Government pushes LIC to change product strategy for better return on investment

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Life Insurance Corporation (LIC) has been trading below the issue price of ₹949 per share since its IPO on May 17

Life Insurance Corporation (LIC) has been trading below the issue price of ₹949 per share since its IPO on May 17

The government is pushing LIC to adjust its product strategy to maximize profitability in a bid to help the country’s largest insurer realize its full growth potential and generate better returns for investors, an official said.

Life Insurance Corporation (LIC) has been trading below the issue price of ₹949 per share since its IPO on May 17. It is listed at ₹872 each on NSE.

On Tuesday, the certificate stood at ₹595.50, down 0.72% from the previous close.

Foreign brokers, however, remain optimistic that LIC will set a higher target price over the next year, as they believe the insurer has good market potential in the medium term, high-potential assets. negligible risk and a solid operational return on intrinsic value (ROEV).

Citi, in a research report dated October 14, set a target price of ₹1,000 for LIC certificates, saying that LIC is “better positioned than mature global players”.

The Ministry of Finance, in its performance review, sensitized the management of the LIC on measures that could be taken to improve the wealth of investors and focus on non-participating products or term plans to improve profitability.

“With the listing of LIC, the process of modernizing the 65-plus-year-old institution has begun. We are working with management to modernize their product offering and reduce the payment of dividends to policyholders,” said the manager at PTI.

In non-participating insurance products, the insurers do not need to share their profits as a dividend with the policyholders, whereas in the case of participating or participating products, the insurer shares the dividend with the policyholders.

“The younger generation is more inclined to a forward plan. LIC will have to rework its strategy and decide what needs to be done to ensure that its assets under management are used to their full potential,” the official added.

LIC’s standalone net profit in the first quarter jumped to ₹682.88 crore from ₹2.94 crore a year ago.

LIC reported an embedded value (EV) of ₹5,41,492 crore in March 2022, compared to ₹95,605 crore in March 2021 and ₹5,39,686 crore in September 2021.

Its initial public offering (IPO) came in a price range of ₹902-949 per share. The issue earned around ₹21,000 crore for the state treasury.

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