The domination of the 65-year-old insurance giant Life Insurance Corporation (LIC) in the domestic market is well known, but it is also a global giant – being the fifth largest in life insurance and ranked 10th in terms of total assets, the company said quoting a Crisil study. Its scale and size trump the size of many economies in the world. With nearly Rs 37 trillion assets under management (AUM), it is 16.6 times larger than the second-largest insurer SBI Life. It is not only the largest asset manager in India but has an established track record of financial performance and profitable growth.
Over the last eight calendar years, The IPO-bound LIC had focused its energies on retaining a reasonably stable set of seven companies among its ten largest equity holdings in its portfolio, which has now touched an investment value of ₹ 9.78 lakh crore as of September 30 last year.
This equity investment of ₹9.78 lakh crore accounts for almost 25 per cent of LIC’s total policyholders’ investments of about ₹39.5 lakh crore.
Over the last few years, the equity portfolio component in overall investments has seen a sharp increase from 15 per cent as of end-March 2020 to about 25 per cent in September last year. The seven companies that are seen to be the jewels in the crown of LIC’s largest equity holdings are Reliance Industries, Tata Consultancy Services, Infosys, ITC, ICICI Bank, State Bank of India, and Larsen & Toubro.
If one were to analyze the top ten equity holdings of the insurance behemoth each calendar year as of the end of December, one can see these seven companies figuring in each of the last eight calendar years. This reflects the stable set that the insurance behemoth is relying on as its top picks of large caps.
Other than the State Bank of India, there is no public sector bank or state-owned entity that has made it to LIC’s ten largest equity holdings each year in the last three calendar years (2019, 2020, and 2021).
ONGC, which formed part of this top ten largest holdings league four years back (2018), was the only other public sector entity that figured in this league in recent years.
With $ 520 billion (about ₹40 lakh crore) in total assets under management (AUM), LIC is the largest institutional investor in Indian markets. LIC’s equity AUM of $130 billion (₹9.78 lakh crore) gives it a 29 per cent share of domestic institutional equity AUM— a shade more than half of all equity mutual funds in India. LIC’s stake in the Indian market is about 4 per cent as of September 30, 2021, down from the 4.7 per cent level seen in 2017.
LIC’s stake in state-owned enterprises (SOE) stocks have been disproportionately high at 8-9 per cent. It has fluctuated, but the share of SOE companies in LIC’s equity portfolio has fallen consistently, a recent research note by UBS Securities showed.
Overall, LIC’s equity portfolio has outperformed Nifty500 in 14 out of the past 29 quarters, it highlighted. At an expected IPO size of at least ₹65,000 crores, the free-float market cap of LIC at $8.6 billion would make it the 32nd largest company in the free-float market cap pecking order.
On the debit side, LIC is the single largest owner of Government bonds (Centre +state) at 19 per cent of outstanding bonds. In fact, LIC holds more than RBI’s holding of Government bonds.
The LIC IPO is expected to be structurally positive for the insurance sector in the long run. Given its reach and size, it might increase awareness and benefit private insurers.
At the upper end of the valuation, LIC IPO could result in close to 60 per cent of the free-float market cap of the three large listed private life insurance companies.