes among policyholders, according to a person privy to the development.
India’s biggest insurer will distribute 90% of its surplus in a phased manner against 95% now, the person told BloombergQuint on the condition of anonymity as details are private.
The state-run company is required to bring down the distributable surplus in line with the industry practice, and increase the share to the government to 10% from 5% by fiscal 2025, according to the changed Life Insurance Corporation Act, 1956. The government had amended the law in June, paving the way for LIC’s maiden offer—expected to be India’s largest—and corporatisation of the insurer.
According to the new surplus policy, life fund will be bifurcated into participatory and non-participatory funds. According to the person quoted earlier, the insurer will in a phased manner distribute the surplus from the participatory business between policyholders and shareholders in the ratio of:
FY22: 95:5
FY23, FY24: 92.5:7.5
FY25: 90:10
LIC has decided to distribute 100% of its surplus from the non-participatory business to shareholders—the government—for FY22.
BloombergQuint awaits LIC’s response to emailed queries.
The insurer’s mega-IPO is expected as early as March 2022. It’s set to file a draft red herring prospectus with the market regulator by Jan. 15. The issue could fetch the government up to Rs 1 lakh crore if it divests up to 10%.
LIC has also invited bids from strategic consultant firms for its digital transformation that will have an impact on the company over the next decade. The insurer has invited expressions of interest from eligible management and strategy consultants to evaluate its current information technology setup and map it with best practices in the banking and financial services sector in India. The last date of submitting bids is Jan. 17.
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