Life Insurance Corporation of India (LIC) is focusing on digital transformation and product mix to ensure better returns for its stakeholders, chairperson Siddhartha Mohanty says in an interview.
Why is the LIC stock underperforming in the market?
In recent times our stock price had also moved up from around ₹500 level and is gradually picking up. Share prices function as per market dynamics. But what I can assure is our performance. We are a committed organisation to all our stakeholders and we will deliver.
What steps you have undertaken towards this?
We have already undertaken many activities in that direction and for example we have focused on product mix. Traditionally par (participating) products were dominant in LIC but after listing we have focused to grow non-par products without compromising on par products. Since non-par products create better margins for shareholders, we have been consciously promoting these. Last year this strategy had yielded some result.
Even in the first quarter of the current financial year the share of non-par to Annual Premium Equivalent (APE) is 10.2%, as against 7.75% in the year-ago period. So, there has been a marked shift.
And the non-par premium during the Q1 has grown more than 29%. The share of non-par to total premium is more than 37%.
So all these directional changes, taken consciously, have created value for all our shareholders. Besides that we have also focused on channel mix. Today over 96% business comes from the agent’s channel. We are now focusing on growing the Bancassurance and direct marketing/digital marketing channels in the total premium portfolio.
I am happy to share that in Q1 the Bancassurance channel has shown growth of 29% and it is growing faster. In the last financial year this channel had grown 3.6% and for this year the target is to grow it to 5-6%. In the next couple of years Bancassurance should have more than 10% share in the total premium kitty.
What is the focus on digital?
We are also growing the share of direct marketing/digital marketing channel whose share is now less than 1%. For this we are designing some products and adopting digital technologies. Recently we introduced a product called Jeevan Kiran which has been appreciated by customers.
In case of technology, we have taken up a customer onboarding project which should go live by December 2023 or January 2024. This customer onboarding will be through the digital mode.
We are already using the Ananda mobile app through which a policy can be issued by an agent in 10 to 12 minutes starting from onboarding to issue of the policy bond. Last year we had issued 8,11,000 policies through the Ananda mode. It is totally paperless and involves no physical contact. Over 1,60,000 agents are active on this and our objective is to scale this up further.
Besides customer onboarding we have undertaken a project for total digital transformation. All our operations will be carried out in digital mode. Once this project takes off, over 95% work will be done through the digital mode. One of these technology interventions will provide results in this year itself.
Before listing, customers were the main focus, now you have to take care of retail shareholders. How are you balancing this?
LIC is a customer-centric organisation wherein we protect the interest of policy holders and automatically the interest of shareholders is taken care of. The non-par products sold to customers generate more margin and in this way the interest of shareholders is also protected. When we act as a customer first approach, obviously it adds to shareholders’ value.
LIC is a major player in the equity and money markets. What is your capital allocation strategy?
Our investment is totally regulated as per IRDAI regulations. We have specific norms for investing in central government and State government securities and some amount is left for the equity markets. Majority of our investment goes to central and State governments securities such as G-Sec and SGL (Subsidiary General Ledger). Out of ₹46 lakh odd crore, about ₹10 lakh crore goes for equity. We do take advantage of market movements both ways. When market goes downwards we focus on value buying and when market goes up we book profit to create value for policyholders and shareholders.
Recently there were allegations that LIC was made to invest in Adani Group entities, your comment?
We do not discuss individual stocks because our total portfolio is huge. But so far as this particular investment is concerned I have already clarified earlier that ever since this issue erupted, I am relating what I said earlier, our investment here has not made any loss. Rather, we have made good profit and good growth in this investment. Even today also as compared to the book value, the market value is higher.
I can assure everyone that the investment by LIC is totally regulated as per IRDAI regulations, the Insurance Act and we have our investment committee as well as there is oversight of the board. With all these in place I can assure everyone that their investment is in safe hands and there is nothing to worry.
LIC has completed one year since listing. What has been achieved?
Since listing we have delivered all the commitments made to our shareholders and to other stakeholders. We have shown growth in premium income and some directional change has also been initiated in the last year in terms of product mix. We are continuing the trend in the current year. In the first quarter we have shown profit of more than ₹9,500 crore.
Whatever decisions we took consciously have started yielding good results post listing. Going forward definitely we will create more value, earn good profit and fulfil our commitment.