The next BIG question is LIC.
LIC is a formidable competitor to private companies - with strong brand, largest network of distributors/agents and trust reposed in it due government as promoter.
LIC stopped doing Unit Linked business in ~2013 and it only focuses on non-traditional insurance products. Unit linked business has low margins compared to other traditional products.
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Despite having 28L Cr AUM and very high vintage book, the profits reported by LIC have been ~3000Cr for FY19. That is like 0.1% return on assets. As vintage of the book grows and back-book becomes far bigger than new business, unwind should overpower the new business strain and should reflect into profitability. Above PAT number is disappointing and frankly quite scary. That LIC does not have low margin ULIP business makes above PAT number very abysmal.
Why is this the case, can you please provide your perspective?
What things do we look for so that our investee companies do not suffer this outcome? (I do not believe public vs. private ownership argument in financial companies based on recent experience in Yes Bank, RBL Bank).
Can you please do insider’s take on SWOT analysis of LIC? -
On a broader context, LIC’s size represents an aspiration to existing private players i.e. what future can look like. Largest private life insurers are at ~1.5L cr AUM and if one removes ULIP AUM, that number is closer to ~1L cr. So there is an opportunity to grow 28x theoretically and due to under penetration, there is inherent growth in the industry.
With that opportunity landscape, what characteristics does private insurer need to have to gain market share?
Can LIC fight back with either pricing or on the back of large agent network? How do insider’s view LIC as competition?
Listing of LIC (if it happens) will probably make it more market aware and probably make it more focused?
If you have some thoughts on listing of LIC, can you please pen those as well?
Best Regards,
Rupesh