LIC Ltd.’s potential acquisition of a 40-49% stake in ManipalCigna Health Insurance could reshape the health insurance market with competitive pricing and leverage its strong agency distribution network, according to J.P. Morgan.
LIC India is reportedly in the final stages of acquiring a significant minority stake in ManipalCigna Health Insurance, a standalone health insurer. The deal, valued at Rs 3,500-3,700 crore, would see LIC owning 40-49% of ManipalCigna, which is currently owned by Manipal Education and Medical Group (51%) and Cigna Holding Overseas (49%).
This acquisition is expected to be a strategic move for LIC, leveraging its extensive agency distribution network of 1.4 million individual agents to scale its new health venture. Despite the relatively small size of ManipalCigna compared to LIC, the acquisition is anticipated to bring substantial value over the next few years, the brokerage noted.
J.P. Morgan analysts believe that LIC’s entry into the health insurance market could be disruptive, with competitive initial pricing aimed at gaining market share. However, the key challenge for LIC will be managing the health loss ratio, a critical factor in ensuring the success of this venture.
ManipalCigna, with a market share of 1.4% in the total health insurance industry and 4.7% within the standalone health insurance space, has shown promising growth. Its solvency ratio stands at 157%, close to the regulatory minimum, and its combined ratio is higher than other standalone health insurers.
The acquisition’s impact on LIC’s financials is expected to be minimal, with a slight decrease in its solvency ratio. However, the potential for selling long-term combo products (life and health insurance) under a composite construct presents a significant upside.
LIC’s competitive advantage in the health insurance space lies in its economies of scale, majorly due to its established agency distribution, the brokerage noted.
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