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The wheels to list India’s largest life insurer, state-owned Life Insurance Corp. of India (LIC), are turning fast, and hopes are that the company will sell shares to the public by the end of FY22. On Wednesday, the government announced ten lead merchant bankers for the insurance firm’s planned initial public offer (IPO).

While there is no doubt that the interest to get a piece of the behemoth is intense, it must be noted that LIC has been losing market share hand over fist to private sector life insurers for a long time now. August was no different in terms of business.

An update of business data from the insurance regulator shows that LIC lost market share yet again to private sector insurers during the month. As the adjoining chart shows, the insurance giant’s share in retail weighted received premium was down to 36% in August.

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Giving up

The insurer has particularly seen its hold on the market weaken in retail products. LIC’s business growth on annualized premium equivalent basis has been in the low single digits every month except March and April this year, which were helped by a low base.

In contrast, most private sector life insurers have reported high double-digit growth consistently. For August, LIC witnessed a year-on-year (y-o-y) drop of 5% in the retail business.

However, a more sensible way to look would be a two-year compounded annual growth rate (CAGR) to smooth out the base effects due to the lockdowns in the wake of the pandemic. Even on this metric, LIC’s growth is wanting. In August, LIC reported a 2% decline on a CAGR basis compared with 14% growth for private life insurers.

To be sure, LIC’s market share increased during lockdowns in the first and the second waves of the coronavirus pandemic. One explanation is that the life insurer’s agency network was able to service customers despite the closure of offices. Indeed, LIC has beefed up its agent base, while that of private-sector insurers has shrunk slightly.

Even though LIC has been losing its grip, it still remains a formidable insurer in size. Further, its market share in group insurance is high at around 68% of the weighted received premium.

Even in retail, the number of retail non-single premium policies sold has grown 27%. But analysts at Motilal Oswal Financial Services Ltd point out that the ticket size has dropped 18% in the retail non-single premium products. The upshot is that LIC’s profitability metrics may be under pressure as retail products are margin-friendly.

Investors will have to keep this in mind while participating in the IPO. The issue size is yet to be decided, but analysts estimate that the life insurer could sell shares worth anywhere between 80,000 crore to 1 trillion. A Reuters report on Wednesday said that the government may allow 20% stake sale to foreign investors.

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