 "Here's why LIC's shares rallied over 4% on Nov 12; check details here")
India’s largest life insurance company, Life Insurance Corporation (LIC) shares surged to an intraday high of Rs 194.20 per share, rallying 4.29 per cent on the BSE on Tuesday. This came after the company received a double upgrade from US investment banking firm JP Morgan after reporting robust growth in quarterly earnings for the second quarter of financial year 2024-25 (Q2FY25).
According to reports, JPMorgan has upgraded LIC to "Overweight" from its previous "Underweight" rating and raised its price target to Rs 1,075 from Rs 790. The brokerage highlighted strong growth in LIC's value of new business (VNB), driven by an improved product mix, and expects this growth to continue.
JPMorgan has revised its VNB estimates for FY25 and FY26, increasing them by 9 per cent and 11 per cent, respectively. Despite challenges from higher product benefits and lower bond yields, LIC's performance continues to outperform, according to JPMorgan.
Q2FY25 results
In the September quarter, LIC reported net premium income of Rs 1.2 trillion, up 12 per cent year on year (Y-o-Y). For H1FY25, net premium income grew 14 per cent Y-o-Y to Rs 2.3 trillion. Net premiums are estimated to grow 8 per cent Y-o-Y during H2FY25.
The new business annual premium equivalent (APE) grew 26 per cent Y-o-Y in Q2FY25 to Rs 16,470 crore, led by a 31 per cent Y-o-Y growth in individual APE to Rs 11,420 crore and 15 per cent Y-o-Y growth in group APE to Rs 5,050 crore. In H1FY25, new business APE grew 24 per cent Y-o-Y to Rs 28,020 crore.
The net value of a new business (VNB) margins improved by 260 basis points Y-o-Y to 17.9 per cent, driven by a 47 per cent Y-o-Y growth in absolute VNB to Rs 2,940 crore. For H1FY25, VNB grew 38 per cent Y-o-Y to Rs 4,550 crore translating into a VNB margin of 16.2 per cent (14.6 per cent in H1FY24).
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LIC reported 4 per cent Y-o-Y decline in shareholder net profit to Rs 7,620 crore. For H1FY25, net profit grew 4 per cent Y-o-Y to Rs 18,080 crore.
The management aims for a positive growth trajectory in the par segment and expects strong growth to continue in the non-par segment.
Health insurance foray
The state-owned company is also considering taking a call on buying a stake in a standalone health insurer in the current financial year. "The ground work is going on...search for suitable health insurance company is going on...we will finalise stake within this financial year," Siddhartha Mohanty, MD and CEO, LIC said during the post result media conference.
Asked about the quantum of stake LIC will have in the health insurance company, he said it would depend on various factors, including valuation.
Once all the groundworks are done, he said, LIC would approach the board for its approval to foray into the health insurance segment. Read more
The company has a total market capitalisation of Rs 5.93 trillion. At 1:00 PM; the shares of the company pared some of their gains and were trading 1.61 per cent higher at Rs 933.35 a piece. By comparison, the BSE Sensex was down 0.59 per cent at 79,028.95 level.