Capital Markets

Life Insurance Corporation of India

In India, insurance has not been penetrated for more than 20%. One of the biggest corporation in India for insurance is life insurance corporation of India. It is an investment company and fully state-owned. With the asset value of more than $370 billion, it is the largest insurance company.

Life Insurance Corporation of India

Life Insurance Corporation of India

Life Insurance Corporation of India

The life insurance corporation of India also known as LIC was formed in 1956. The headquarters of LIC lies in Mumbai, Maharashtra. Also, it was formed when the Indian parliament passed the life insurance act. Furthermore, this nationalized the insurance industry sector in India.

To create LIC, over 245 insurance companies were merged into 1. Since it’s inception in 1955, LIC has commanded a monopoly of selling and soliciting life insurance in India. Thus, it created a huge surplus in 2006. Also, it accounted for 7% of GDP at that time.

Furthermore, the company has grown substantially with more than 350 million policies and a corpus larger than $120 billion.

In 2000 things changed when the Indian government opened up the insurance sector for private players. They liberalize the insurance sector and thus LIC emerged as a beneficiary from the process. Also, they grew substantially higher than private players.

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Operations of LIC

Today there are more than 2048 fully computerized branch offices in India. Furthermore, there are around 113 divisional offices and 8 zonal offices. Also, there are 25 metro area service hubs in towns and cities of India.

To add to all this there are 54 different customer zones of LIC. Currently, LIC also has 1899 branches of IDBI bank at its disposal. The insurance business of IDBI bank is carried out by LIC.

Holdings of LIC

Currently, LIC used to hold shares in all the nifty companies in India. But now it has holds shares in only 27 nifty companies. The cumulative value of these shares in 27 companies fell by 8000 crores. Also, it is believed that LIC has sold shares of 500 to 1000 crores in HDFC Bank, Mahindra and Mahindra, L&T, Maruti Suzuki, Bajaj auto, etc.

Furthermore, LIC also trimmed it’s holding in TCS, Cipla, Ambuja cement, Asian paints, etc. On the other hand, it increased its a stake in other 14 nifty companies. This is estimated to be around ₹4000 crores. The major companies where LIC upped its investment are RIL, Infosys, Cairn India, and Coal India Ltd. Besides this, other companies include NTPC, ITC, Siemens, Hero motorcop, and Bharti Airtel.

For nifty companies, LIC had the highest holdings in terms of its value in ITC. In 2012, this was around 28,000 crores. This was followed by RIL, ONGC, SBI, and L&T. Besides all this, LIC has a 51% stake in IDBI bank. This makes the LIC only insurance company in India to own a bank.

The regulations state that an insurance company cannot have more than 15% stake in any company. Thus, LIC has to decide on the timeline for pairing it’s a stake in IDBI. Furthermore, LIC will also have to pair its a stake in LIC housing finance Ltd. Because a company is not allowed to be a promoter of two finance companies that carries out the same housing finance business.

Questions on Life Insurance Corporation of India

Q. When did the life insurance sector in India was nationalized?

A. 1807

B. 1834

C. 1934

D. 1956

Answer: D. 1956

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