doctorcassandra

Jindagi ka saath bhi;

Jindagi ka baad bhi.

Usually I write stories about stocks without revealing the name of the Script, anticipating the readers to guess the script.

But today I will change the scheme

I am going to talk about LIC as a equity investment and its potential according to me.

Life Insurance Corporation (LIC) is the largest insurance provider company in India, owned bt the Govt of India (PSU).

It has a market share of above 66.2% in new business premium.

The company offers participating insurance products and non-participating products like unit-linked insurance products, saving insurance products, term insurance products, and annuity & pension products.

LIC has a history of over 65 years and a 61.6% market share in terms of premiums, 61.4% in New Business Premium, 71.8% in a number of individual policies issued, 88.8% in a number of group policies issued for 9MFY2022.

LIC is ranked fifth globally by life insurance GWP and 10th globally in terms of total assets. It is the largest asset manager in India with an AUM of Rs 40.1 lakh crore as of Dec 2021, which is 17.0% of India's GDP. Its investments in listed equity represented around 4% of the total market capitalization of NSE and more government bonds than the RBI.

https://economictimes.indiatimes.com/markets/stocks/news/lic-owns-stocks-worth-rs-9-5-lakh-crore-check-out-its-biggest-holdings/articleshow/89473762.cms

History LIC was formed by merging and nationalizing 245 private life insurance companies in India on 1 September 1956. Until 2000, LIC was the only life insurer in India, and it is identified by IRDAI as a Domestic Systemically Important Insurer (D-SII). The brand LIC was recognized as third strongest and 10th most valuable global insurance brand as per the 'Insurance 100 2021 report' released by Brand Finance and now has become synonymous with insurance in India.

AUM As of 30 Sep 2021, it has a total AUM of Rs. 40 lakh crore. LIC operates through 2048 branches, 113 divisional offices, and 1,554 Satellite Offices. It operates globally in Fiji, Mauritius, Bangladesh, Nepal, Singapore, Sri Lanka, UAE, Bahrain, Qatar, Kuwait, and the United Kingdom. The premium collection from outside India represented 0.69% of the total premium in 9MFY2022.

Product portfolio LIC has a broad, diversified product portfolio covering various segments across individual products and group products. The Corporation’s individual product portfolio in India comprised 32 individual products (16 participating products and 16 non-participating products) and seven individual optional rider benefits. The Corporation’s group product portfolio in India comprised 11 group products.

Omni Channel LIC has an omnichannel distribution platform which comprises (i) individual agents, (ii) bancassurance partners, (iii) alternate channels (corporate agents, brokers, and insurance marketing firms), (iv) digital sales (through a portal on Corporation's website), (v) Micro Insurance agents and (vi) Point of Salespersons-Life Insurance scheme.

Largest Distribution Network LIC has the largest individual agent network among life insurance entities in India, comprising approximately 1.33 million individual agents end of December 2021. It has 2,048 branch offices and 1,559 satellite offices in India, covering 91% of all districts in India.

Premium collection The premium collection in India increased at a CAGR of 9% from Rs 337127.58 crore in FY2019 to Rs 402886.22 crore in FY2021. LIC has posted a net profit of Rs 1715.31 crore in 9MFY2022, after Rs 2974.14 crore in FY2022.

Intense Competition LIC faces significant competition from private insurers LIC has poor new policy growth as they continue losing market share to private insurance players. From FY2016 to FY2021, the total premium for private sector players in the life insurance industry increased at a CAGR of 18% while LIC's total premium in India increased at a CAGR of 9% for the same period.

India’s Largest IPO The Co. raised 21,008 Crs through the IPO the largest IPO in India, in May 2022 at 950 per share.

The stock has been languishing around 600's after the IPO

Then why the interest:

1. Post Interest rate hikes and liquidity tightening measures of Central Banks Value stocks compared to Growth are in focus. This scenario, at present looks structural, to last for a long time.

2. Public sector stocks are the most undervalued stocks in the Indian market, most of them rightly so because of the past Govt. interference and poor corporate governance.

However with the proactive policies of the present govt. demonstrated over the past six years the image of PSUs is changing for the better, rightly so.

3. Change in Accounting policy at LIC, now reflecting the same accounting standards as all private insurers in India,

https://www.business-standard.com/article/companies/lic-q2-net-profit-soars-to-rs-15-952-crore-due-to-transfer-of-funds-122111101704_1.html

the profit in the last quarter Sept 2022 has increased by a whooping 1040% giving a EPS of 25 for the quarter,

this should translate into a EPS of about 45/50 for the accounting year 22/23

4. If Indian economy and the markets are to remain buoyant as predicted.. then the largest holder/( hoarder) of Equity should bloom irrespective of its primary insurance business, which as such is doing great.

5.Invest in equity for the long term for compounding gains and a wealthy retirement is the mantra taught by investment gurus.

Here is the company which does exactly that and has been a bulwark of Indian indexes with its contrarian approach to the markets, proved over multiple stock market cycles.

And is available at a discount to the IPO price which was oversubscribed!!! ( we Indians like to stand in que, although never follow the discipline, but when Laxmi comes home on her own as a guest we overlook her). {Now don't extrapolate it to PayTm, my perennial short,.....awaiting its FNO listing}

Whether you buy the LIC policy or the LIC EQ / stock the retirement of yours and your loved ones is assured to comfort.

**********

Mile stones:

1. IPO 950 per share May 2022

2. Languish. Identified potential around 644, present price 725 (14th Dec 2022)

3. Immediate short term target around IPO price, 900/950

4. Introduction in Future and Option market

5. Constituent of Sensex/ Nifty......

The Price/ Volume action and the 'public sentiment barometer' of the LIC shares reminds me of Eicher Motors.. identified in 2013/14 during mine Ladakh Sojourn.

from Disbelief to Nifty

750 to 22,000 and than the 10/15% compounding story in most mutual fund portfolios.

LIC seems to be following the same path.

* comments especially contrasting views welcome.

Update:

1. Jan 3 2023,

Kotak initiates coverage

https://www.businesstoday.in/markets/company-stock/story/lic-shares-at-rs-1000-why-kotak-sees-40-potential-upside-on-the-insurance-behemoth-358660-2023-01-03

2. 5/04/2023

https://epaper.livemint.com/Home/MShareArticle?OrgId=543af6ecdc&imageview=0

3. 24/11/23

LIC saw its largest single-day increase since its listing due to a positive growth outlook

sqst.in/cQFHj (Twitter/X)

4. 24/11/23

LIC shares surge 10% as company aims for double-digit growth in new biz premium.

PSU insurers on a tear; LIC, General Insurance and New India Assurance gain up to 20%

https://www.moneycontrol.com/news/business/markets/psu-insurance-stocks-on-a-tear-lic-general-insurance-and-new-india-assurance-gain-up-to-17-11804621.html

5. 6/12/2023

LIC fourth largest insurer in world

https://m.timesofindia.com/business/india-business/with-504-billion-reserves-lic-4th-largest-insurer/articleshow/105764261.cms