LIC stock is up 16% in July on the BSE; what's fueling the rise? Check here

Analysts remain optimistic about the medium-term outlook for the life insurance sector, and expect Retail APE to grow ~12-13 per cent during FY25E.

LIC share price today, July 22: Shares of the state-owned Life Insurance Corporation of India (LIC) jumped 3 per cent to Rs 1,143.80 on the BSE in Monday’s intra-day trade backed by heavy volumes on healthy business outlook. The stock was seen inching towards its record high level of Rs 1,175 touched on February 9, 2024.

Thus far in the month of July, the stock price of LIC has appreciated by 16 per cent after the insurer significantly regained its market share in new business premium (NBP), driven by a substantial increase in group premiums.

At 10:41 am; LIC was trading 2 per cent higher at Rs 1,130, as compared to 0.10 per cent rise in the BSE Sensex. The counter saw huge trading volumes with a combined 3.3 million shares changing hands on the NSE and BSE.

LIC market share

Data released by the Insurance Regulatory and Development Authority of India (Irdai) revealed that LIC’s market share in Q1FY25 stood at 64.02 per cent, up from 59.59 per cent in Q4FY24 and 61.42 per cent in Q1FY24. LIC's market share had peaked to 68.25 per cent in Q3FY23, which gradually declined over subsequent quarters, with private sector insurers gaining significant market share, majorly driven by SBI Life Insurance and HDFC Life.

For Q1FY25, the insurance industry has recorded a solid 19.7 per cent retail annual premium equivalent (APE) growth, with Private players growing 23.8 epr cent and LIC 12.1 per cent YoY. On total APE basis, the private sector posted 19.7 per cent YoY growth, whereas LIC saw 20.8 per cent YoY growth in Jun-24, thus culminating in 20.2 per cent YoY growth for the industry. LIC’s impressive APE growth was driven by strong 29.7 per cent YoY growth in the Group APE, analysts at Emkay Global Financial Services said in its sector report.

The brokerage firm remains optimistic about the medium-term outlook for the life insurance sector, and expects Retail APE to grow ~12-13 per cent during FY25E with the private sector reporting ~14-15 per cent growth and LIC growing in the 6-8 per cent range.

Outlook for insurance stocks

In recent times, regulatory uncertainties have led to substantial underperformance of life insurance stocks, which have hence entered an attractive valuation zone, analysts said.

"Emerging clarity on the sector outlook and the franchise strength of listed players, combined with attractive valuations, provide a favorable risk-reward for life insurance stocks, thus urging a positive stance on the overall sector. The brokerage firm has an ‘Add’ rating on LIC with a target price of Rs 1,200 per share," analysts at Emkay Global Financial Services said in their report.

Meanwhile, in Q1FY25, the brokerage firm expects LIC to report a 14.5 per cent YoY growth in APE on the back of strong growth in April 2024.

With the launch of several non-par products during FY24, the share of non-par products is expected to increase, with value of new business (VNB) margin inching up, to 14.7 per cent during Q1FY25E, from 13.7 per cent during Q1FY24. LIC’s profit after tax is expected to rise 7 per cent to Rs 10,200 crore, whereas the AUM is expected to grow 3.1 per cent QoQ to Rs 52.81 trillion during Q1FY25E.