Reduced annuity returns after rate cuts: LIC chief
With both markets and interest rates down, how will you increase returns? Have you repriced any products because of the fall in rates?
We are a long-term investor. We look at all market cycles and invest whenever there's an opportunity for value creation. If equities aren't attractive, we invest in other instruments like money market products and wait for the right moment. Short- or medium-term market movements don't affect us because we focus on the long term.
We look for value opportunities in equity IPOs as well. Until then, we park funds in short-term investments and shift when we see value.
We recently repriced our annuities - both Jeevan Akshay and Jeevan Shanti - towards the end of last month in line with market conditions.
LIC's stock is below the IPO price. How will you attract investors if govt wants to dilute? What's your dividend policy?
We believe LIC deserves a better valuation. Govt is closely watching the market and will take a call on a price when there is enough scope in the market to go for further dilution.
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They aim to reduce their holding to 90% by 2027 and are working towards that. Dividend distribution will depend on capital and solvency needs. We currently have a solvency ratio above 2, while the requirement as a systemically important insurer is 1.75.
The solvency ratio will drop by a few basis points once the regulator implements risk-based capital requirements and IFRS (accounting norms). We've engaged Deloitte as consultants and are preparing for compliance.
Is LIC moving towards more profitable products? Why was there a drop in the number of policies?
We've shifted towards non-par products to match market demand, especially from younger customers seeking guaranteed and short-term plans. Our non-par share in premiums has risen from 7% in 2022 to 30%. We will now balance focus between par and non-par products. The decline in policies was because a new master circular in Oct 2024 required us to modify all products, increase the minimum sum assured, and change commission structures.
This reduced policy numbers, especially in popular low-ticket plans. We saw a significant degrowth in the number of policies sold during Q3FY25, which continued in Q4 as well as Q1FY26. We're working to recover growth in the second half.
There was news about LIC picking up a stake in a health insurer. When will the deal conclude? Will you look at composite (life and non-life) insurance?
We never named any company. We were exploring taking a strategic stake in a standalone health insurer for learning purposes. But as we progressed, we found that we needed to do much more due diligence and expand the options available, examining them in greater depth.
So we decided not to make a quick move. We will also wait for changes in insurance laws and other regulatory changes expected in the near future. We have been a pure life insurer since 1972.
We'll examine the composite option if laws change, but we have no such plan now.
What's the aspiration in banking after the IDBI stake sale proposal?
Our vision is to be a transnationally competitive financial conglomerate. We acquired up to 51% of IDBI Bank because their recapitalisation need provided us an opportunity.
We are now at 49.2%. Govt and LIC will jointly offload part of our stake during privatisation, but we will retain a significant holding post-sale and continue the relationship.
Do you plan to grow your market share?
The focus of govt is to allow 100% foreign direct investment so that there are new players. When the market has more players, market share may reduce. We are not looking at market share as a prime focus. We are focusing on continuing to grow sustainably and profitably while expanding the market.
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