- RBSA Advisors value LIC somewhere between this range.
- Valuation done is on the basis of market capitalization as a percentage of Assets Under Management (AUM).
What is the full form of LIC? It’s Life Insurance Corporation of India! But after the valuation of LIC reaching between this range, it’s also one of the Largest Insurance corporations in India!
After the announcement of LIC going public, leading independent valuation firm RBSA Advisors valued the going public firm, and this is the figure they have come up with!
Assets Under Management of LIC stood at ₹33.20 lakh crores in December last year. If we compare other insurance firms and their AUM then we have SBI Life and HDFC Life stood at ₹1.64 lakh crore and ₹1.36 lakh crores.
But market capitalization as a percentage of AUM was 59% and 93% for SBI Life and HDFC Life respectively. For LIC, RBSA believes that the firm is comfortably lying in the range of 30-35% of AUM.
“LIC has a relative lower earning power because of relatively higher distribution of surplus to shareholders, lower investment yield and possibly sub-optimal underwriting practices.” – RBSA said it’s in the valuation of the LIC report.
LIC shares its total surplus between policyholders and shareholders in the ratio of 95:5 and in the case of private players, 100% of surplus generated from non-participating bonuses and 10% surplus generated from participating businesses are normally attributed to shareholders.
Profits from participating are distributed between policyholders and shareholders. While in a non-participating plan, benefits are defined upfront and this doesn’t come with profit sharing.
But it doesn’t mean that LIC doesn’t have anything good in it. How can the valuation of LIC be such huge if its portfolio is not attractive and all dark and shady?
LIC has a high market share along with the highest claim settlement ratio and sovereign guarantee by the Government of India.
Summing Up –
India’s very own LIC is reliable, carries a legacy of trust. Which is why the valuation of LIC falls in the lakh crores range!
After the insurance firm going public, the valuation of LIC saw a sudden boost. But looking at the present times one thing is for sure, we are in a constantly changing environment. Only fit human and companies will be able to reap the best of the times.
For now, with this valuation of LIC, we wish the authority all the best for its future endeavors.