It was a big improvement for Life Insurance Corporation of India (LIC) in December 2023, when they collected 93.8% more premiums than the previous year. However, insurance income fell 16.2% over the first nine months of FY2024.
Monthly Premiums Zoom 94% but 9 Month Growth Still in Red
New information from the industry shows that LIC’s premium in December 2023 was Rs 26,117 crore, which is 94% more than the Rs 13,434 crore it received in December 2022.
Over 61% of all the premiums paid by Indian life insurers went to the state-owned insurance giant.
But LIC’s cumulative premium rise slowed down in 2023–24 because of the high base of the previous year. The company’s premium collection reached Rs 1.57 lakh crore in the nine months ending in December 2023, down 16% from the same time last year.
Overall, though, India’s total life insurance rates kept going up, going up 44% year-over-year in December and 28% over the previous 9 months.
Individual Premium Growth Trails After Bumper FY23
A big deal in December was that LIC’s individual Annualized Premium Equivalent (APE) grew by 2% to Rs 14,643 crore. Before November 2023, sales of new policies had been going down for 12 months in a row.
But the rate of growth is still much slower than it was in FY 2022–23, when each APE shot up 40% from a very low start. Market participants think that buyers are less likely to buy long-term life insurance this year because of high inflation and rising interest rates.
LIC is India’s biggest life insurer, with a 66% market share. Its performance has a big effect on statistics for the whole business. As a whole, individual APE only went up by 13% in December.
What Do Analysts Forecast for LIC Share?
After the recent rise, global brokerage Goldman Sachs became “neutral” on LIC stock. However, they raised their goal price by 14% to Rs 750 per share.
Even though premiums have been going down year-over-year so far in FY24, experts think that growth rates will start to rise again in the next few quarters as the base normalizes.
LIC is also continuing to grow its market share by using its unbeatable network of delivery. The insurance giant is still at the top of the government’s plan to get more people in India to have insurance, with a share of over 75% of the sum guaranteed.
Analysts believe that LIC stock will go up in value over the next few years due to its low valuation, leadership place in the industry, and large untapped potential.
Key Downside Risks
But there are still short-term problems because high inflation hurts people’s wallets and rising bond rates hurt investment income.
Stock in LIC, which went public in May 2022, is also risky because the government still owns 94% of it. The stock is still being held back by sudden private share sales by the government.
There are also persistent concerns about LIC’s ability to make money, as the total ratio is still above 100%, even though it has recently gone down. As private players step up the battle, it will be very important to be able to keep prices stable.
What Should Investors Do?
Long-term buyers would be smart to buy LIC shares on any big drop after the Q3FY24 results, even though some risks were already mentioned.
Even though things are rough right now, the insurance penetration story is still strong, and LIC has the unmatched track record to strengthen its control even more.
Smart buyers might want to put up to 5 percent of their money into LIC stock right now and buy more when the price drops by 10 to 15 percent over the next six to twelve months. Good risk-reward opportunity, but you need to be patient.