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Insurance 12-Dec-22

LIC gained 4%, hitting a 3-month high in subdued market

Shares of Life Insurance Corporation of India (LIC) rose 4 percent to a three-month high of Rs 695.85 on the BSE in intra-day trade on Monday, in an otherwise subdued market.

The state-owned insurer's stock has been trading at its highest since August 18, 2022. At 02:18 pm, LIC shares were up 3 percent at Rs 691.35, compared with a 0.34 percent decline in the S&P BSE Sensex.

Shares rose 7 percent for the fourth consecutive day on reports that the government is targeting a private sector professional as its first chief executive. It is seeking to modernize its largest insurer after a disappointing stock market debut, the report said.

"The government is planning to broaden the eligibility criteria for appointment of LIC CEO so that private sector candidates can apply," news agency Reuters reported.

Currently, the insurer is headed by a chairman but that post will be scrapped when the term of the present incumbent ends in March 2023. Changes to the law that governs the LIC were made last year to enable this. The move will lead to more choices and send good signals to shareholders, the report added.

In the past one month, LIC's stock has outperformed the market, rising 11 percent compared to a 0.33 percent rise in the S&P BSE Sensex. With the last one-month rally, LIC has recovered 18 percent from its record low of Rs 588 on October 21. However, LIC is trading 27 percent below its issue price of Rs 949. The company made its IPO on May 17, 2022.

The Indian life insurance industry recorded strong growth in new business in November 2022, with retail APE (Annual Premium Equivalents) for the industry growing 21.8 percent year-on-year (YoY), pushing up YTDFY23 retail annual premium equivalent growth to 17 per cent YoY from 16.2 per cent till October 2022.

With Diwali festive season being in October this year (vs. November in 2021), November numbers were expected to be better, but this strong performance came as a positive surprise, analysts at Emkay Global Financial Services said in insurance sector update.

"Overall, developments of November 2022 reaffirm our view of ~12 per cent YoY growth in retail APE for the sector with the private sector delivering mid-teen growth and LIC growing in high single digits. A slightly difficult external macroeconomic environment means that the remaining months of FY23 remain crucial for growth," the brokerage firm said.

With a host of reforms by the regulator and the government on the anvil, growth volatility in the sector and the individual company-specific, non-operating issues would mean that stocks will remain volatile in the near term. Notwithstanding near-term noises, the private sector's market leaders, powered by their formidable brand and distribution combination, are in a position to deliver robust growth in the medium term coupled with improving business margins. The recent underperformance of stocks in the life insurance sector and valuations turning more attractive provide a good opportunity to accumulate them, analysts said.

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