LIC gains 4%, hits over 3-month high in subdued market

The government aims to appoint a private sector professional as the first chief executive of the LIC in an effort to modernise its largest insurer after a disappointing stock market debut

Shares of Life Insurance Corporation of India (LIC) hit over three-month high of Rs 695.85, gaining 4 per cent on the BSE in Monday's intra-day trade, in an otherwise subdued market. The stock of the state-owned insurer was trading at its highest level since August 18, 2022. At 02:18 PM, LIC shares were up 3 per cent at Rs 691.35, as compared to 0.34 per cent decline in the S&P BSE Sensex.

The stock was trading higher for the fourth straight day, surging 7 per cent during the period, on report that the government aims to appoint a private sector professional as the first chief executive of LIC. This, the report said, was in an effort to modernise its largest insurer after a disappointing stock market debut.

"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. CLICK HERE FOR FULL REPORT

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, the stock of LIC has outperformed the market by surging 11 per cent, as compared to 0.33 per cent rise in the S&P BSE Sensex. With the past one month's rise, LIC has bounced back 18 per cent from its record low of Rs 588, touched on October 21. Yet, LIC is trading 27 per cent below its issue price of Rs 949 per share. The company made stock market debut on May 17, 2022.

The Indian life insurance industry reported strong growth in new business for November 2022, with retail APE (annual premium equivalent) for the industry growing at 21.8 per cent 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.