Government asks LIC to change its product strategy for better ROIs

New Delhi: The government is nudging LIC to change its product strategy to maximise profitability in a bid to help the country's largest insurer realise its full growth potential and yield better returns for investors, an official said.

LIC shares on stock exchanges

Life Insurance Corporation (LIC) has been trading below the issue price of Rs 949 a share ever since it got listed on stock exchanges on May 17. It listed at Rs 872 apiece on NSE.

The scrip settled at Rs 595.50 which was down by 0.72 percent in the previous close.

Foreign brokerages, however, remain bullish on LIC setting a higher target price over the next year as they feel that the insurer has good medium-term market potential, negligible high-risk assets and robust core operating Return on Embedded Value (ROEV).

Citi in a research report dated October 14 set a target price of Rs 1,000 for LIC scrip, saying LIC is 'positioned better than mature global players.'

Govt wants LIC to modernise product offerings

The Finance Ministry in its performance review has been sensitising the LIC management about the steps that could be taken to maximise investors' wealth and focus on non-participating products or term plans to improve profitability.

"With the listing of LIC, the process of modernisation of the over 65-year-old institution has started. We are working with the management so that they modernise their product offerings and lower dividend payout to policyholders," the official told PTI.

In non-participating insurance products, insurers do not need to share their profit in the form of dividends with policyholders, whereas in the case of participating or par products, the insurer shares dividends with policyholders.

State-run insurer to rework its product-based strategies

"The younger generation is more inclined to term plans. LIC will have to rework their strategy and decide what should be done so that their asset under management is utilised to its full potential," the official added.

LIC's standalone first-quarter net profit surged to Rs 682.88 crore from Rs 2.94 crore in the year-ago period.

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

Its initial public offering (IPO) came in a price band of Rs 902-949 a share. The issue fetched about Rs 21,000 crore to the exchequer.

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