{"id":176123,"date":"2023-05-29T06:39:28","date_gmt":"2023-05-29T06:39:28","guid":{"rendered":"https:\/\/precoinnews.com\/?p=176123"},"modified":"2023-05-29T06:39:28","modified_gmt":"2023-05-29T06:39:28","slug":"lics-total-wealth-erosion-over-rs-2-trillion","status":"publish","type":"post","link":"https:\/\/precoinnews.com\/business\/lics-total-wealth-erosion-over-rs-2-trillion\/","title":{"rendered":"LIC’s Total Wealth Erosion: Over Rs 2 Trillion"},"content":{"rendered":"
The decline in LIC’s share price makes it the biggest wealth destroyer among IPOs which hit the market after COVID-19 took hold globally in 2020.<\/strong><\/p>\n Since its listing, peers belonging predominantly to the private sector have largely outpaced the Life Insurance Corporation of India, which was originally formed by merging 245 private players in 1956.<\/p>\n The stock dropped 8 per cent on the listing day, and has declined by more than a third since.<\/p>\n It is down over 40 per cent in total from the price offered to shareholders who bought the stock in its initial public offering (IPO).<\/p>\n The S&P BSE Sensex has risen nearly 14 per cent since then (chart 1).<\/p>\n <\/p>\n The decline in LIC’s share price makes it the biggest wealth destroyer among IPOs which hit the market after COVID-19 took hold globally in 2020.<\/p>\n The total wealth erosion of over Rs 2 trillion made it a bigger wealth destroyer than all the others in the top five put together (chart 2).<\/p>\n <\/p>\n There are some headwinds on the business side. The growth in LIC’s annualised premium equivalent (APE), a measure of sales in the insurance industry, has slowed.<\/p>\n The insurer has also seen some loss of market share, especially when it comes to the individual business segment (charts 3, 4).<\/p>\n <\/p>\n <\/p>\n <\/p>\n Private players have diversified ways of sourcing business, while LIC is more dependent on its agents.<\/p>\n This can affect business in the event of shutdowns like the pandemic or if there are regulatory issues in getting new agents, according to analysts (chart 5).<\/p>\n <\/p>\n Other troubles include taxation of high-value insurance policies, and the fact that a large part of LIC’s surplus goes to policy holders instead of shareholders, though it has moved to increase the shareholder proportion to 10 per cent by 2024-25, from 5 per cent earlier.<\/p>\n A recent report of US-based short-seller Hindenburg Research alleging irregularities in the Adani group affected sentiment.<\/p>\n The insurance behemoth has clarified that Adani accounts for less than 1 per cent of its investments.<\/p>\n It has also increased its stake marginally in at least four out of seven Adani group companies after the Hindenburg report.<\/p>\n A large portion of its book can be affected by capital market fluctuations, according to analysts.<\/p>\n The equity market portfolio accounts for over 20 per cent of assets.<\/p>\n Another headwind is rise in interest rates.<\/p>\n Over 60 per cent of assets are invested in government securities (chart 6).<\/p>\n <\/p>\n