LIC extends rally, surges 23% in two weeks; hits highest level in CY 2023

The stock rallied 5% to Rs 750.55 on the BSE in the intraday trade, quoting close to its 52-week high level of Rs 754.40 touched on December 20, 2022

Shares of Life Insurance Corporation of India (LIC) rallied 5 per cent to Rs 750.55 on the BSE in Wednesday's intraday trade on the back of heavy volumes on an optimistic outlook. A combined 5.79 million equity shares have changed hands on the NSE and BSE till 10:23 AM.

In the past two weeks, the stock of the state-owned insurer has surged 23 per cent. 

The stock was quoting at its highest level in the current calendar year 2023, and close to its 52-week high level of Rs 754.40 touched on December 20, 2022. It has soared 41 per cent from its 52-week low of Rs 530.20, hit on March 29.

However, the stock is still trading 21 per cent below its issue price of Rs 949 per share. It had hit a record of Rs 918.95 on May 17, 2022.

Founded and majority owned by the Government of India, LIC is the country's leading statutory insurance and investment corporation with assets under management (AUM) of over Rs 47 trillion and investments in more than 270 listed companies.

In the July to September quarter (Q2FY24), LIC's gross premium income fell 18.7 per cent year-on-year (Y-o-Y) to Rs 107,947 crore, mainly due to lower single premium. Further. in H1FY24, value of new business (VNB) fell 10.1 per cent Y-o-Y, but the VNB margin remained stable at 14.6 per cent.

LIC has levers in place to maintain its industry-leading position and ramp up growth in the highly profitable product segments (mainly Protection, Non-PAR, and Savings Annuity). However, changing gears for such a vast organisation requires a superior and well-thought out execution plan.

Analysts at Motilal Oswal Financial Services expect LIC to deliver a 3 per cent CAGR (decline in FY24 and a sharp recovery in FY25) in APE over FY23-25, thus enabling a 9 per cent VNB CAGR. However, the brokerage firm expects operating RoEV to remain modest at 10.5 per cent, given its lower margin profile than private peers and a large EV base.

Analysts at Geojit Financial Services, on the other hand. believe LIC will continue to diversify its product mix with a focus on enhancing the non par share of products.

"Life insurance density and penetration age continues to be lower in India vis-à-vis other developing economies. With gradual rise in domestic household savings, the share of life insurance in incremental household financial saving is expected to increase steadily. LIC, as the market leader and a trusted name among the populace, is best positioned to benefit in the long-term," the brokerage firm had said in its Q2 result update.