IPO-bound LIC third largest globally, but offers highest ROE of 82%: CRISIL

While the market share for LIC has been steadily declining – from 100 per cent in the pre-2000 era to 71.8 per cent in 2016 and further down to 64.1 per cent in 2020, for SBI Life, which is the second largest in India. In the country, it was only 5 per cent in 2016 and 8 per cent in 2020, Crisil said in a report prepared in November 2021, which is yet to be made publicly available.

At 64.1 per cent or with a Gross Written Premium (GWP) of USD 56.405 billion, LIC’s market share is unparalleled globally, and no other life insurer is enjoying such a high market share, the report said.

This attributed to the corporation’s vast agent network of 1.35 million individual agents as of March 2021, which was 55 per cent of the total agent network in the country and 7.2 times the number of agents of SBI Life, the second largest life insurer. Strong track record, immense trust in the LIC brand and its lineage of over 65 years.

Market share Elsewhere, the Chinese market is dominated by Ping An Insurance and China Life Insurance, with 21 per cent (GWP US$74.13 billion) and 20 per cent (US$69.65 billion). Nippon Life, the largest Japanese company, has a market share of just 16.2 per cent (US$39.84 billion).

While there is no market share gap between the largest and the second largest elsewhere in the world, SBI Life, the second largest player, has only 8 per cent market share compared to LIC’s 64.1 per cent FY21, says the report. .

The distribution of market share in the US is unlike anywhere else, with the top 15 accounting for 60 percent of the total market in 2020. Northwestern Mutual Life topped the list with 8.4 percent (GWP of USD 15.72 billion), followed by MetLife Inc. at 7.6 percent. cents (USD 14.2 billion) and New York Life at 7.5 percent (USD 14.1 billion) in 2020.

Similarly, the report states that LIC has the highest ROE among its peers at 82 per cent as of March 2021. It is followed by China’s Ping An Insurance, which is the world’s largest at 19.5 percent, Aviva at 14.8 percent, and China Life. Insurance at 11.9 percent.

The report attributes such high ROEs to LIC’s large agency network, asset management capabilities, leverage and operational efficiencies, which have helped it achieve consistent revenue growth and profitability.

Again globally, Germany’s Allianz is the largest life insurer in terms of life insurance premiums (US$88.48 billion) and second in terms of net worth. This is largely due to its presence in many geographic regions such as Europe, America and Asia Pacific. Among the top global insurance companies, LIC is the only Indian player and ranks fifth globally in terms of life insurance premiums and tenth in terms of net worth.

LIC ranks third in terms of gross written premium of USD 56.405 billion in FY21.

While Ping An has grown 15 per cent annually in the past four years, China Life has grown 9 per cent and LIC has grown 6 per cent in the same period.

But when it comes to profitability, LIC doesn’t come anywhere near a net income of USD 406 million as against Ping An’s USD 23.1 billion in FY21.

In terms of total assets, LIC is the sixth largest with an annual clipping of 8 per cent between 2019 and 2021 at USD 522 billion. Ping An (USD 1.38 trillion), MetLife Inc. (USD795.15 billion), Nippon Life (USD 705 billion) are among the top five in terms of wealth, Aviva Life of England ($657.34 billion) and China Life at $616.3 billion.

LIC’s growth comes amid continued decline of its peers in 2020, with the global life insurance market growing 3.1 per cent to USD 2.79 trillion from $2.88 trillion in 2019, due to the pandemic. Advanced markets were down 3.9 percent compared to emerging markets, down just 30 bps.

Citing Swiss Re data, Crisil’s report said global life premiums are expected to bounce back strongly from the shock of the pandemic, with annual growth of 3.8 per cent in 2021 and 4 per cent in 2022, led by emerging markets at 5.7 per cent. and with 6.8 percent. Percentage increase in 2021 and 2022 respectively.

And the scope for LIC is huge given the massive security gap of US$16.5 trillion in the country by 2019, which was much higher than its Asian counterparts. As of 2019, the security gap stood at 83 percent, the highest among all countries in the Asia-Pacific.

This story has been published without modification in text from a wire agency feed. Only the title has been changed.