LIC awakens, shrugs at new competition

Venkatachari Jagannathan
26 November 2000

The wake up bugle for India's largest, and till date a monopoly, insurance company, the Life Insurance Corporation of India (LIC), has been sounded. The Insurance Regulatory and Development Authority (IRDA) has licensed HDFC Standard Life, Max New York Life and ICICI-Prudential combine to transact life insurance business. Waiting in the wings are Reliance and Tata-AIG.

So are we going to see LIC struggling? Not necessarily, given LIC's known and hidden strengths. And if the corporation can get its act together to meet the competition, it can be a very tough adversary. In fact, LIC is not perturbed by the likely competition, while waking up to the emerging reality. Conversely, it believes that it is the new players who will have to seek cover if the Indian public sector giant flexes its huge financial muscle!

Last fiscal, the corporation's total income stood at Rs. 45,174 crore, which included Rs. 27,849 crore from premium income and Rs. 16,113 crore from investment and rental income. The company's total assets stand at a whopping Rs. 160,935 crore and its total life fund at the end of last fiscal was an astounding Rs. 154,043 crore.

And these are just the declared figures. The corporation has huge hidden reserves, as the assets are valued at cost in its balance sheet. For example, LIC owns sizeable real estate, the market value of which runs into thousands of crore rupees. "We haven't estimated the market value of our real estate," says Mr. G.N. Bajpai, the corporation's new chairman.

LIC owns around 600 branch premises, apart from the towering buildings in Mumbai, Delhi and Chennai. Similarly, the book value of its equity investment is a whopping Rs. 10,000 crore. These will take care of the corporation's solvency margin requirements several times over.