As of June 2024, India has seen surges in the stock market. Life Insurance Corporation of India (LIC) saw it as the opportunity to reduce its stakes and shares within different companies during the 2023-24 financial year. The remaining shares have increased in value, totaling Rs 4.39 trillion as of July 2024, and a higher return on the initial investment.
Some financial and marketing experts have advised that the Indian government, which owns 96.5% of LIC, should take advantage of the increased value and sell a portion of its stake. Then the Indian government can use the returns to create or maintain infrastructure for the public. Such an investment will then boost the country’s economy; the India Brand Equity Foundation projects that focusing on infrastructure such as “roads, railways, and aviation,” will lead to India reaching its economic growth target of $5 trillion in US dollars or Rs 4.18 billion.
Reuters reported in May 2024 that LIC’s business margin based on new premiums “fell to 17.2% for the quarter ended March 31, from 19% a year earlier.” LIC explained that the company had invested in pension liability for policyholders, and group business premiums also fell by 5.5%. While profits had increased, investors would have to wait until the 2025 fiscal year to see the positive effect on premium profits.
What Do You Need To Know About LIC?
LIC, a government-owned company based in Mumbai, is the largest insurance entity in India. Founded in 1956, it represents more than 245 insurance companies combined into one conglomerate. Its policies include covering health, electricity, vehicles, and finances. Other public insurance entities include the General Insurance Corporation and its subsidiaries.
Despite India opening up private sectors for insurance in 2000, LIC has maintained a consistent growth rate and profit margins. Competitors mainly comprise domestic private insurance companies, which operate on a smaller scale than national and state-run entities.
Private insurance companies have provided different strategies to increase individual and group premiums. The Week reported that Aceso, a Mumbai-based firm, intends to cause disruption by offering Assignment of Life Insurance Policies, where a holder doesn’t have to pay a life insurance premium but still receives coverage benefits. LIC happens to provide these policies for Aceso customers and has released a circular refusing association with the concept of ALIPs. Aceso has maintained its stance on providing ALIPs by citing a 2015 Supreme Court case. The battle over premiums, and other similar legal conflicts, will affect both companies’ financial values and public perceptions, respectively.
LIC’s Market Value
As of Friday, July 5, LIC’s market value is Rs 6.42 trillion according to Business-Standard, and Yahoo Finance reports that as of July 5, 2024, the company’s market share stands at Rs 1,014.55. Reducing its stakes during a stock market boom meant that it was selling at the optimal time to increase its liquid assets.
The strategy behind these stake reductions shows accurate predictions for the Indian stock market. Seeing the spike in LIC-owned shares in other companies will contribute to investor confidence for upcoming fiscal quarters.
