LIC share at record high; m-cap hits Rs 7.56 trn post 39% rally in CY24

LIC share price hits record high: Share price of Life Insurance Corporation (LIC) of India hit a fresh record high of Rs 1,197 per share on the BSE on Friday. This comes after LIC share price gained 3.1 per cent on the Exchange in the intraday trade.

At 12 noon, LIC share price was trading 2.7 per cent higher at Rs 1,192 per share as against a 0.8-per cent rise in the benchmark BSE Sensex. Around 4 million shares have, together, changed hands on the NSE and BSE till the time of writing of this report.

With today's gain, LIC's market capitalisation (m-cap) reached an all-time high of around Rs 7.56 trillion, making the life insurer the second largest listed public sector company.

In the overall m-cap ranking, LIC of India is now the eighth largest listed company in India. It trails Reliance Industries, Tata Consultancy Services, HDFC Bank, ICICI Bank, Bharti Airtel, Infosys, and State Bank of India.

LIC share price in 2024

Thus far in calendar year 2024, LIC share price has surged 39.2 per cent on the BSE. By comparison, the Sensex index has added about 12 per cent during the period. Thus far in July, the stock has rallied 17.3 per cent.

This comes amid LIC's growing share in the new business premium segment. According to a Business Standard report, LIC of India's market share in the NBP rose to 64.02 per cent in Q1FY25, up from 59.59 per cent in Q4FY24 and 61.42 per cent in Q1FY24, aided by a substantial increase in group premiums. READ ABOUT IT HERE

On the contrary, private insurance companies ceded their positions due to adverse effects of recent regulatory changes.

According to analysts, life insurance companies may see strong growth in the sale of non-linked policies in the near term, after insurance regulator -- Insurance Regulatory and Development Authority (Irdai) -- asked industry players to introduce norms to ensure better payouts for customers who exit their policies prematurely.

The insurance industry, Irdai said in June, has to introduce these norms by September 30, 2024. Non-linked or traditional policies are not linked to the market.

"Life insurance companies would have to pay a special surrender value (SSV) after the completion of the first policy year, provided the customer has paid one full-year premium. Currently, companies do not pay such an amount to customers surrendering their policies in the first year," said a report by Business Standard. READ MORE

Given this, life insurance companies are expected to discontinue products and change offerings by adjusting maturity benefits to the policyholders and commission payouts to distributors.

Analysts, thus, see the industry indulging in "fire-sales", led by channel push, before discontinuation of current products.

LIC Financial Performance, share price target

Meanwhile, the Board of Directors of LIC of India is scheduled to meet on August 8, 2024, to consider and approve the financial results for the April-June quarter of the current financial year (Q1FY25).

In the March quarter of FY24, LIC of India's net profit grew by 2.5 per cent year-on-year (Y-o-Y) to Rs 13,762.64 crore due to wage revision and arrears.

The annualised premium equivalent (APE), meanwhile, grew by nearly 10.7 per cent to Rs 21,180 crore from Rs 19,137 crore in the year-ago period. The value of new business premium (VNB) slipped 1.6 per cent to Rs 3,645 crore Y-o-Y.

"VNB increased by 4 per cent Y-o-Y in FY24 to Rs 9,580 crore, which is better than the listed insurance peers. With robust growth in non-par products and no one-time sales base effect in Q4FY23, we expect even stronger VNB growth in FY25," said analysts at Ashika Institutional Equities in a post-result update report.

VNB margin (net basis) increased to 16.8 per cent in FY24 from 16.2 per cent in FY23.

On its part, the management had said it intended to focus on profitability over market share gain and reiterated the strategy to increase the profitable non-par share, going forward. The company expects its APE growth to be in double-digit in FY25, aided by savings growth apart from other business segments.

"With a continued strong quarterly operating performance, we expect the company to continue to perform well in the coming period as well with double-digit growth in embedded value (EV) and a significant improvement in VNB margin to 19-20 per cent by FY26E. We expect increase in the share of profitable non-par business to ~18-20 per cent and the company's focus to increase its agency force in Tier-II and Tier-III cities to drive growth, going forward," Ashika analysts said with a 'Buy' rating and a target price of Rs 1,430.