LIC Owns 4% of all listed stocks in India | although continues losing market share to private insurance

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LIC manages assets of ₹39 lakh crores, or more money than the entire mutual fund industry combined. As per a note by GEPL Capital on the LIC IPO, LIC invests these funds across stocks and bonds. They own 4 % of all listed stocks in India and more government bonds than the RBI.

The note said that LIC is the leading insurance provider company in India and fifth largest global insurer by GWP.

Among the challenges, the note states that LIC has poor new policy growth as they continue losing market share to private insurance players, especially in urban areas.

In addition, the margin in insurance plus investment products is low. It’s very difficult to value LIC as the business model is unlike any other company. LIC collects money upfront and then promises to compensate policyholders at a later stage. The premiums they collect (part insurance and part investment) cannot be recognised as revenue.

The embedded value for LIC is ₹5,39,686 crore and its post issue implied market capitalisation is ₹6,00,242 crore which is 11.2 % premium to its IEV.

“The Mcap to EV ratio for its listed peers it in the range of 1.5x to 2.5x , Hence we believe Valuations of LIC with its majestic size are priced reasonably,” the note said.

As data suggest, its business is largely driven by agent based model (90 % plus), hence a larger digital on boarding of its network will be needed to pursue growth ahead.

In addition, the margin in insurance plus investment products is low. It’s very difficult to value LIC as the business model is unlike any other company. LIC collects money upfront and then promises to compensate policyholders at a later stage. The premiums they collect (part insurance and part investment) cannot be recognised as revenue.