West Asia Crisis Threatens to Disrupt Insurance Sector: LIC Chief Warns of Potential Consequences

LIC CEO Warns of Potential Impact of Middle East Crisis on Insurance Sector

The insurance sector may witness some moderation if the Middle East crisis persists for a longer period, said LIC CEO and MD R Doraiswamy. This could potentially reduce people's income levels, affecting both their spending and saving patterns.

The country has been showing a good amount of resilience and has protected the end consumer from the complete impact of the West Asia crisis, according to Doraiswamy. However, if the crisis continues for a longer time, it will have a cascading impact on individuals, affecting their spending and saving patterns. The insurance industry cannot remain isolated if the broader segment of the economy is impacted.

Various segments of the economy, especially the energy sector, have been hit after the West Asia war broke out on February 28, raising fears of a slowdown in economic growth and rising inflation. If society as a whole gets affected and the income of people and their saving capacity get affected, it may naturally affect the insurance industry.

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Doraiswamy also addressed the possibility of further dilution of stake in LIC by the Centre. "We have been prepared right from day one," he said. "When we started preparing for the IPO, we were prepared for this kind of subsequent actions as well. So the call is taken by the government." As and when a decision is taken on the timing and quantum of further stake dilution, LIC will be fully prepared to work closely with the government.

Prior to 2022, LIC was wholly owned by the Government of India. The company came with an initial public offering, the biggest till 2022 in terms of size, resulting in the government raising about Rs 21,000 crore by diluting just 3.5 per cent stake in the insurance behemoth.

The government has been focusing on complying with the listing requirements under which any listed company will have a public float of 10 per cent or 15 per cent at different schedules and time. Due to current market volatility, it is waiting for the right time to launch the next public offering, Doraiswamy added.

Post-IPO, Doraiswamy said, LIC has done quite a good amount of activity in rewarding the shareholders. In the last quarter, the company announced a 1:1 bonus and followed up with a good dividend, which is 67 per cent more than what was declared in the previous year. The board of LIC recommended a final dividend of Rs 10 per equity share of Rs 10 each (equivalent to Rs 20 per equity share pre-bonus issue basis) subject to approval of shareholders.

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Last week, LIC posted a 23 per cent increase in net profit to Rs 23,420 crore in the March quarter, the highest by any financial services firm in the country.