LIC Share Fundamental Analysis: PM Modi Effect on PSU Stock

Introduction

For over 65 years, LIC has been more than just an insurance company - it's been a trusted friend for many families.  especially those in rural areas who might not have other options., LIC offered a way to save and protect their future. From diverse policies to a wide network, LIC became a symbol of security and continues to play an important role in many lives. Prime Minister Modi recently mentioned them again, highlighting their importance. So this blog is going to be about the journey and business of lic . 

 

The Rise to Power

LIC's journey to becoming the largest Public Sector Undertaking (PSU) is nothing short of remarkable. With a market capitalization now reaching at 6.6 lakh crore, it has managed to surpass even the giant players of the sector like State Bank of India (SBI), which shows its dedication and strategic supremacy. The market is filled with excitement as LIC shares are trading approximately Rs 100 above its Initial Public Offering (IPO) price.

 

Company Profile

Life Insurance Corporation (LIC), owned by the Government of India, stands as the largest insurance provider in the country. With a rich history spanning over 65 years, LIC has consistently held a dominant position in the market, boasting a 61.6% market share in premiums and a robust portfolio of insurance products.

 

Key Specifications

• Global Recognition: LIC is ranked fifth globally in life insurance Gross Written Premium (GWP) and holds the tenth position in terms of total assets. Its assets under management (AUM) of Rs 40.1 lakh crore, as of December 2021, constitute 17.0% of India's GDP.

• Historical Significance: Formed by merging and nationalising 245 private life insurance companies in 1956, LIC has been a key player in shaping India's insurance landscape. It was the sole life insurer in India until 2000 and is recognized as a Domestic Systemically Important Insurer (D-SII) by IRDAI.

• Product Portfolio: LIC boasts a diversified product portfolio, offering 32 individual products and 11 group products, covering a wide range of segments in the insurance market.

• Distribution Network: With the largest individual agent network, comprising approximately 1.33 million agents, LIC's extensive reach spans 91% of all districts in India.

• Financial Performance: The premium collection in India has seen a consistent growth, posting a net profit of Rs 1715.31 crore in 9MFY2022. However, LIC faces intense competition from private insurers, leading to a decline in market share.

• Upcoming Milestone: LIC is set to make history with India's largest IPO, aiming to raise Rs 21,008 crores through an Offer for Sale by the Government of India.

 

 

Global Footprint

Operating through 2048 branches, 113 divisional offices, and 1,554 Satellite Offices beyond the borders of India, LIC's presence is felt across various nations, including Fiji, Mauritius, Bangladesh, Nepal, Singapore, Sri Lanka, UAE, Bahrain, Qatar, Kuwait, and the UK. A demonstration to its global impact and the trust it has earned internationally.

 

Market Share Story

While LIC's dominance in the Indian insurance market has not been matched by any of its competitors, recent data paints a different picture. The market share in terms of new premium written has witnessed a decline, dropping from 71% in 2019 to 58.8% by November 2023. This begs the question - what's causing this model shift?

 

Challenges and Competition

LIC's competition and peers aren't another giant in the public sector; instead, it comes in the form of small private players. These contenders, growing at a staggering 18% CAGR, have posed a formidable challenge, outpacing LIC's 9% growth rate. The primary driver behind their success? A swift adoption of new technologies, something LIC is grappling to catch up with.

 

Agent’s Pros and Cons

LIC's dependence on agents for policy sales, though once a strength, is now becoming a stumbling block. Private players, unburdened by agent-related constraints, are witnessing faster growth and lower operational costs. This predicament, while contributing to LIC's extra expenses, is also a significant factor behind the decline in its market share.

 

 

The Modi Factor and Future Prospects

Prime Minister Modi's recent expression of confidence in LIC has sparked optimism in the market. In a recent address to the Rajya Sabha, PM Modi provided further insights into the growth of PSUs. He revealed that the market capitalization of PSU companies now exceeds 17 lakh crore, a significant jump from the 9.5 lakh crore in 2014. As we eagerly await the Q3 results of 2023, analysts predict a positive trajectory for LIC. The question arises- will LIC manage to bounce back, reclaiming its lost market share? Only time and the unfolding Q3 results will unveil the answer.

 

Conclusion

Standing at an important point, LIC's future growth is yet to be decided. Its past flexibility and achievements are met with the challenges of private players and digital disruption. Can it adapt, innovate, and reclaim its dominance, or will its tale shift towards survival through strategic adjustments? The market watches with bated breath, eagerly awaiting the next chapter in the enthralling saga of LIC and its impact on the Indian insurance landscape.

Disclaimer: This Stock Analysis is only for informational purposes and should not be considered as investment advice. Always do your research and consult with a financial advisor.