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The Indian government is preparing to divest more of its LIC stake to meet the 10% public shareholding mandate by 2027. Disinvestment department to decide timing and price.

Government to sell minority stake in LIC

The Indian government is preparing to divest more of its LIC stake to meet the 10% public shareholding mandate by 2027. Disinvestment department to decide timing and price.

The government is working on further stake sale in Life Insurance Corporation (LIC) and the disinvestment department would work out finer details of the transaction, sources said.
The government currently holds 96.5 per cent stake in LIC. It had sold 3.5 per cent through an initial public offering (IPO) in May 2022 at a price band of Rs 902-949 a share. The share sale fetched the government around Rs 21,000 crore.
Sources said the government has given its approval for further share sale in LIC through the OFS route and the discussions are still in the nascent stage.
"It is up to the disinvestment department to look at the market condition and conclude the stake sale," a source said The government needs to offload another 6.5 per cent stake in the public sector life insurer to meet the mandated 10 per cent public shareholding requirement by May 16, 2027.
The quantum of stake sale, price and timing would be decided in due course, the source added.
LIC's current market capitalisation stands at Rs 5.85 lakh crore.
Shares of LIC were trading at Rs 924.40 apiece, down 2.27 per cent over the previous close on the BSE.

While Jefferies had said that the insurers may offset some impact by lowering costs, Nomura has mentioned that the implementation of proposal could have adverse impact on IRR on non-linked insurance products

Adverse impact on IRR: Brokerages on IRDAI's proposal to increase surrender value of life insurance 

<h2>While Jefferies had said that the insurers may offset some impact by lowering costs, Nomura has mentioned that the implementation of proposal could have adverse impact on IRR on non-linked insurance products</h2>

Brokerage firms have reacted to the proposal by insurance regulator IRDAI to increase the surrender value of life insurance policies. They have said that the implementation could have an adverse impact on the Internal Rate of Return (IRR) of insurance companies. IRR is used in capital budgeting to estimate the expected return of an investment.
<h3>IRDAI Proposal</h3>
The insurance regulator, IRDAI, released a crucial consultation paper on increasing the surrender value for life insurance policies. In insurance, &lsquo;surrender&rsquo; refers to the voluntary termination of a life insurance policy by the policyholder before its maturity or before the insured event has occurred.
When a policy is surrendered, the policyholder is no longer obligated to pay premiums, and the insurance coverage ceases. However, the life insurance company is obliged to pay a certain amount of surrender value to the policyholder who has paid the premium for the said interim period.
<h3>Jefferies on IRDAI's proposal</h3>
Jefferies has mentioned that this new concept of threshold premium may raise the surrender values and trim fees for insurers. It further mentioned that insurers may offset some impact by lowering costs. The lowering of cost may form 40-45% of Annual Premium Equivalent (APE) and Value of new business (VNB). Annual Premium Equivalent is the sum of the total value of regular&ndash;or recurring&ndash;premiums plus 10% of any new single premiums written for the fiscal year. Value of new business is the present value of the future profits associated with new business written during the year.
<h3>Nomura on IRDAI's proposal</h3>
Nomura has said that this proposal could lead to higher surrender value, lower VNB margins for non-linked insurance products. It also added that it may deter long-term investing by policyholders.&nbsp;
The agency went on to say that the implementation of the proposal could have adverse impact on IRR on non-linked insurance products. It also said that it would have significant implications on product design, pricing and viability of non-linked products. It has predicted that Max Life and HDFC Life will be the most affected and SBI Life will be insulated if proposal is implemented.
<h3>CLSA on IRDAI's proposal</h3>
CLSA has said that there may be a drag on the margins but extent of the margin will depend from insurer to insurer. It went on to call a more favourable surrender value for end customers will be double edged swords

Life Insurance giant LIC will soon meet the management of the Adani group to better understand how the conglomerate is dealing with the crisis. However, LIC has no plans to reduce its exposure to the Adani group currently. 

LIC: No plans to cut exposure, but will meet Adani management

Life Insurance giant LIC will soon meet the management of the Adani group to better understand how the conglomerate is dealing with the crisis. However, LIC has no plans to reduce its exposure to the Adani group currently.&nbsp;

Chairman of the country's largest insurer, Life Insurance Corporation, said that LIC officials will soon meet the Adani group management over the crisis that the conglomerate is facing. He also added, that there are no plans currently to reduce LIC's exposure to the Adani group companies.&nbsp; "Though our investor team has already sought clarifications from the Adanis, we are soon going to call them to meet us and explain. We want to understand what is happening in the market and in the group, and how they are managing the whole crisis." LIC chairman told reporters at the earnings conference on Thursday.
In a recent statement, LIC had said that the total purchse value of their equity exposure was over Rs 36,000 crore and the market value as on January 27th, was Rs 56,142 crore rupees.&nbsp;
LIC has been facing criticism over its exposure to the Adani group companies. Since the scathing report by the U.S based short seller, Hindenburg, made a slew of allegations, the Adani group has seen a massive erosion in market cap.&nbsp;
&nbsp;

The government also plans stake sales in IDBI Bank, Central Bank of India and Punjab & Sind Bank, as per the report.

Union Budget 2021: Modi Government may announce stake-sale plans in LIC, IDBI Bank

The government may announce to sell a 10-15% stake in the country's biggest insurer Life Insurance Corporation or LIC&nbsp;in next week's union budget, as part of a privatisation push to improve public finances, government sources told&nbsp;Reuters.
The government had announced plans to sell its stake in LIC last year but it got delayed by legal and administrative hurdles, the report said.
The government also plans stake sales in IDBI Bank,&nbsp;Central Bank of India&nbsp;and Punjab &amp; Sind Bank, as per the report.
Together, the plan is to raise up to ₹3 lakh&nbsp;crore&nbsp;in the next financial year, partly to set off the shortfall in the proceeds this year.

Budget 2021: Govt may announce stake-sale plans in LIC, IDBI Bank

The government may announce to sell a 10-15% stake in Life Insurance Corporation in next week's union budget, as part of a privatisation push to improve public finances, as per a Reuters report. The government also plans stake sales in IDBI Bank,&nbsp;Central Bank of India&nbsp;and Punjab &amp; Sind Bank. Together, the plan is to raise up to ₹3 lakh&nbsp;crore&nbsp;in the next financial year, partly to set off the shortfall in the proceeds this year.

The government may announce to sell a 10-15% stake in the country's biggest insurer Life Insurance Corporation or LIC&nbsp;in next week's union budget, as part of a privatisation push to improve public finances, government sources told&nbsp;Reuters.
The government had announced plans to sell its stake in LIC last year but it got delayed by legal and administrative hurdles, the report said.
The government also plans stake sales in IDBI Bank,&nbsp;Central Bank of India&nbsp;and Punjab &amp; Sind Bank, as per the report.
Together, the plan is to raise up to ₹3 lakh&nbsp;crore&nbsp;in the next financial year, partly to set off the shortfall in the proceeds this year.

LIC made ₹13,000 cr profit in equity till August this fiscal

Life Insurance Corporation (LIC) of India, which is preparing for its IPO&nbsp;despite volatility in the stock market, has already made a profit of ₹13,000 crore from its equity portfolio till August this year, a top official said.
The insurer has collected about ₹87,300 crore of renewable premium till August this year, registering a growth of 13.5% over the same period of the last fiscal.
In the 2020-21 budget, Finance Minister Nirmala Sitharaman had announced the government's plan to sell a part of its holding in LIC&nbsp;by way of Initial Public Offer.

Life Insurance Corporation&nbsp;of India, which is preparing for its IPO&nbsp;despite volatility in the stock market, has already made a profit of ₹13,000 crore from its equity portfolio till August this year, a top official said.
The insurer has collected about ₹87,300 crore of renewable premium till August this year, registering a growth of 13.5% over the same period of the last fiscal.
In the 2020-21 budget, Finance Minister Nirmala Sitharaman had announced the government's plan to sell a part of its holding in LIC&nbsp;by way of Initial Public Offer.

Life Insurance Corporation (LIC) of India, which is preparing for its IPO&nbsp;despite volatility in the stock market, has already made a profit of ₹13,000 crore from its equity portfolio till August this year, a top official said.
The insurer has collected about ₹87,300 crore of renewable premium till August this year, registering a growth of 13.5% over the same period of the last fiscal.
In the 2020-21 budget, Finance Minister Nirmala Sitharaman had announced the government's plan to sell a part of its holding in LIC&nbsp;by way of Initial Public Offer.

life insurance corporation

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