IPO-bound LIC 3rd largest globally, but offers highest RoE of 82%: CRISIL

While for LIC the market share has been steadily declining–down 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 the country, the same was only 5 per cent in 2016 and 8 per cent in 2020, Crisil said in a report prepared in November 2021 which is not yet 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, with no other life insurer anywhere else enjoying such a high market share, says the report.

It attributed this to the Corporation’s enormous agent network of 1.35 million individual agents as of March 2021 accounting for 55 per cent of the total agent network in the country and was 7.2 times the numbers of agents of the second-largest life insurer SBI Life has, strong track record, immense trust in the LIC brand and its over 65 years of lineage.

Market share elsewhere, the Chinese market is dominated by Ping An Insurance and China Life Insurance, with 21 per cent (GWP at USD 74.13 billion) and 20 per cent (USD 69.65 billion). The largest Japanese player Nippon Life’s market share is only 16.2 per cent (USD 39.84 billion).

However, nowhere else in the world is the market share gap between the largest and the second largest as stark as here, with the second-largest player SBI Life having only 8 per cent market share compared to LIC’s 64.1 per cent fiscal 2021, says the report.

The market share distribution in the US is quite unlike elsewhere with top 15 accounting 60 per cent of the total market in 2020. NorthWestern Mutual Life tops the list with 8.4 per cent (GWP of USD 15.72 billion), followed by Metlife Inc at 7.6 per cent (USD 14.2 billion) and New York Life at 7.5 per cent (USD 14.1 billion) in 2020.

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

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

Again globally, Allianz of Germany is the largest life insurer in terms of life insurance premium (USD 88.48 billion) and is second in terms of total assets. This is largely due to its presence in multiple geographies like Europe, the US and Asia Pacific. Amongst the top global insurers, LIC is the only Indian player and is ranked fifth globally in terms of life insurance premium and tenth in terms of total assets.

LIC is ranked third in terms of gross written premium of USD 56.405 billion in fiscal 2021.

While Ping An has grown 15 per cent annually over the last four years, China Life by 9 per cent, and LIC grew by 6 per cent in this period.

But when it comes to profitability, LIC does not come anywhere with a paltry USD 406 million in net income in fiscal 2021 as against Ping An’s USD 23.1 billion.

In terms of total assets, LIC is the sixth largest with USD 522 billion clipping at 8 per cent annually between 2019 and 2021. Ping An (USD 1.38 trillion), MetLife Inc (USD795.15 billion), Nippon Life (USD 705 billion), Aviva Life of England at (USD657.34 billion), and China Life at USD 616.3 billion are the top five in terms of assets.

LIC’s growth comes amidst the continued decline of its peers elsewhere as in 2020, the global life insurance market contracted by 3.1 percent to USD2.79 trillion from USD2.88 trillion in 2019 due to the pandemic. The advanced markets were hit harder as they contracted by 3.9 percent compared to emerging markets, which degrew just 30 bps.

Citing Swiss Re data, Crisil report said the global life premium is expected to rebound strongly from the pandemic shock, with annual growth of 3.8 per cent in 2021 and 4 per cent in 2022, led by emerging markets with a 5.7 per cent and 6.8 per cent growth in 2021 and 2022, respectively.

And scope for LIC is very high given the massive USD 16.5 trillion protection gap in the country as of 2019, which was much higher compared with its Asian counterparts. This  protection gap was 83 percent as of 2019, the highest amongst all countries in Asia-Pacific. 

This story has been published from a wire agency feed without modifications to the text. Only the headline has been changed.