LIFE INSURANCE CORPORATION

An Elephant which can Dance

18 August 2020

▪ SANKETH GODHA  sanketh@sparkcapital.in  +91 22 6176 6821

▪ ARJUN N  arjun@sparkcapital.in  +91 44 4344 0081

Page 1
LIFE INSURANCE CORPORATION
An Elephant which can Dance
The government, in its budget in Feb. 2020, expressed intention to list LIC in the current fiscal. LIC is the largest and oldest life insurer with a balance sheet size of over
Rs 32 trillion. In this report, we have delved into public disclosure & annual reports of LIC and attempted to arrive at plausible Embedded Value and Valuation.
Key Highlights COMPANY UPDATE
Implicit sovereign guarantee and productive distribution aided in-line growth with the industry: LIC enjoys implicit sovereign guarantee and has the most productive 18 August 2020
agency channel. A combination of both has aided it to maintain growth in-line with the industry. This growth is commendable as LIC has largely exited linked products
since the promulgation of ULIP norms in FY11. The bulk of the Pvt. insurers growth during FY14-19 was ULIP-led. Hence, we believe, in the current environment where the Total Mcap/
Global Life
Asset Total
ULIP demand is weak, it shall report better growth than Pvt insurers and increase market share. Historical data suggest LIC gains market share when ULIP demand is weak. Insurers
(USD bn.) Assets
A behemoth that maintained a balanced growth driven by value & volume; significant scope to improve ticket size: Unlike a few large private peers, LIC’s Individual
annualized premium equivalent (APE) growth in the last 5 years was driven by both an increase in the ticket size (ATS) and number of new policies. However, the LIC’s avg. L&G 505 3%
Individual APE per policy at Rs. 14K is significantly lower vs. Pvt insurers’ Rs.60K in FY20. We believe, given its pan-India reach, LIC could grow at a significantly better rate
than the industry if it manages to increase its ATS. The ATS in 4MFY21 increased to Rs. 23K and if this sustains, it shall grow better than the industry in FY21E. Aviva 460 4%
Removal of 80C exemptions could significantly dent LIC: Given its ticket size, most of LIC’s customers would buy life policies to avail 80C benefit on income tax. The Lincoln 335 4%
current fiscal budget has given an option to personal income-tax payers to move to lower-income tax slabs by not availing any exemption such as 80C. We believe this
shall not impact LIC immediately as most of its customers would be middle-class (with annual income less than Rs.1mn) and would be better off in old tax structure. Samsung Life 246 5%
However, if the government’s medium-term objective is to remove all exemptions & deductions (incl. 80C), it shall structurally impact LIC significantly.
LIC enjoys strong Banca tie-up but it hardly contributes to new business: LIC agent’s productivity, in terms of premium and number of policies, is the best in the industry. Metlife 740 6%
This is reflected in the disproportionate contribution of agency channel (95% of APE) and savings business to LIC’s APE. LIC has one of the best bancassurance tie-ups, but
it has hardly capitalized on it to grow the business. Hence, an incremental focus on banca could result in better growth in high margin products such as protection. Principal Fin. 276 6%
Online term to increase traction in protection business: Since LIC depend heavily on agency channel, the protection business did not see traction as it was significantly
LIC 427 14%
expensive vs. private peers. Further, the agency channel did not prefer to sell this product due to lower ticket size resulting in lower commission income to them. Now, LIC
has launched online products where pricing is very competitive vs. many large private insurers. Also, it enjoys an implicit sovereign guarantee and hence, we expect Prudential 454 11%
protection growth to pick up going ahead. However, LIC’s presence is not prominent in web-aggregator and banca channel, where protection is easily sold.
Individual business is Par-heavy; group contribution steadily rising: LIC’s individual business is skewed to Par. Given its BS structure and the way it funds solvency from New China L 127 15%
Par business (policyholders surplus is calculated post deduction of available solvency margin(ASM) from the controlled fund) always keep LIC Par-heavy. Unlike Pvt. peers,
who share 90% of surplus to policyholders, LIC share 95%. The Non-Par business is largely annuity and group (which is less capital intensive for no sum assured). The China Life 539 23%
group contribution has steadily increased and it contributes ~30% to APE in FY20 (vs 11% in FY13) & ~70% to unweighted new business premium (vs. 45% in FY13).
AIA Group 284 45%
Par-heavy business makes it self-funded - Solvency is least of concerns: LIC funds solvency requirements from Par surplus (as policyholder’s surplus is distributed after
deducting solvency cost). Hence, LIC shall always operate close to bare minimum solvency margin requirement of 150% and this would not hamper its ability to grow.
BS is better than perception: LIC’s non-linked AUM has 73% as G-Secs and 13% as equity. Exposure to corporate bonds was ~14% as on Mar’20. NPAs and downgraded
investment as % of total investments stood at 1.2% & 2.4% respectively. Further, provision for NPAs stood at ~90%. Given that it has huge PAR AUM (91% of total AUM),
LIC need not linger on provisions. Any impact from bad assets hits policyholders instead of shareholders (due to Par-heavy mix) and thus making its BS more immune than RESEARCH ANALYST
perceived. LIC’s revisionary bonus rate on Par policies is stable since FY13, indicating its ability to manage investments without impacting policyholders returns.
SANKETH GODHA
VNB margins to be significantly lower than listed Pvt peers due to higher surplus sharing with Par policyholders: Given LIC shares more surplus than private insurers (LIC
95% vs. Private 90%), we believe the VNB (value of new business) margin made by LIC on Par business shall be significantly lower than Pvt players. With lower sanketh@sparkcapital.in
contribution of individual non-par savings business (including protection business), we believe LIC’s VNB margins shall be at 10-11% of APE. +91 22 6176 6821
FY20 Embedded value of Rs 3.2 trillion with ROEVs of ~10%: Given ASM is funding LIC’s business (which is at Rs. 1.5tln vs. reported shareholder equity of meagre Rs. ARJUN N
7.4bn), we believe it is equivalent to adjusted net worth reported by private life insurers. VIF of LIC shall be lower at ~5% of it AUM (9-11% of AUM is VIF for Pvt. Insurers) arjun@sparkcapital.in
due to their higher surplus sharing in Par business. Factoring in this, we estimate FY20 EV of LIC to be ~Rs.3.2trillion in FY20 with an ROEVs of ~10%. For its ROEVs and +91 44 4344 0081
growth, it can be fairly valued at 1-1.2x EV which translate into to market cap of Rs 3.8-4.5tln.
find SPARK RESEARCH on Bloomberg [RESP SPAK <go>] | FACTSET | REFINITIV EIKON * Based on 20% holdco. discount to CIFC Page 2
LIC- Market share & Product Mix

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 Life Insurance Corporation

#1. LIC: Despite its size, it broadly maintained growth momentum with the private industry since FY15

Despite lower ticket size; LIC growth was steady largely in-line with peers since product regulation flux settled in FY15

APE & Product mix SBILIFE IPRU HDFCLIFE Max BALIC LIC What is better
APE CAGR FY16-20 (%) 21% 9% 19% 18% 24% 12% Higher
ATS CAGR FY16-20 (%) 16% 1% 23% 9% 22% 8% Higher
No of policies CAGR FY16-20 (%) 5% 7% -6% 7% 5% 2% Higher
Individual APE % of total APE (%) 92% 92% 83% 94% 84% 71% Higher
ULIP % of Total Individual APE (%) 76% 70% 28% 40% 51% 0% Lower
Protection % of Total APE (%) 9% 15% 17% 14% 8% NA Higher
Group Protect % of Total Protection (%) 47% 31% 63% 41% 100% NA Lower
Group Funds % of total APE (%) 4% 3% 6% 0% 8% 29% Lower
Average ticket size (Rs '000) 64 89 68 65 62 14 Lower
No of Reds (no) 2 4 3 0 2 4 Lower
Source: Company, Spark Capital

Since FY16, LIC APE CAGR at 12% was better than a few private insurers LIC gains market share when ULIP demand is weak

LIC - APE Growth (%) LIC - APE Market share (%)

500 31% 40% 70%
30% 65%
400 16% 16%
12% 20% 60% 66% 65% 56% 65% 63% 64%
9% 10% 11% 53%
6% 53%
300 55% 50% 51% 56% 51% 51%
0% 1% 10% 54% 53% 49%
-4% 50% 44%
200 0% 46% 47% 51%
45% 50% 49% 49% 49%
-10% 47% 47%
-21% -23% 40% 34% 35% 44% 35% 37% 36%
100
-20% 35%
271 271 216 283 308 343 328 331 253 279 324 361 382 441
0 -30% 30%
FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20 4M21

APE (Rs bn, LHS) YoY (%, RHS) Pvt LIC

Source: Company, Spark Capital Source: Company, Spark Capital

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 Life Insurance Corporation

#2. LIC: With increase in the contribution of group business, total premium growth moderated; enjoy 66% market share in total premium

Total Premium growth slowed since FY17

LIC - Total Premium (Rs bn)

18%
4,000 17% 20%
3,500 13% 13% 12% 15%
3,000 11%
9%
2,500 10%
5% 6% 6%
2,000
3% 5%
1,500 1%
0%
1,000
0%
500 1,278 1,498 1,573 1,861 2,035 2,029 2,088 2,369 2,397 2,664 3,005 3,182 3,375 3,794
0 -5%
FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20

LIC (Rs bn, LHS) YoY (%, YoY, RHS)

Source: Company, Spark Capital

Total Premium Market share is higher than new business; however, it is declining gradually

Total Premium - Mkt share (%)

100%
90% 18% 25%
26% 29% 30% 31% 29% 27% 27% 27% 28% 31%
80% 34%
70%
60%
50% 82% 75%
74% 71% 70% 69% 71% 73% 73% 73% 72% 69%
40% 66%
30%
20%
FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19

LIC Pvt

Source: Company, Spark Capital

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 Life Insurance Corporation

#3. LIC: Par, group business and lower ticket size does not bode well for profitability

With no focus on ULIPs, LIC’s average ticket size remained broadly stable. LIC’s market share in no. of individual policies is better and remained stable (sell 3x no. of individual
policies vs. private insurers)

Avg APE per policy (Rs'000) Individual No of policies (mn) Market share - No of individual policies
70 25.0 21.9 100%
60 20.5 21.3 21.4
55 20.1 20.1
60 52 51 20.0 80%
50 45
37 64%
40 35 15.0 60% 78% 77% 76% 76% 75% 76%
30 23 10.0
6.3 6.9 7.2 7.0 40%
14 5.7 6.2
20 12 13 14
10 10
5.0 20% 36%
10 3.5 3.3 3.2 3.1 3.0 3.1 22% 23% 24% 24% 25% 24%
0 0.0 0%
FY15 FY16 FY17 FY18 FY19 FY20 4M21 FY15 FY16 FY17 FY18 FY19 FY20 FY15 FY16 FY17 FY18 FY19 FY20 4M21

Private LIC Pvt LIC x of pvt Pvt LIC

Source: Company, Spark Capital

Contribution from Group business, which has lower profitability than individual
PAR heavy company; individual Non-Par is largely annuity business
business has significantly increased

LIC - APE Mix (Individual vs. Group) LIC - APE Mix (%)
100% 0.2% 0.0% 0.0% 0.0% 0.1% 0.2% 0.1%
4% 4% 6% 7% 100%
11% 11% 11% 12% 14% 18% 22% 21%
15% 18% 1% 1% 23% 23%
90% 23% 24% 23% 24% 80% 1%
29% 2% 5% 5% 4%
80% 60%
96% 96% 94% 93%
70% 89% 89% 89% 40% 87% 85% 81%
85% 82% 76% 72% 73% 73%
77% 76% 77% 76%
60% 71% 20%
50% 0%
FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY13 FY14 FY15 FY16 FY17 FY18 FY19

Individual Group Par Non-Par Group ULIPs

Source: Company, Spark Capital Source: Company, Spark Capital

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 Life Insurance Corporation

#4. LIC: Protection contribution is lower as agents don’t prefer selling low ATS policies; launch of affordable online plan can drive growth

LIC launched cheaper online term plan which is priced better than larger Pvt life insurer. Given implied sovereign guarantee it enjoys, protection growth should pick up

Mar'20 Jun'20 Aug'20

Increase in Aug vs. Jun Increase since Mar'20
Insurers Premium per policy Premium per policy Premium per policy

ICICI Prudential Life 9,739 11,616 13,391 15% 37%

Tata AIA 9,440 12,744 12,744 0% 35%

SBI Life 11,092 11,092 11,092 0% 0%

LIC 11,007 11,007 11,007 0% 0%

HDFC Life 9,718 10,648 10,648 0% 10%

ABSL 8,469 10,372 10,372 0% 22%

Max Life 8,378 9,086 9,912 9% 18%

Bajaj Allianz 7,033 9,626 9,626 0% 37%

Kotak Life 8,968 8,968 8,968 0% 0%

PNB MetLife 8,732 8,732 8,732 0% 0%

Edelweiss Tokio 7,228 7,950 7,950 0% 10%

Future Generali 7,682 7,682 7,682 0% 0%

Aegon Life 7,087 7,087 7,087 0% 0%

Source: Policy bazaar, Company, Spark Capital * Premium per policy is for Sum assured of Rs 10mn for a non-smoker at an entry age of 30 yrs and with a premium paying term of 30yrs. #Above prices include GST

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Life Insurance Corporation

#5. LIC: Ticket size of LIC indicates than large part of their customers bought life insurers products for 80C benefits

More than 50% of premium is from low ticket size policies which could be at risk if
While in no of policy terms, the contribution is much higher at 85%
80C is removed
FY20 - Composition of Individual Regular premium Ticket size (Rs.mn) FY20 - Composition of Individual Regular premium Ticket size (No. of policies)
100% 100% 1%
2%
10% 16% 11% 9% 10% 9%
13%
10% 12% 15% 16% 11%
80% 42% 80% 13%
45% 45% 44%
63% 29%
60% 60% 36%
31% 41% 41% 42%
18% 21% 24% 19%
40% 40% 85%
15% 51%
20% 29% 26% 28% 27% 44%
20% 39% 36% 35%
17% 32%
4% 8% 7% 6% 11%
0% 0%
IPRU SBILIFE HDFCLIFE MAXF BALIC LIC IPRU SBILIFE HDFCLIFE MAXF BALIC LIC
<25,000 25,000-75,000 75,000-1,25,000 >1,25,000 <25,000 25,000-75,000 75,000-1,25,000 >1,25,000

Source: Company, Spark Capital Source: Company, Spark Capital

Compared to other private players, LIC has a relatively diversified geographical presence

Statewise New Business Premium contribution (Individual)

LIC 14% 11% 10% 7% 7% 6% 4% 4% 3% 4% 29%

MAXF 14% 11% 8% 6% 7% 5% 8% 3% 1% 4% 34%

IPRU 24% 6% 6% 9% 7% 7% 8% 4% 4% 1% 23%

HDFCLIFE 30% 6% 7% 6% 8% 6% 6% 2% 4% 2% 23%

SBILIFE 9% 6% 10% 8% 6% 7% 0% 5% 6% 5% 39%

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
Maha WB UP TN Gujarat Karnataka Delhi Kerala Teleng AP Others

Source: Company, Spark Capital

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LIC- Distribution & Opex

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 Life Insurance Corporation

#1. LIC: Largely agency-driven business model; has the most productive agents in the country

Despite having strong bancassurance relationships; agency force continue to remain the dominant channel for LIC’s individual business

Distribution SBILIFE IPRU HDFCLIFE Max BALIC LIC What is better

Major Banca partner exclusivity (no) 1 1 3 2 4 3 Lower

Banca contribution (%) 68% 55% 55% 61% 13% 2% Higher

Agent Productivity (Rs'000) 255 95 113 235 149 408 Higher

Direct contribution (%) 2% 14% 22% 14% 22% 2% Higher

No of Reds (no) 1 1 2 1 2 Lower

Source: Company, Spark Capital

LIC has tie-up with 14 large and medium Public and Private Banks (Co-operative
Agency is 95% of individual business
banks not included)

Distribution Channel - Individual business Premium (%) Major Bancassurance tie-ups

100% 1% 1% 1% 1% 1% 2% 2% Axis BanK Indian Bank

2%
3% 3% 3% 2% 2% 3% 2%
3% Punjab National Bank Indian Overseas Bank
95%

Union Bank Of India Karnataka Bank Ltd.

90%
96% 96% 96% 96% 96% 96% 96% City Union Bank Ltd. Punjab And Sind Bank
95%
85%
LIC HFL The South Indian Bank Ltd

80% Central Bank Of India Bank Of Maharashtra

FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20
UCO Bank IDBI Bank
Agency Banks Corp Agency Brokers Mirco Agents Direct Business

Source: Company, Spark Capital Source: Company, Spark Capital

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 Life Insurance Corporation

#2. LIC: Agent’s productivity is more than 3x of private life insurance industry

LIC has more no. of agents vs. entire Pvt. insurers Productivity of the agents (in Rs) is more than 3x of private insurers

No. of individual agents (mn) Agent productivity -LIC vs. Pvt (Rs '000)
1.4 1.2
1.2 1.2 1.2 1.1 1.2 500 5.0
1.1
1.2 1.1 1.0 1.1
0.9 1.0 1.0 1.0 0.9 4.1 4.2
1.0 0.9 400 4.0 4.0
3.6 3.4
0.8 3.1 3.3
300 3.0
0.6
200 2.0
0.4
0.2 100 1.0
328 79 336 79 267 85 284 87 399 101 434 119 420 122
0.0 0 0.0
FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY13 FY14 FY15 FY16 FY17 FY18 FY19
LIC Pvt
LIC Pvt x of private

Source: Company, Spark Capital Source: Company, Spark Capital

Productivity of the agents (no. of policies) is more than 9x of private insurers No. of branches of LIC is more than entire pvt insurers

Agent productivity -LIC vs. Pvt (no. of policies) No. of branches

35 12.0 6,759
7,000
6,193 6,156 6,179 6,204 6,347
30 6,057
9.7 9.7 10.0
9.0 9.0 9.0 6,000
25
8.0 8.0 4,932
4,839 4,877 4,892 4,897 4,908
20 5,000
6.0 6.0
15
4.0 4,000 3,526
10
5 2.0
29 3 29 3 16 2 18 3 18 2 18 2 18 2 3,000
- 0.0
FY13 FY14 FY15 FY16 FY17 FY18 FY19 2,000
FY13 FY14 FY15 FY16 FY17 FY18 FY19
LIC Pvt x of private
LIC Pvt

Source: Company, Spark Capital. Source: Company, Spark Capital.

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 Life Insurance Corporation

#3. LIC: Operating metrics, such as cost and persistency, weaker than larger Pvt. insurers

Key operating metrics such as opex and persistency weaker than Pvt. peers

Key operating metrics SBILIFE IPRU HDFCLIFE Max BALIC LIC What is better
Opex Ratio (ex- commissions) (%) 5.9% 8.5% 13.0% 14.5% 18.1% 9.1% Lower
Par - Opex Ratio (%) 6.9% 8.3% 16.3% 15.3% 18.4% 12.2% Lower
13-month persistency (%) 86.1% 85.3% 90.1% 83.0% 79.2% 72.2% Higher
Single premium % of Individual New business 14.6% 17.4% 33.4% 22.8% 4.0% 42.9% Lower
Linked Surrenders % of Avg AUM (%) 3.5% 14.0% 14.6% 12.3% 11.0% 5.0% Lower
Avg Policy Tenure (no of years) 12.0 14.0 19.6 25.0 NA NA Higher
Avg age of customer (no of years) 40.0 42.0 37.2 36.0 NA NA Lower
(Non-Par+SH) AUM % of Total non-linked AUM (%) 62% 63% 57% 23% 53% 7% Lower
Debt % of ULIP AUM (%) 72% 52% 54% 63% 40% 76% Higher
No of Reds (no) 3 5 3 2 4 2 Lower

Source: Company, Spark Capital

13-month persistency is weak (which we believe is due to lower ATS); but other
.. However, conservation ratio of LIC is better than private insurers
cohorts largely on par/better than private insurers

80% 74%76%77%72% Premium Persistency Conservation Ratio - LIC vs. Pvt (%)
71%
66%68% 67% 68%
63%65%63% 66% 63%
62% 60%58% 100% 91% 91% 92%
58%59% 90% 91% 91%
60% 54%
90% 82%

40% 80%
81% 83%
70% 78% 77% 78%
20%
60% 69%
64%
0% 50%
13 month 25 month 37 month 49 months 61 month FY13 FY14 FY15 FY16 FY17 FY18 FY19

FY17 FY18 FY19 FY20 LIC Private

Source: Company, Spark Capital Source: Company, Spark Capital

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 Life Insurance Corporation

#4. LIC: 13M persistency is weak; but superior in deeper cohorts

LIC’s persistency ratio vs. larger private peers

FY20 - Persistency Ratio (%)

100% 86% 87% 90% 87%
79% 78% 80% 79%
80% 72% 67% 70% 67% 74% 73% 71% 72%
67% 64% 60% 67% 63%
60% 59% 58% 58% 54%
55% 53% 51%
60%
40%
40%

20%

0%
SBILIFE IPRU HDFCLIFE MAX BALIC LIC

13M 25M 37M 49M 61M

Source: Company, Spark Capital

Opex ratio better than private insurers; with focus on traditional products, LIC’s commission ratio is higher than pvt insurers

Opex (ex-commission) Ratio (%) First Year Commission Ratio (%) Total Commission Ratio (%)
25% 35% 29.3% 8%
18.9% 19.1% 26.5% 27.2% 27.2% 27.0% 28.1% 7.1% 7.1%
30% 25.4%
20% 16.4% 16.0% 7% 6.3%
14.6% 25% 5.8%
13.3% 12.9% 5.5% 5.7% 5.7%
15% 20% 6%
10% 15%
5% 5.7%
10% 15.6% 14.6% 5.3%
5% 9.3% 9.6% 9.5% 12.6% 13.6% 13.9% 4.9% 5.0% 4.9%
8.0% 8.6% 8.5% 8.6% 12.2% 11.6% 4% 4.7% 4.6%
5%
0% 0% 3%
FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY13 FY14 FY15 FY16 FY17 FY18 FY19

LIC Pvt LIC Pvt LIC Pvt

Source: Company, Spark Capital

Page 13
LIC- AUM & Solvency

Page 14
 Life Insurance Corporation

#1. LIC: Enjoys ~78% of industry’s AUM with limited exposure to ULIPs; PAR is 91% of total AUM, thus making immune to any defaults

LIC has Rs. 28tln Assets Under Management LIC has 80% market share of industry’s AUM

Industry AUM - Pvt vs. LIC (Rs trillion) Industry AUM Mix (%)
40 35 100%
32 20% 20% 21% 20% 20% 21% 22%
29 80%
30 25 8
22 7
20 6 60%
17 5
20 5
4 40% 80% 80% 79% 80% 80% 79%
3 78%
25 28
10 20 23
16 18 20%
14
0 0%
FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY13 FY14 FY15 FY16 FY17 FY18 FY19

LIC Pvt Total LIC Private

Source: Company, Spark Capital Source: Company, Spark Capital

LIC’s AUM Mix – Product-Wise PAR is 91% of total AUM, thus making immune to any defaults

LIC – Product-wise AUM Mix (%) LIC - AUM mix (%)

100% 6% 5% 3% 3% 2% 1% 1% 100%
8% 2% 2%
4% 3%
19% 19% 21% 22% 24% 25% 25% 7% 6% 6%
80% 18% 95% 9% 5% 6% 7%
1% 4%
1% 4%
60% 90% 1%
74% 75% 76% 76% 75% 75% 74% 74% 93% 92% 92%
85% 92% 91% 91% 91%
40% 89%

20% 80%
FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20
Life Pension, annuity & group ULIPs Par Non-Par ULIPs Shareholders

Source: Company, Spark Capital. Source: Company, Spark Capital.

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 Life Insurance Corporation

#2. LIC: ~14% of non-linked AUM is corporate bonds (largely in Par) and hence limited risk to shareholders

~14% of non-linked AUM is corporate bonds (largely in Par) and hence limited risk
With most of the ULIPs running off, the debt contribution is higher for LIC
to shareholders of LIC

FY20 - Non-ULIP AUM Mix (%) FY20 - ULIP AUM Mix (%)

Real Estate, 1%
MFs, 3%
Govt bonds, 73% MFs, 0%
Govt bonds, 67% Real Estate, 0%
Infra, Housing & Infra, Housing &
Social, 9% Social, 10%

Other fixed income, Other fixed income,

Equity, 13% 5% 3%
Equity, 17%

Source: Company, Spark Capital Source: Company, Spark Capital

With G-sec and equity heavy portfolio (Non-linked), NPA & Downgraded book is 1.2% and 2.4% of total investments respectively; Due to aggressive provisions, Net NPA is just
2.2% of the available solvency margin (%)

Exposure to NPA & Downgraded Investments (%) FY20 - NPA PCR (%) Net NPA % of ASM (%)
4.0% 3.7% 92% 91% 2.5%
91% 91%
3.5% 91% 0.0%
3.0% 2.0%
2.4% 90% 0.5%
2.5% 2.0% 89% 1.5%
2.0%
1.3% 1.4% 88%
1.5% 1.0% 1.2% 87% 2.2%
87% 1.0%
1.0% 0.7% 1.6%
0.5% 86%
0.5%
0.0% 85%
Life fund Pension ULIP Total 84% 0.0%
NPA Downgraded Life Pension ULIP Total Life Pension ULIP Total
Source: Company, Spark Capital.

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 Life Insurance Corporation

#1. LIC: Sitting on decent gains on investment book; solvency is funded by policyholder (Par surplus is calculated post solvency cost)
With long dated investment & equity exposure, LIC MV of investment is 10-12%
With steady premium growth, there has been net addition to AUM
better than reported book value

MTM gain on investments Net Addition to opening AUM (ex- MTM gains)
16% 60% 54%
14%
14% 12% 50%
36%
40%
12%
10% 9% 30%
10% 8% 8% 16%
20%
8% 10% 2% 1% 5% 3% 2%
1% 1%
5% 5%
6% 0%
-10%
4%
-20% -13% -14%
2% -16%
FY17 FY18 FY19 FY17 FY18 FY19 FY17 FY18 FY19 FY17 FY18 FY19 FY20
0%
FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20 PAR Non-Par ULIP Total

Source: Company, Spark Capital Source: Company, Spark Capital

Solvency policyholder funded - Par surplus is calculated post solvency cost Available solvency margin is significantly higher than reported shareholders equity

Solvency Margin (%) ASM vs. Shareholder

1,600 158% 160% 165%
158% 1,600 209x 204x 250x
154% 154% 154% 155% 155% 155% 160% 189x 197x
173x 200x
1,200 155% 1,200 159x
136x 147x
150% 150x
800 145% 800
140% 100x
1,008

1,145

1,284

1,418

1,506

1,008

1,145

1,284

1,418

1,506
400 135% 400
50x

698

791

896
617
400

698
453

791
513

896
579

652

727

811

886

974

7.4
6.8
6.5
5.8

6.1
5.4

5.6
5.2
130%
0 125% 0 0x
FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY19

ASM (Rs bn) RSM (Rs bn) Solvency margin ratio (%) ASM Shareholders equity ASM / Shareholders equity (x)

Source: Company, Spark Capital. Source: Company, Spark Capital.

Page 17
LIC- Embedded Value & Valuation

Page 18
 Life Insurance Corporation

#1. LIC: FY20 EV to be ~Rs 3.2trillion with an operating ROEVs of ~10%

As per our estimates, LIC would be have EV of Rs 3.8 trillion as on Mar’22 generating an ROEV of ~10%

EV (Rs mn) FY16 FY17 FY18 FY19 FY20 FY21E FY22E

Opening EV 1,833,061 2,038,436 2,361,316 2,637,669 2,884,723 3,170,602 3,478,475
VNB 29,868 37,394 41,197 43,130 46,941 47,539 53,619
Unwind 175,507 285,487 235,155 203,924 238,938 260,334 289,281
Closing EV 2,038,436 2,361,316 2,637,669 2,884,723 3,170,602 3,478,475 3,821,376
Unwind rate 9.6% 14.0% 10.0% 7.7% 8.3% 8.2% 8.3%

ROEVs 11.2% 15.8% 11.7% 9.4% 9.9% 9.7% 9.9% Unlike private insurers, LIC has
a single controlled fund for all
product and hence it deducts
EV Mix FY16 FY17 FY18 FY19 FY20 FY21E FY22E cost of capital to maintain
ANW 1,007,720 1,145,345 1,284,160 1,417,628 1,505,587 1,589,333 1,708,533 solvency at 150% from the
VIF 1,030,716 1,215,971 1,353,509 1,467,095 1,665,015 1,889,143 2,112,843 fund before distributing
EV 2,038,436 2,361,316 2,637,669 2,884,723 3,170,602 3,478,475 3,821,376 surplus to the Par business
policyholders

EV Mix (%) FY16 FY17 FY18 FY19 FY20 FY21E FY22E Given this, we have assumed
ANW 49% 49% 49% 49% 47% 46% 45% ASM of the business to be
equivalent to Adjusted Net
VIF 51% 51% 51% 51% 53% 54% 55%
worth component of EV
EV 100% 100% 100% 100% 100% 100% 100%

Key Assumptions (%) FY16 FY17 FY18 FY19 FY20 FY21E FY22E
AUM 20,614,312 24,319,426 27,070,188 29,341,900 30,273,007 31,786,657 34,170,657
AUM growth 10% 18% 11% 8.4% 3.2% 5.0% 7.5%
VIF % of AUM 5.0% 5.0% 5.0% 5.0% 5.5% 5.9% 6.2%
VIF % of Total Premium 38.5% 40.5% 42.5% 43.5% 43.7% 46.2% 46.9%
ASM or ANW % of AUM 4.9% 4.7% 4.7% 4.8% 5.0% 5.0% 5.0%
Source: Company, Spark Capital
LIC for Par business retain 5% of surplus for shareholders vs. 10% by private insurers; hence VIF % of AUM assumed is lower for LIC vs. Private

Page 19
 Life Insurance Corporation

#2. LIC: With higher surplus sharing in Par and lower protection, we expect VNB margin of LIC to be ~10-11%
APE growth & VNB margin Assumptions
Key Assumptions FY16 FY17 FY18 FY19 FY20 FY21E FY22E
APE (Rs mn) 300,478 349,771 387,830 408,168 441,321 446,946 504,111
APE Growth (%) 16.1% 16.4% 10.9% 5.2% 8.1% 1.3% 12.8%

Product Mix (%)

Par 76.4% 72.4% 73.3% 72.7% 71.9% 71.9% 71.9%
Non-Par 1.9% 5.1% 5.1% 4.4% 4.5% 4.5% 4.5%
ULIPs 0.0% 0.1% 0.2% 0.1% 0.1% 0.1% 0.1%
Group 21.6% 22.5% 21.3% 22.8% 23.5% 23.5% 23.5%

Indicative VNB Margin (%)

Par 8.0% 8.0% 8.0% 8.0% 8.0% 8.0% 8.0%
Non-Par 30.0% 30.0% 30.0% 30.0% 30.0% 30.0% 30.0%
ULIPs 10.0% 10.0% 10.0% 10.0% 10.0% 10.0% 10.0%
Group 15.0% 15.0% 15.0% 15.0% 15.0% 15.0% 15.0%
Total 9.9% 10.7% 10.6% 10.6% 10.6% 10.6% 10.6%
Source: Company, Spark Capital

Private insurers VIF % of AUM and total premium

VIF % of total premium FY16 FY17 FY18 FY19 FY20
HDFCLIFE 43% 43% 44% 43% 41%
SBILIFE 46% 45% 46% 42% 42%
IPRU 44% 42% 43% 46% 45%
MAXF 38% 39% 40% 45% 46%
Total 43% 43% 44% 44% 43%

VIF % of AUM FY16 FY17 FY18 FY19 FY20

HDFCLIFE 9.4% 9.1% 9.7% 9.9% 10.6%
SBILIFE 9.4% 9.8% 10.0% 9.8% 10.9%
IPRU 8.1% 7.7% 8.4% 8.9% 10.0%
MAXF 9.9% 9.4% 9.6% 10.4% 10.9%
Total 9.0% 8.8% 9.3% 9.6% 10.5%
Source: Company, Spark Capital

Page 20
 Life Insurance Corporation

#3. LIC: For its ROEVs and growth, it can be fairly valued at 1-1.2x EV which translate into to market cap of Rs 3.8-4.5tln

At 1.2x P/EV implied NBx at 13.4x and P/EVOP of 15.7x is fair compared Pvt Life insurer

Rs mn FY22 FY22 FY22 FY22

EV 3,821,376 3,821,376 3,821,376 3,821,376

P/EV 0.8x 1.0x 1.2x 1.5x

Implied NBx -15.7x 0.0x 15.7x 39.2x

Implied P/EVOP 8.9x 11.1x 13.4x 16.7x

Valuation 3,057,101 3,821,376 4,585,651 5,732,064

Source: Company, Spark Capital

Indian private life insurers trade at one of the highest M.cap to Assets ratio compared to global peers

Mkt Cap
505 460 335 246 740 276 427 454 127 539 284 7 21 22 18
/AUM (USD50%
bn)
Mcap/Total Assets 41% Mcap/Total Assets
40% 90%

30% 27%
51%
18% 42%
20% 14%
28%
9%
10% 3% 4% 5% 4%
3% 2%
0%

MAXF

IPRU

HDFC Life
SBI Life
L&G

Principal

Prudential

New China

China Life
Samsung

LIC
Lincoln

Metlife
Avivia

AIA
Mcap/Total Assets Mcap/Total Assets

Page 21
 Life Insurance Corporation

#4. Valuation summary of listed Pvt life insurance companies

Company Market Cap CMP Target price Rating P/EV (x) New business multiple (x) P/ Op EVE (x)
Rs bn Rs Rs FY19 FY20E FY21E FY22E FY19 FY20E FY21E FY22E FY19 FY20E FY21E FY22E
IPRU 651 454 425 REDUCE 3.0 2.8 2.4 2.1 27.2 28.6 22.6 18.1 17.1 19.8 18.8 16.5
SBILIFE 842 842 950 ADD 3.8 3.2 2.7 2.3 30.7 29.5 23.0 18.3 25.3 18.4 19.8 17.0
HDFCLIFE 1,190 590 490 SELL 6.5 5.8 4.8 4.1 52.5 57.3 47.6 39.8 38.8 35.9 34.0 29.1
MAXF 140 522 590 ADD 2.9 2.6 2.2 2.0 18.7 19.5 14.6 11.3 13.6 14.2 16.5 13.5
Total 2,823 4.7 4.2 3.5 3.0 38.5 40.5 32.8 27.0 28.6 25.9 25.4 21.8

Company EV p/s (Rs) EVE P/s (Rs) Operating EV P/s (Rs) NBV p/S
FY19 FY20E FY21E FY22E FY19 FY20E FY21E FY22E FY19 FY20E FY21E FY22E FY19 FY20E FY21E FY22E
IPRU 150.6 160.4 191.6 216.8 25.6 12.6 31.9 27.5 26.5 22.9 24.1 27.5 9.3 11.2 10.3 11.6
SBILIFE 224.0 262.7 315.0 362.1 35.7 38.7 54.6 49.7 33.2 45.8 42.6 49.7 17.2 20.1 19.6 23.0
HDFCLIFE 90.7 102.3 123.8 142.3 17.0 11.5 23.2 20.3 15.2 16.4 17.4 20.3 7.6 9.5 8.5 9.8
MAXF 181.4 202.5 232.3 265.3 41.2 30.4 35.9 38.6 38.5 36.8 31.6 38.6 16.7 18.2 16.4 19.9

Company EV p/s growth (%) EVE P/s growth (%) Operating EV P/s growth (%) NB p/s growth (%)
FY19 FY20E FY21E FY22E FY19 FY20E FY21E FY22E FY19 FY20E FY21E FY22E FY19 FY20E FY21E FY22E
IPRU 15.1% 6.5% 19.4% 13.2% -3.0% -50.7% 153.1% -13.9% 3.3% -13.5% 5.2% 14.3% 3.3% 20.7% -7.9% 13.1%
SBILIFE 17.5% 17.3% 19.9% 14.9% 28.9% 8.3% 41.2% -9.1% 12.3% 37.8% -7.1% 16.7% 23.7% 16.9% -2.3% 16.9%
HDFCLIFE 20.0% 12.8% 21.0% 14.9% 16.2% -32.3% 101.6% -12.5% 14.0% 8.2% 5.5% 16.8% 19.8% 24.6% -10.5% 15.1%
MAXF 17.8% 11.6% 14.7% 14.2% 53.1% -26.3% 18.2% 7.6% 38.2% -4.5% -14.0% 22.1% 24.1% 9.0% -9.8% 21.3%

Company VNB Margins Operating ROEV ROEV ROE

FY19 FY20E FY21E FY22E FY19 FY20E FY21E FY22E FY19 FY20E FY21E FY22E FY19 FY20E FY21E FY22E
IPRU 17.0% 21.7% 22.5% 22.6% 20.2% 15.2% 15.0% 14.4% 19.6% 8.4% 19.9% 14.4% 15.0% 14.0% 12.7% 12.1%
SBILIFE 17.7% 18.7% 18.7% 18.8% 17.4% 20.4% 16.2% 15.8% 18.7% 17.3% 20.8% 15.8% 17.4% 16.3% 16.2% 16.0%
HDFCLIFE 24.6% 25.9% 24.5% 24.5% 20.1% 18.1% 17.0% 16.4% 22.5% 12.7% 22.6% 16.4% 21.0% 18.2% 17.4% 16.7%
MAXF 21.7% 21.6% 19.5% 20.5% 21.9% 20.3% 15.6% 16.6% 27.0% 16.7% 17.7% 16.6% 20.5% 22.6% 22.8% 22.7%

Company EPS BVPS DPS Dividend yield

FY19 FY20E FY21E FY22E FY19 FY20E FY21E FY22E FY19 FY20E FY21E FY22E FY19 FY20E FY21E FY22E
IPRU 7.9 7.4 7.6 7.8 49.0 50.2 58.7 64.2 4.9 2.3 0.8 2.3 1.1% 0.5% 0.2% 0.5%
SBILIFE 13.3 14.2 15.4 17.7 75.8 87.4 101.9 116.9 2.0 0.0 2.3 2.7 0.2% 0.0% 0.3% 0.3%
HDFCLIFE 6.3 6.4 6.6 7.2 27.7 33.5 38.6 44.2 1.6 0.0 1.6 1.8 0.3% 0.0% 0.3% 0.3%
MAXF 11.3 10.9 12.2 14.0 NA NA NA NA 0.0 0.0 0.0 0.0 0.0% 0.0% 0.0% 0.0%
Source: Company, Spark Capital; Note: MAXF is for 70% economic interest in Max Life

Page 22
LIC- Financial Summary

Page 23
Life Insurance Corporation

LIC – Key Financial Summary

Income Statement (Rs mn) FY14 FY15 FY16 FY17 FY18 FY19 FY20
- New business regular 319,045 231,122 238,294 263,010 281,464 313,262 579,588
- Renewal premium 1,461,335 1,611,599 1,685,527 1,759,040 1,835,515 1,951,691 2,011,134
- Single Premium 589,043 553,955 740,621 982,823 1,065,253 1,110,097 1,203,175
Gross premiums 2,369,423 2,396,677 2,664,442 3,004,874 3,182,232 3,375,051 3,793,896
Net premiums 2,367,981 2,394,828 2,662,254 3,001,967 3,178,510 3,371,854 3,790,626
Investment income - Policyholders 1,429,671 1,677,861 1,569,969 1,918,229 2,049,590 2,227,577 2,353,514
- Interest & Dividend income 1,180,971 1,354,831 1,513,383 1,640,150 1,820,960 1,978,936 2,157,911
- Profit & loss from sale of investments 226,768 261,835 129,081 202,552 266,320 236,801 183,962
- Fair value change (linked) 21,933 61,195 (72,495) 75,528 (37,690) 11,840 11,641
Investment income - Shareholders 340 325 318 482 380 433 293
Other Income 0 0 0 0 0 0 0
Total Income 3,797,992 4,073,014 4,232,541 4,920,678 5,228,480 5,599,864 6,144,433
Commissions 166,865 150,921 154,772 165,901 182,268 199,963 210,271
Operating expenses 202,727 223,955 226,921 289,521 301,425 284,980 345,658
Provisions 19,940 11,540 16,893 45,680 64,052 70,205 102,684
Service tax/GST on linked income 0 2,080 2,030 1,897 1,879 1,098 983
Total expenses 389,532 388,496 400,616 502,998 549,623 556,246 659,596
Benefits paid 1,580,155 1,441,257 1,412,010 1,666,951 1,965,719 2,492,849 2,525,489
Change in valuation reserves 1,739,219 2,171,713 2,334,304 2,661,772 2,606,851 2,438,411 2,861,794
Change in FFA 0 (13) (0) 0 0 0 0
Profit before tax 16,630 18,356 25,289 22,484 24,594 27,035 27,266
Tax 115 107 110 166 130 150 80
Profit after tax 16,514 18,249 25,178 22,317 24,464 26,885 27,186

Key Operational metrics FY14 FY15 FY16 FY17 FY18 FY19 FY20
Commission/ Total Premium (%) 7.0% 6.3% 5.8% 5.5% 5.7% 5.9% 5.5%
Opex (ex-commissions) / TWP (%) 8.6% 9.3% 8.5% 9.6% 9.5% 8.4% 9.1%
Conservation Ratio (%) 90% 91% 91% 91% 91% 92% 89%
Investment yield - Shareholders (%) 7.0% 6.4% 6.2% 8.9% 6.6% 7.1% 4.5%

Product mix - APE (%) FY14 FY15 FY16 FY17 FY18 FY19 FY20
Linked 0.0% 0.0% 0.1% 0.1% 0.2% 0.1% NA
Par 75.2% 72.4% 67.5% 64.2% 67.5% 65.2% NA
Non Par 24.8% 27.6% 32.5% 35.7% 32.3% 34.7% NA

Page 24
 Life Insurance Corporation

LIC – Key Financial Summary

Balance sheet (Rs mn) FY14 FY15 FY16 FY17 FY18 FY19 FY20
Shareholders’ Investments 5,081 5,062 5,131 5,740 5,858 6,366 6,794
Policyholders’ Investments 13,898,724 16,777,415 18,722,426 22,388,727 25,155,496 27,535,495 28,482,668
Unit linked Investments 989,881 946,585 845,111 902,046 881,336 756,814 705,318
Loans 962,750 1,010,280 1,041,644 1,022,913 1,027,498 1,043,226 1,078,227
Fixed assets 27,828 31,664 32,106 25,858 27,489 28,840 30,138
Cash & Bank Balances 880,824 643,755 429,107 327,289 226,805 421,781 285,812
Advances and Other Assets 701,341 730,072 865,196 911,746 1,125,413 1,325,585 1,446,043
Total Assets 17,466,430 20,144,832 21,940,720 25,584,318 28,449,895 31,118,106 32,035,000
Share Capital 1,000 1,000 1,000 1,000 1,000 1,000 1,000
Reserves and surplus 4,300 4,507 4,715 5,018 5,268 5,546 6,220
Fair Value Change Account 86 118 114 47 236 241 175
Shareholder's equity 5,386 5,625 5,829 6,065 6,504 6,787 7,395
Fair Value Change Account 1,081,911 1,586,687 1,039,715 1,949,976 1,967,335 2,167,785 (43,405)
Policy Liabilities 15,378,229 17,625,244 20,070,793 22,729,359 25,432,625 27,964,956 30,947,838
Linked Liabilities 779,036 703,229 591,740 606,067 509,687 416,598 325,495
Funds for Future Appropration (FFA) 13 0 1 0 0 0 0
Current Liabilites & Provisions 221,854 224,047 232,642 292,851 533,744 561,981 797,677
Total Liabilites 17,466,430 20,144,832 21,940,720 25,584,318 28,449,895 31,118,106 32,035,000

Embedded value (Rs mn) FY14 FY15 FY16 FY17 FY18 FY19 FY20
Adjusted networth 791,066 896,094 1,007,720 1,145,345 1,284,160 1,417,628 1,505,587
Value of in force 792,822 936,967 1,030,716 1,215,971 1,353,509 1,467,095 1,665,015
Embedded value 1,583,888 1,833,061 2,038,436 2,361,316 2,637,669 2,884,723 3,170,602
- Growth 13% 16% 11% 16% 12% 9% 10%
Value of New Business (VNB) 32,664 24,512 29,868 37,394 41,197 43,130 46,941
- Growth -25% 22% 25% 10% 5% 9%
VNB Margin 9.1% 9.5% 9.9% 10.7% 10.6% 10.6% 10.6%
APE 358,054 258,877 300,478 349,771 387,830 408,168 441,321
- Growth -28% 16% 16% 11% 5% 8%

Page 25
 Life Insurance Corporation

BUY Stock expected to provide positive returns of >15% over a 1-year horizon REDUCE Stock expected to provide returns of <5% – -10% over a 1-year horizon
Absolute Rating
Interpretation
ADD Stock expected to provide positive returns of >5% – <15% over a 1-year horizon SELL Stock expected to fall >10% over a 1-year horizon

Spark Disclaimer
Spark Capital Advisors (India) Private Limited (Spark Capital) and its affiliates are engaged in investment banking, investment advisory and institutional equities. Spark Capital is registered with SEBI as a Stock Broker, corporate member on the
Bombay Stock Exchange and National Stock Exchange and Category I Merchant Banker. We hereby declare that our activities were neither suspended nor we have defaulted with any stock exchange authority with whom we are registered in
the last five years. We have not been debarred from doing business by any Stock Exchange/SEBI or any other authorities, nor has our certificate of registration been cancelled by SEBI at any point of time.
Spark Capital has two wholly owned subsidiaries (1) Spark Family Office and Investment Advisors (India) Private Limited which is engaged in the services of providing investment advisory services and is registered with SEBI as Investment
Advisor and (2) Spark Alternative Asset Advisors India Private Limited engaged in the business of Category II Alternate Investment Fund. Spark Capital have two more subsidiaries (1) Spark Fund Managers Private Limited which is engaged in
the business of Portfolio Management Services and is registered with SEBI (2) Spark Fund Advisors LLP registered with SEBI as Category III Alternate Investment Fund which was originally an associate entity and became subsidiary with effect
from August 01, 2018. Spark Capital also has an associate company Spark Infra Advisors (India) Private Limited which is engaged in the business of providing infrastructure advisory services.
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this document. This should however not be treated as endorsement of views expressed in this report:

Details of Financial Interest of Research Entity [Spark Capital Advisors (India) Private Limited] and its Associates No
Details of Financial Interest of covering analyst/ and his relatives No
Disclosure of interest statement

Investment banking relationship with the company covered No

Any other material conflict of interest at the time of publishing the research report by Spark and its associates No
Receipt of compensation by Spark Capital or its Associate Companies from the subject company covered for in the last twelve months:
▪ Managing/co-managing public offering of securities ; Investment banking/merchant banking/brokerage services ; Products or services other than those above in connection with research report; No
Compensation or other benefits from the subject company or third party in connection with the research report
Whether covering analyst has served as an officer, director or employee of the subject company covered No
Whether the Spark and its associates has been engaged in market making activity of the Subject Company No
Whether the research entity or its associates, has actual/beneficial ownership of one per cent. or more securities of the subject company, at the end of the month immediately preceding the date of publication
No
of the research report

Page 26
 Life Insurance Corporation

Analyst Certification of Independence

The views expressed in this research report accurately reflect the analyst’s personal views about any and all of the subject securities or issuers; and no part of the research analyst’s compensations was, is or will be, directly or indirectly,
related to the specific recommendation or views expressed in the report.
Additional Disclaimer for US Institutional Investors
This report was prepared, approved, published and distributed by Spark Capital Advisors (India) Pvt. Ltd a company located outside of the United States (a “non-US Group Company”). This report is distributed in the U.S. by LXM LLP USA, a
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exemption in Rule 15a-6 and any transaction effected by a U.S. customer in the securities described in this report must be effected through LXM LLP USA.
Neither the report nor any analyst who prepared or approved the report is subject to U.S. legal requirements or the Financial Industry Regulatory Authority, Inc. (“FINRA”) or other regulatory requirements pertaining to research reports or
research analysts. No non-US Group Company is registered as a broker-dealer under the Exchange Act or is a member of the Financial Industry Regulatory Authority, Inc. or any other U.S. self-regulatory organization.
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subject companies and securities and (2) no part of his or her compensation was, is or will be directly or indirectly dependent on the specific recommendations or views expressed in this report. Please bear in mind that (i) Spark Capital
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LXM LLP USA assumes responsibility for the research reports content in regards to research distributed in the U.S. LXM LLP USA or its affiliates has not managed or co-managed a public offering of securities for the subject company in the past
12 months, has not received compensation for investment banking services from the subject company in the past 12 months, does not expect to receive and does not intend to seek compensation for investment banking services from the
subject company in the next 3 months. LXM LLP USA has never owned any class of equity securities of the subject company. There are not any other actual, material conflicts of interest of LXM LLP USA at the time of the publication of this
research report. As of the publication of this report LXM LLP USA, does not make a market in the subject securities.
Additional Disclaimer for UK Investors
Spark Capital’s research, including the recommendations recorded therein, have been objectively prepared from public sources which it believed to be reliable and therefore constitutes independent investment research, and is presented as
such. Note that Spark Capital has concluded an agreement with Avior Capital Markets International Limited (“ACMI”), regulated by the Financial Conduct Authority (FRN: 191074), pursuant to which ACMI promotes and markets the products
and research of Spark Capital, provides investment advice in respect thereof to the extent permissible. In return for this Spark Capital pays a monthly fee and commissions earned on certain qualifying transactions to ACMI. Spark Capital’s
research reports, including any recommendations in respect thereof, may only be distributed to, and relied on by, qualifying investors, who are permitted to receive the same in the UK. A list of Spark Capital’s research reports disseminated in
the UK over the past 12 months is available on request.
This material produced by Spark Capital is solely for information purposes only and for the personal use of the recipient. It is not to be reproduced under any circumstances and is not to be copied or made available to any person other than
the recipient. It is distributed in the UK by ACMI and elsewhere in the world by Spark Capital or an authorized affiliate of Spark Capital. This document does not constitute an offer of, or an invitation by or on behalf of Spark Capital or its
affiliates or any other company to any person, to buy or sell any security.
Securities, money market instruments, strategies, financial or investment instruments mentioned herein may not be suitable for all investors. The information and opinions provided in this note do not constitute a personal recommendation
and take no account of the investor's individual circumstances. Investors should consider this research as only a single factor in making any investment decisions and, if appropriate, should seek advice from an investment advisor.
Spark Capital or its affiliates does not accept any liability or responsibility whatsoever for the accuracy or completeness of any information contained in its research reports. All estimates, expressions of opinion and other subjective judgments
contained herein are made as of the date of this document. Emerging securities markets may be subject to risks significantly higher than more established markets. In particular, the political and economic environment, company practices and
market prices and volumes may be subject to significant variations.
Save as specifically disclosed otherwise, Spark Capital’s relationship with ACMI is not reasonably expected to impair the objective presentation of the recommendations in respect of in the research report, including any interests or conflicts of
interest concerning any financial instruments or the issuers to which the recommendations, directly or indirectly, relate. The research report is deemed to be first disseminated at the date and time recorded on Spark Capital’s distribution
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ACMI does not assume any responsibility, or liability of any nature whatsoever, arising from or in connection with the contents, use, reliance or dissemination of Spark Capital’s research or any recommendation in respect thereof and
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