Saturday, 28 May 2022


India's bigger Insurance company LIC listed in the stock markets recently. Sadly, it disappointed the investors with a below-par listing with a 10% loss to the issue price.

What should existing holders of LIC shares do?
What should you do if you are interested in buying LIC shares?

So, firstly, NO NEED TO PANIC.

We have to understand that when LIC was listed, stock markets were going through a bad phase and hence the discount listing.


1. Compared to other Listed Insurance companies like HDFC LIFE, SBI LIFE, ICICI LIFE, the LIC is definitely cheaper and if you are an investor who is ready to HOLD FOR the LONG TERM and don't mind FD plus returns, you can go ahead and purchase the shares of LIC (If existing can continue to hold them)

2. LIC's sheer size and huge brand value, and a large network of agents will continue to keep it on a pedestal in the foreseeable future. Insurance is a business of scale and hence the bigger the company, the more profitable it becomes LIC is BIGGEST in India for so many years and will continue to be the BIGGEST for many years to come.

3. The changes in Surplus Distribution Norms will lead to LIC seeing an increase in Profits.

4. Awareness about Insurance is increasing and this will increase the market size for Insurance companies and LIC with its size could be a big beneficiary.


1. The persistency ratio is the RENEWALs that policyholders do. That is...if you take a policy and continue to renew it every year, then the persistency ratio increases.
Higher Persistency Ratio leads to Higher Profits for Insurance companies.
Sadly, LIC's persistency ratio is at a lower end and hence its profit margins are not big compared to Private Insurance companies.

2. LIC is big. And in a sense too big for its own comfort.
The Lean, Hungry Private Insurance companies with their aggressive marketing and focussed reach have been capturing market share quicker.

3. 50% of new business for Insurance comes from Banks and sadly, LIC gets only 3% from Banks with 97% contribution from agents.
Thus LIC is losing market share due to too much dependency on agents.

4. LIC, at the end of the day, is owned by Govt.

We all know what Govts can do when it wants to win Elections.

For example, LIC had put its money in IDBI BANK for a bailout, in spite of this move being against the interest of small shareholders

So, LIC will continue to be squeezed by Govts

5. Many point to the huge real estate that LIC has.

But MTNL, BSNL, and Air India too have huge real estate but did this real estate help in generating returns to Share Holders? The answer is a clear NO!


Many point to the fact that LIC is a big shareholder in many blue chips (ITC, Asian Paints, TCS, Infosys, etc)
LIC has huge equity holdings.

But this equity holding is from the money of policyholders and thus this profit, as and when generated, will go to policyholders and not to you as a shareholder.

(Similar to AMC... for example, if NIPPON AMC has huge equity holdings, the money(Holdings) belong to mutual fund investors and not shareholders)


As a Dividend play, LIC can be held. It gives a good dividend and hence if held as an FD Plus then, holding shares of LIC makes sense.

But, if you are looking for Wealth Creation, I would rather look at the much faster growing private insurance companies like HDFC LIFE, and ICICI LIFE than LIC

LIC is more for an investor who doesn't want volatility and is happy with FD plus returns.

Looking for Wealth Creation: Better options are definitely available.



Long term, I would rather look at other companies or go for a Diversified portfolio in form of a Flexi-cap Mutual fund.



Disclaimer: Purely my personal views.

You are requested to talk with your financial guide before considering an investment. This is shared only for information purposes



Srikanth Matrubai

All the best,
Srikanth Matrubai
Srikanth Matrubai, Author of the Amazon Best Seller DON'T RETIRE RICH
Srikanth Matrubai an AMFI registered mutual fund distributor. We suggest investment products keeping in mind the suitability profile of our clients.

You are strongly encouraged to consult your financial planner before making any decision regarding this investment. The views expressed here are the author's personal views and should not be interpreted as a recommendation to invest/avoid.

Srikanth Matrubai Author of the Amazon Best Seller DON'T RETIRE RICH

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