An Annuity product converts an accumulated retirement corpus into a guaranteed, lifelong stream of income. When one invests a lump sum, LIC pays a regular pension for life, ensuring the savings aren’t outlived.
“When the annuity markets are becoming more favoured by the policyholders, and more investments flow into annuities, we need to necessarily have long-term investments matching that kind of long-term liabilities. So we have been in touch with the (insurance) regulator as well as the regulators like SEBI, as well as RBI and the requirements of LIC, particularly are being duly communicated to them,” he told PTI in an interview.
He further said the sector regulator, Insurance Regulatory and Development Authority of India (IRDAI), has also been taking proactive steps in ensuring that the evolving needs of the market are also fully met by the insurance company.
“Given the fact that insurance companies generate long-term funds, they go on to meet the long-term financing requirements in terms of infrastructure needs and nation-building. The regulations are also getting aligned with the requirements. So it is a win-win situation for both of us. We keep working together,” he said.
LIC has a substantial portfolio of annuity business which is very long tailed with liabilities running into 30, 40, 50 years. So the investment of funds is based on the underlying business and the underlying fund.
Asked if LIC could sustain a high net Value of New Business (VNB) margin of over 20 per cent in FY27 as well, Doraiswamy said, the effort that the Corporation is taking is to see that the VNB margin, or more than that, the gross VNB, as well as the performance in almost all parameters, keep improving.”The VNB margin has got multiple components. Some of the components are within the area of focus of the corporation. Some are outside our purview, but given the set of circumstances, our focus or our efforts will be to see that the margin that we have reached, we would like to maintain or build up on that a bit more. That is what we are looking at, but ultimately, we have to be very clearly focused on the interests of the policyholders,” he said.
So, he said, we should be having products in such a way that they provide good value to customers, and the customers keep adopting and subscribing to LIC’s products.
“So that will be our primary focus, and we will be trying to improve our margins by improving the ticket size, by improving the volume, and through that, improving the efficiency of the Corporation and through that achieve the VNB and VNB margins,” he said.
Doraiswamy further said LIC is actively considering establishing a fintech arm either through strategic investment or an organic way to cater to its growing digital needs.
“Naturally, to meet the modernisation requirement and particularly to bring innovation, we are engaging both fintech and insurtech players, and we are getting a lot of new things being developed by such players,” he said.
On the other side, he said, “We are a big financial institution investing in multiple organisations, and we also look at strategic investments in any specialised player as a way of improving the returns on the policyholders’ funds.”
Asked if LIC is prepared for further dilution of stake by the Centre, Doraiswamy said, “We have been prepared right from day one. When we started preparing for the IPO, we were prepared for this kind of subsequent actions as well. So the call is taken by the government.”
As and when a decision is taken on the timing and quantum of further stake dilution, LIC will be fully prepared to work closely with the government to ensure the initiative achieves the success it deserves.
LIC came with an initial public offering, the biggest till 2022 in terms of size, resulting in the government raising about Rs 21,000 crore by diluting just 3.5 per cent stake in the insurance behemoth.
Prior to 2022, LIC was wholly owned by the Government of India.
He further said the government has been focusing on complying with the listing requirements, under which any listed company will have a public float of 10 per cent or 15 per cent at different schedules and times.
The government is focused on achieving this goal, but due to current market volatility, it is waiting for the right time to launch the next public offering, he added.