Shares of Life Insurance Corporation (LIC) jumped 10% today to record best single-day gain since listing. Investors appear to be buoyed by the company’s plans to launch 3-4 new products over the coming months to push growth in its new business premium (NBP).
Trading at 20 times its 20-day average trading volume, LIC shares hit two-month high at Rs 680 and surpassed above its 50 and 100-DMA levels.
A similar buying interest was also seen in two other PSU insurance stocks. While General Insurance Corporation of India shares jumped 18%, the counter of The New India Assurance Company was locked in 20% upper circuit limit.
LIC Chairman Siddhartha Mohanty had told PTI in an interview that the state-run insurer was projecting a double-digit growth in the current financial year over the last year. LIC intends to achieve this goal by launching some new attractive products, Mohanty revealed.
LIC is going to launch one product in the first week of December, he said, hoping that it will attract a lot of traction in the market. In addition, he said, loan facility and premature withdrawal would also be a feature of the new product.
Guaranteed return products are in the interest of policyholders and shareholders, he said, adding that many shareholders are also policyholders. “So, it is a dual benefit for policyholders,” he had said.
The stock has been a market laggard and returned just approximately 3% returns in the last 12 months as against 8% returns given by the Nifty. In 2023, its performance has been even worse with over 9% price erosion over the previous year.
Since its listing on May 17, 2022, the stock has been on a downhill and fell to a low of Rs 530.05 on March 23, 2023. Though it has made an upward move, it is still trading at a 44% discount from its issue price of Rs 949.
LIC’s Q2 earnings have also failed to inspire any confidence among the investors. India’s largest life insurer reported a 50% decline in net profit to Rs 7,925 crore for the quarter ending September 30, 2023.
During the same period last year, LIC had reported a net profit of Rs 15,952 crore. However, LIC clarified that these profits are not directly comparable due to accounting changes.
LIC changed its accounting policy in September 2022 regarding the transfer of the amount (net of tax) related to the accretion on the available solvency margin from the non-participating policyholder’s account to the shareholder’s account.
During FY23, Rs 27,241 crore (net of tax) was transferred, including Rs 14,272 crore (net of tax) in the quarter ended September 2022.
In the first-half of FY23, the actual profit increased by 44.45% to Rs 17,469 crore from Rs 12,093 crores. This half-year profit incorporates an amount of Rs 13,768 crore (net of tax), related to the accretions on the available solvency margin, transferred from the non-par fund to the shareholders’ account. The Solvency Ratio, as of September 30, 2023, improved to 1.90 compared to 1.88.
The value of new business (VNB) for the six-month period ending September 30, 2023 fell 10% to Rs 3,304 crore, compared to Rs 3,677 crore in the corresponding period last year, while the net VNB margin for this period remained constant at 14.6%.
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