The Centre may appoint a new executive chairman of the Life Insurance Corporation (LIC) after the extended tenure of incumbent M R Kumar ends by mid-March 2023 and before the helm of the organization is handed over to a chief executive officer (CEO) and managing director (MD) by March 2024 to instil more professionalism in the 66-year old organization.
The Finance Act 2021 which came into effect on April 1 of that year amended the LIC Act 1956 to pave the way for the abolition of the post of executive chairman in three years and transition to CEO and MD structure.
Unlike the past practices of drawing chairperson from the LIC cadre, the CEO and MD post will be open for talent from the private sector aspirants as the insurance behemoth aims to check the decline in its life insurance market share and improve returns to the shareholders and the stock’s performance.
“It seems like there will be one more chairman after the incumbent retires. The processes are taking time as the LIC Board has to work out all the nitty and gritty. The power structure in LIC up to the branch level will be reviewed and streamlined,” an official aware of the matter told FE.
Latest by March 31, 2024, the CEO will be entrusted with substantial powers of management in respect of the whole of the affairs of the LIC that are now vested with chairman, the official said. The CEO with the approval of the Board will also delegate powers to manage directors and other senior executives. All these power structure changes will be done by the LIC Board, the official added.
The amendment to LIC Act has a provision that if no CEO and MD is appointed before the due date (March 31, 2024), the individual holding office as chairperson would be deemed to have been appointed as the CEO and MD from from April 1, 2024.
The LIC held approximately 64% of the market share of the sector’s total insurance premiums in FY22 after it gradually ceded ground to private players that entered the sector from 2000 post-liberalization.
For smooth sailing for the LIC’s listing, its current chairman MR Kumar has got two extensions one from July 2021 to March 2022 and one from April 2022 to March 2023. To enable this, the government amended the LIC (Staff) regulations and increased the superannuation age to 62 for the chairman.
Post the listing of LIC in May this year, the stock has taken a beating by falling nearly 33% and it is now trading at Rs 688.6 or 27% lower than the IPO issue price of Rs 949/share, giving rise to investor concerns.
The LIC Board is working on five-six key areas to prop up its sagging share price, including higher dividend payouts or bonus issues, deployment of modern technologies and roping in top IT talent laterally from the market to boost productivity and improve communication with investors. LIC, a very large institutional investor with assets under management of about Rs 41 trillion, will also take a relook at at its investment strategy.
Dividends by LIC could jump this year as the insurance behemoth reported a net profit of about Rs 16,000 crore in Q2FY23, as it chose to transfer a surplus of Rs 14,300 crore from its non-par fund to shareholders’ fund. It may announce dividend after the December quarter results, sources said.
Among other measures, LIC is currently in the process of hiring talent from the market such as a chief digital officer and chief technical officer to give a leg up to its digital push where it lags private peers.