LIC To Invest 10-15% More In Equities In FY23, Says Chairman

India’s largest insurer will invest 10-15% more in the equities market in the ongoing fiscal.

"As the premiums and profitability grows, we will continue to be bigger in the fixed income and equity," MR Kumar, chairman at Life Insurance Corporation of India, said during an interaction post the listing of the insurer. "We will continue to be major player in the markets... We are contrarian. We have been selling when the market is high and buying when the market is low and that strategy has paid off very well."

LIC targets to invest 10-15% more than it invested in FY22 and book 5-10% more profit, Kumar said.

Shares of LIC declined on listing after the nation's biggest initial public offering was subscribed 2.65 times. The stock listed at Rs 867.2 apiece on the BSE, a discount of 8.6% to its IPO price of Rs 949.

Demand for its shares in the IPO was led by retail, policyholders and employees. The government raised nearly Rs 20,500 crore by selling a 3.5% stake.

"Markets are in a very bad shape; we know that and it's going to continue to like that for some time," said Kumar. "In spite of that, the listing price is improving as we speak; and more than the discounted price given to the policyholders is a good thing," he said. "Maybe, we are not looking at Rs 1,000-1,200 [per share] but we are still looking at a range above the policyholders have put in money."

To retail investors and policyholders who have bought shares in LIC IPO, Kumar as one thing to say: "The time in the market is more important than timing the market." Many investors know that and those who are new may not know but please hold on to the shares, Kumar said in a response to weak listing.

Brokerage Macquarie in an initiation note rated the company 'neutral' with a price target of Rs 1,000. Any investor who’s taking an exposure to LIC is “indirectly taking an exposure to equity markets and its inherent volatility”, it said.

“The issue with LIC is that a large part of the EV (embedded value) as per our calculations is constituted by equity MTM (mark-to-market) gains and hence any fall in equity markets can significantly affect EV,” the brokerage said in the report.

But Kumar said Macquarie has said both things. "If they are saying MTM is an issue, what it means that if the price is Rs 1,000, the market is going to go up."

India's largest largest insurer is looking to grow at a faster rate than the industry. It will depend on the product mix. "Par policies (or participatory polices where buyers are eligible for a share in profit) are good for the policyholders and non-par for the shareholders. We also need to look at what the customers want."

"We are strong in par products and...are bringing non-par products," said Kumar. "We have started these policies and we expect terrific growth in non-par policies."

The insurer is looking to improve its value of new business margin in line with that of listed peers.

VNB margin is 9.9% now and, after taking bifurcation of its life fund into participatory and non-participatory funds into account, it is 12%.

"From 12 to 20 or 25 is a distance...but then since we have a very strong network of agents, we have very strong bancassurance partners, we have all the elements to grow," said Kumar. "I don't see any reason why we cannot grow the VNB margin much faster than others... It has taken them time because they started at zero and we are not starting at zero, we are starting at quite a big base here," he said. "From that base, to take it up it will not be difficult."

Watch the full conversation here: