Life Insurance Corporation of India (LIC) is the largest and oldest life insurance company in India, with a market share of over 66% in the industry. LIC is also one of the most valuable companies in India, with a market capitalization of over Rs. 4.2 lakh crore as of September 2021. LIC’s share price has been on an upward trend since its listing on the National Stock Exchange (NSE) in January 2020, reaching a 52-week high of Rs. 754.25 in July 2021. In this blog post, we will discuss the factors that affect LIC’s share price, the performance of LIC in recent quarters, and the future outlook for LIC.
Factors Affecting LIC’s Share Price
LIC’s share price is influenced by various factors, such as:
- Business growth: LIC’s business growth depends on its premium income, policy sales, assets under management, and market share. LIC has been consistently growing its premium income and policy sales, despite facing competition from private insurers. LIC’s total premium income increased by 16.06% year-on-year to Rs. 1.93 lakh crore in the first quarter of fiscal year 2024 (Q1FY24), while its new business premium grew by 17.81% to Rs. 49,179 crore. LIC’s assets under management also increased by 11.43% to Rs. 36.74 lakh crore as of June 2021. LIC’s market share in terms of new business premium was 66.26% as of July 2021.
- Profitability: LIC’s profitability depends on its net profit, return on assets, earnings per share, and dividend payout. LIC’s net profit surged by 120.28% year-on-year to Rs. 78.15 billion in Q1FY24, mainly due to higher investment income and lower operating expenses. LIC’s return on assets improved to 4.06% in Q1FY24 from 2.01% in Q1FY23. LIC’s earnings per share increased by a whopping 1,503.16% year-on-year to Rs. 15.23 in Q1FY24. LIC also declared an interim dividend of Rs. 3 per share for FY24.
- Valuation: LIC’s valuation depends on its price-to-earnings ratio, price-to-book ratio, dividend yield, and market capitalization. LIC’s price-to-earnings ratio was 9.31 as of September 2021, which was lower than the industry average of 19.03. This indicates that LIC’s shares are undervalued compared to its peers. LIC’s price-to-book ratio was 9.25 as of September 2021, which was also lower than the industry average of 10.64. This indicates that LIC’s shares are trading below their book value. LIC’s dividend yield was 0.45% as of September 2021, which was higher than the industry average of 0.35%8. This indicates that LIC’s shares offer a good return to investors. LIC’s market capitalization was Rs. 4.21 lakh crore as of September 2021, which made it the sixth-largest company in India by market value.
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Performance of LIC in Recent Quarters
LIC has been performing well in the recent quarters, despite the challenges posed by the COVID-19 pandemic and the economic slowdown. Some of the highlights of LIC’s performance in recent quarters are:
- Q1FY24: LIC reported a strong growth in premium income, policy sales, net profit, earnings per share, and assets under management in Q1FY24, as mentioned above. LIC also improved its solvency ratio to 1.67 in Q1FY24 from 1.52 in Q4FY23, which indicates its financial strength and ability to meet its liabilities.
- Q4FY23: LIC reported a robust growth in premium income, policy sales, net profit, earnings per share, and assets under management in Q4FY23 as well. LIC’s total premium income increased by 14.73% year-on-year to Rs. 6.15 lakh crore in FY23, while its new business premium grew by 10.11% to Rs. 2 lakh crore. LIC’s net profit increased by 124% year-on-year to Rs. 53 billion in FY23, while its earnings per share increased by a staggering 2,100% to Rs. 10.34. LIC’s assets under management increased by 12.81% to Rs. 35.28 lakh crore as of March 2021.
- Q3FY23: LIC reported a healthy growth in premium income, policy sales, net profit, earnings per share, and assets under management in Q3FY23 as well. LIC’s total premium income increased by 12.56% year-on-year to Rs. 4.78 lakh crore in the first nine months of FY23, while its new business premium grew by 7.99% to Rs. 1.56 lakh crore. LIC’s net profit increased by 90.6% year-on-year to Rs. 26.7 billion in the first nine months of FY23, while its earnings per share increased by 906% to Rs. 5.21. LIC’s assets under management increased by 11.4% to Rs. 34.16 lakh crore as of December 2020.
Future Outlook for LIC
LIC has a bright future outlook, given its strong business growth, profitability, valuation, and competitive edge in the Indian life insurance industry. Some of the factors that will drive LIC’s future growth are:
- IPO plans: LIC is planning to launch its initial public offering (IPO) in the current fiscal year, which will be the largest IPO in India’s history. The IPO is expected to raise around Rs. 70,000-80,000 crore for the government, which holds a 100% stake in LIC. The IPO will also enhance LIC’s transparency, governance, and accountability, and attract more investors to its shares.
- Digital transformation: LIC is undergoing a digital transformation to improve its customer service, operational efficiency, and innovation. LIC has launched various digital initiatives, such as e-KYC, online premium payment, chatbot, mobile app, and web portal, to provide a seamless and convenient experience to its customers. LIC has also invested in emerging technologies, such as artificial intelligence, blockchain, cloud computing, and data analytics, to enhance its product development, risk management, and fraud detection.
- Product diversification: LIC is diversifying its product portfolio to cater to the changing needs and preferences of its customers. LIC has launched various new products, such as Jeevan Umang (a whole life plan), Jeevan Akshay VII (an immediate annuity plan), Jeevan Shanti (a deferred annuity plan), and Jeevan Labh (an endowment plan), to offer more options and benefits to its customers. LIC has also introduced various riders, such as accidental death benefit, critical illness benefit, and disability benefit, to provide additional coverage and protection to its customers.
- Market expansion: LIC is expanding its market presence both domestically and internationally to increase its customer base and revenue. LIC has a network of over 4,500 branches, 1.3 lakh employees, and 12 lakh agents across India, which gives it a wide reach and penetration in the Indian market. LIC has also established eight subsidiaries and six joint ventures abroad in countries such as Bahrain, Fiji, Kenya, Nepal, Saudi Arabia, Sri Lanka, and the UK, which gives it access to new markets and opportunities.
LIC is a market leader in the Indian life insurance industry, with a strong business growth, profitability, valuation, and competitive edge. LIC’s share price has been on an upward trend since its listing on the NSE in January 2020, reflecting its performance and potential. LIC has a bright future outlook, given its IPO plans, digital transformation, product diversification, and market expansion. LIC’s shares are undervalued compared to its peers and offer a good return to investors. If you are looking for a long-term investment in the life insurance sector, then LIC’s shares are worth considering.