LIC share price today: Shares of Life Insurance Corporation of India (LIC) fell for the fifth consecutive session. The scrip fell 2 percent to Rs 786.05, on the BSE on Monday. The shares hit their lowest level since listing, with the state life insurer’s market cap (market cap) breaking below the Rs 5 lakh crore mark.
The IPO of 20,557 crore, the largest ever in India, was only subscribed to 2.95 times. LIC made a weak stock market debut on May 17, 2022, trading nearly 8 percent below its issue price. With today’s fall, LIC has fallen 17 percent below the issue price of Rs 949 per share in a week. At the issue price of Rs 949, the m-cap of LIC was Rs 6,00,242 crore; based on the listing on the BSE, the valuation of LIC fell to Rs 5,57,675 crore resulting in a loss of approximately Rs 42,500 crore.
The stock currently trades at a P/E ratio of an eye-watering 123.55, compared to HDFC Life Insurance Company Ltd which trades at a P/E of 96.81, or ICICI Pru Life Insurance Company Ltd shares which P/W requirements of 96.81.
The 13-month persistence ratio was 69.24 percent at the end of Q4 FY22, compared to 73.94 percent in the same period last year. The persistence ratio is widely used in the insurance industry and measures how many policyholders choose to renew their policy after the end of the year. This is an important metric for measuring how long policyholders have adhered to their policies. A fall in the same is not a good sign for the insurer.
However, the solvency ratio for FY22 was recorded at 1.85 versus 1.76 in the previous year, which is a good sign. A higher solvency ratio indicates greater stability in the company’s financial position in order to remain solvent.
Should Investors Buy the Dip?
Last week, brokerage firm Emkay Global Financial Services launched coverage on LIC with a hold rating and a target price of Rs 875 – about 11 percent higher than current levels. The brokerage said its neutral view is supported by several factors – low VNB vs. EV, limiting potential RoEV to near premium settlement rate, lower APE growth and margin outlook vs. private sector peers, if LIC’s higher commission costs and opex limit the possibilities for product and channel diversification.
Another factor is inherent volatility in EV, as about 35 percent of non-par assets are in equity, and no track record of EV movements under the fund’s new split structure, the note said.
“We are using a 0.9x Jun’23 P/EV multiple to arrive at our TP, which reflects a 10 percent discount on EV due to the lack of a track record of EV growth and higher volatility in the EV. While we appreciate LIC’s market-leading position and comfortable valuations, we prefer private sector peers that have better growth, profitability and thus higher RoEV prospects,” Emkay added.
“LIC’s dominant share of the group’s single-premium fund management business is artificially increasing its market share and decreasing some of its expense ratios. Commission and opex ratios are on the higher side relative to cost-efficient larger retail players, despite the sheer scale. Adjusted for the group single premium policies and LIC’s nearly ULIP-less product mix, the persistence and surrender ratios are not impressive.
The state-run insurance giant reported lower profits for its fourth quarter ended March 2022. In its first post-listing earnings release, LIC recorded a 17 percent drop in consolidated net profit to Rs 2,409 crore for the fourth quarter of Rs 2,917 crore in the same quarter a year ago. The insurer’s total income rose to Rs 2,12,230 crore, from Rs 1,90,098 crore in the same period of the previous fiscal year.
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