LIC listing to increase the transparency of its operations: Moody’s
As a publicly traded company, LIC will face more demanding disclosure requirements, which will result in increased transparency about its operations and encourage it to prioritize profitable underwriting and risk management, said Moody’s Investor Service.
It will in turn strengthen its ability to generate and grow capital internally.
“We see the entry of external shareholders with experience in the insurance industry as another key benefit of the IPO. We believe that the presence of foreign players will bring particular advantages in the areas of capital adequacy, financial flexibility and governance standards, improving LIC’s credit profile,” Moody’s said.
Moreover, their influence could contribute to operational and distribution efficiency.
While LIC complies with the solvency requirements of the Insurance Regulatory and Development Authority of India (IRDAI), its capital adequacy is lower than that of its global life insurance peers, he said. changes in the entire life insurance industry. »
Indeed, as the dominant life insurer in India, LIC often sets the trend when it comes to pricing and terms of insurance.
Indian private insurers have already braced for the prospect of future profitable growth opportunities as premium growth continues alongside government reforms of public insurers.
“In fiscal 2020, four of the 24 life insurers raised capital, and we expect more such deals, as well as more M&A deals and IPOs. These will improve the capital adequacy and financial flexibility of the Indian insurance industry in the coming months.”
He also expects foreign insurers to continue to invest in India’s private insurers where the 49 percent foreign direct investment limit is well above the 20 percent allowed in the LICs.
Many global companies already operating in India through joint ventures could increase their stake in their local subsidiaries, he added.
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