Shares of Life Insurance Corporation of India (LIC) hit a new low of Rs 648, down nearly 1 per cent on the BSE in Thursday's intra-day trade. The stock of the state-owned insurance company has fallen below its previous low of Rs 650, which it had hit on June 20, 2022.
LIC now trades 32 per cent below its issue price of Rs 949 per share, and is at its lowest level since market debut on May 17, 2022. Since its listing, LIC continued underperforming the market with wide margin. In the past one month, the stock has shed 4 per cent, as compared to 0.41 per cent rise in the S&P BSE Sensex. Further, in the past three months, it declined 3 per cent, as against 14 per cent rally in the benchmark index.
On a year-on-year basis, LIC reported slower growth of 5.2 per cent in retail annualized premium equivalent (APE) for August 2022 as against 8.9 per cent for the private sector; on a three-year CAGR basis. LIC's growth of 0.66 per cent was materially lower than that of the private sector at 12.6 per cent.
"LIC posted a satisfactory performance in August 2022 (Retail APE: 5 per cent YoY; 3Y CAGR of 0.7 per cent) on a favorable base, but the structural divergence in growth between LIC and the private sector is clearly visible in the ~4.4ppt retail APE market-share loss for LIC over the past 3 years," analysts at Emkay Global Financial Services said in insurance sector update.
For FY23, the brokerage firm expects total Retail APE growth of 12-13 per cent YoY, with the private sector growing in the mid-to-high teens and LIC seeing a high single-digit growth. Considering their product diversification, distribution mix and better cost efficiencies, listed private players are expected to grow, with higher margins, the brokerage firm said with ‘hold’ rating on LIC.
"The structural factors challenging the industry growth are persistent low interest rates and pricing pressures aggravated by price comparison websites. Though many insurers have undertaken cost savings programs, the aggregate results are not very encouraging. Industry-wide, productivity improvements have been limited," LIC said in its FY22 annual report.
Insurers need to begin the hard core process to improve productivity by establishing the trajectory and full performance potential of the business across the value chain-including sales and distribution, product development, operations, technology, and corporate functions- rather than mere piecemeal attempts at improvement. Only a transformative approach will allow an insurer to survive and thrive in a post COVID-19 world, the company said.