LIC | Analysing Meltdown Series | Fundamental Analysis | CA Rachana Ranade
Published: 2022-08-06
Status:
Available
|
Analyzed
Published: 2022-08-06
Status:
Available
|
Analyzed
Predictions from this Video
Incorrect: 0
Prediction
Topic
Status
The next phase of growth in the life insurance industry is expected to be driven by protection products, non-power saving products, and annuity products.
"the company says that the next phase of growth in this life insurance industry will be driven by protection products will be driven by non-power saving products and as per annuity products."
Pending
SBI Life's annuity business market share is projected to continue declining, dropping from 84.7% in FY20 to 68.7% by the nine-month period of FY22.
"SBI's annuity market share it was 84.7%, in FY 20 but it dropped to 76.9% in 21 and nine month ended data for 22 it has further dropped to 68.7% so annuity business market share continuously that is going down"
Pending
LIC's revenue generated per employee is significantly lower than SBI Life's, with LIC at 2,54,327 and SBI Life at 13,86,494.
"unfortunately if you see here it's the lowest for LIC at 2,54,327 revenue generated per employee and if I were to compare that with SBI Life, SBI Life's revenue per employee is 13,86494."
Pending
SBI Life's persistency ratios are higher than LIC's, with 87.9% versus 79% at the 13th month and 61.6% versus 59% at the 61st month.
"LIC's persistency ratio in the 13th month that is at the end of first year is 79% but SBI Life it is 87.9% so here also SBI Life's persistence ratio is better as compared to LIC, if I were to talk about the fifth year persistency ratio LIC has at 59% and SBI Life is at 61.6% and again SBI Life is outperforming LIC."
Pending
LIC's product portfolio is heavily weighted towards non-linked products, with 99.2% being non-linked and only 0.8% being linked, indicating a greater exposure to debt markets.
"non-linked product portfolio for LIC is almost 99.2% which is highest as compared to its peers and link is obviously only 0.8% as compared to its peers."
Pending
With 62.8% of LIC's policies being participating, a majority of the company's profits are distributed to policyholders as bonuses rather than benefiting shareholders.
"participating policies means those who participate in the profits of the company so basically if LIC makes more profit the policyholders will get a chunk of their profit in terms of bonus. ... 62.8% with participating at only 37.2 with non-participating policies so I hope you are understanding this that more profits LIC generates majority of that is going to work to the policy holders and not to the shareholders of the company."
Pending
As of the nine-month period ended FY22, LIC has invested the largest portion of its funds (87.76%) in sovereign bonds, with an additional 8.13% in AAA-rated bonds.
"as per nine month ended FY 22 data in the sovereign category they have invested highest that is 87.76% in AAA rated it is 8.13% and then lower allocations to other categories"
Pending
LIC's Gross Non-Performing Assets (GNPA) for policyholder funds stand at 7.78%, which is considerably higher than its peers.
"GNPA for policyholder funds is at 7.78% and if you want to compare that with any of its peers it is way too higher."
Pending
In FY21, LIC's yields on debt instruments were the lowest among its peers at approximately 7.42%, a trend also observed in FY19 and FY20.
"if you see for financial year 21 LIC yields were around 7.42% in all flat categories and if you compare this with SBI Life or HDFC Life, LIC's yields are at the lowest and a very similar point you can see also for financial year 19 as well as financial year 2020."
Pending
LIC has been losing market share over the past five to six years.
"they are losing ground on market share over the last five to six years"
Pending
Due to the significant investment in low-yield sovereign bonds and the structure of participating policies, shareholders of LIC are unlikely to see substantial returns from the company's investments.
"majority of their money is parked in debt instruments and more than 80% is parked only in sovereign bonds so how much returns are they going to generate from investments in sovereign worlds so anyways even if they earn good yield majority of the policies are participating policies so whatever profit is made by them majority is going to be eaten up by the policy holders and very few will come into the hands of the shareholders"
Pending
LIC's low market cap to EV ratio of 0.82 suggests a comparatively cheap valuation, but this is likely due to underlying issues that prevent it from commanding a higher valuation than its peers.
"market cap to EV ratio it is the lowest for LIC. it is at 0.82 and that is why you might see shareholders patting themselves that yes I have invested in a company whose valuation is at least comparatively cheap as compared to their peers but if you have watched this video carefully you might have completely gotten this conviction that yes we know as to why this stock cannot command a valuation higher as compared to its peers."
Pending
The bond market, which a significant portion of LIC's portfolio is invested in, has seen an 11% correction from its all-time high in FY20 due to rising inflation and yields, negatively impacting LIC's investments.
"the bonds hit an all-time high in financial year 2020 but the 10-year bond saw a correction of almost 11% from its all-time high now why has this happened? I am sure you might be tracking the macroeconomic factors where inflation is soaring at a very high rate if inflation is high yields are going to be high and if yields are high the bond prices are going to correct and this exact hit has been taken by LIC's product portfolio."
Pending