LIC, the country’s largest life insurer, is in an advanced stage of acquiring a stake in a health insurance company and an agreement is likely to be finalised by the end of the month.
Without identifying the company it will be buying a stake in, Siddhartha Mohanty, MD and CEO of LIC said the government-owned company is in the final stage of discussions and is optimistic that a deal could be announced before March 31.
“It is a natural choice for LIC to be in health insurance, discussion is going on at the final stage,” he said on the sidelines of the Global Conference of Actuaries event in Mumbai.
While LIC’s stakeholding could be substantial, it may not hold a controlling stake in the target company and the exact size of the stake would depend on factors like the decision of the LIC board and valuations.
In a stock filing later in the day, LIC said it is still in advanced talks of picking up a stake in a stand-alone health insurance company and no binding agreement has been signed.
“The execution and ultimate consummation of the deal is subject to various factors, including approval of the board of directors of the corporation, regulatory approvals and other approvals, if any, before executing any binding agreements. There can be no guarantee or assurance of the execution/consummation of the potential deal,” the filing said.
LIC’s foray into the health insurance segment is seen as a positive development by analysts as the large agency base of LIC could play a key role in widening the reach of health insurance in the country.
At present, life insurance companies are not allowed to offer health covers which include covering up hospitalisation and other expenses for the insured.
Till the time a composite licence is allowed in regulations, diversification into the health space by picking up a stake in an existing health insurer is an alternative.
There are seven standalone health insurance companies in operation. ManipalCigna is reportedly an option where LIC could look to pick up stake in a deal estimated at around ₹4,000 crore.
LIC scrips at ₹757.65 were up 1.7 per cent on the Bombay Stock Exchange on Tuesday.
100-year bonds
LIC has requested the Reserve Bank to introduce long-term government bonds, including a 100-year paper.
Mohanty said the insurer sells whole-life policies, which need investments in long-term bonds. The RBI has been giving permission to 20-30 years bonds, and has also given a go-ahead for a 40-year bond, he added.
“I am also expecting 50-year, even 100-year bonds. Our people are discussing this from time to time with the RBI, and they are also considering this,” Mohanty said.
He added that while many countries issue 100-year bonds in the global market, India has yet to introduce such bonds due to limited demand and low activity in the secondary market.