Life Insurance Corporation (LIC), a state-run insurer, embarked on a series of meetings with investors, starting with the United States and with subsequent roadshows scheduled in Singapore, Hong Kong, and the UK.
According to government sources that spoke to CNBC-TV18, these roadshows aimed to communicate to a broader investor base, given that LIC's share price had fallen by one-third since its listing on the Indian stock market, compared to the issue price of Rs 949 per share.
Government sources have reiterated that the primary objective of these meetings was to enhance investor perception of the company.
Despite experiencing a decline in market share in recent years, LIC still accounted for an impressive 63% of new business premiums in the financial year ending March 2023.
“There should be a broader understanding of strengths of LIC. LIC management is engaging with wider set of investors. The corporation is very clear about its earnings, earnings have been fabulous and they are working to increase their market share, making a qualitative change to portfolio. Next few quarters are important for LIC,” said Tuhin Kanta Pandey, the secretary of the Department of Investment and Public Asset Management (DIPAM), in an interview with CNBC-TV18.
During the corporate presentations to investors, LIC outlined three key initiatives to enhance its business: introducing new products, focusing on non-participating policies, and expanding distribution channels such as bancassurance and digital platforms.
LIC prioritized non-participating policies due to their potential to improve profitability. Currently, more than 94% of LIC's policies are participatory, while private insurers typically have 5-20% participating policies, according to a recent Ambit report.
Factors affecting LIC's share price also include the dominance of private peers backed by major banks. In contrast, LIC relies on state-owned banks. Additionally, private banks have a vested interest in promoting their life insurance units, while LIC can only incentivize its sales force through increased commission rates, which may impact the company's profit margins.
Despite these challenges, LIC's brand recognition in India contributes to its advantages. With only a small fraction of the population having insurance coverage, LIC's nearly five-decade history and household name status make it a formidable player in the market.
After a successful IPO in May 2022, which attracted bids three times higher than the shares offered, LIC's share value declined soon after listing.
The government, retaining a 96.5% stake, is hopeful that global investors will recognize LIC's true worth, surpassing its current market valuation.
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