Shares of Life Insurance Corporation of India rose as much as 9 per cent to ₹682.70 on the BSE on Monday, after the insurance major reported a multifold surge in quarterly profit on Friday.
However, the stock failed to hold on to part of the early gains and closed at ₹664.80, up 5.85 per cent, over the previous day’s close of ₹628.05.
According to analysts, this is the first major gain for the stock since its listing on May 17.
Other income boosts profit
LIC on Friday (post market hours) reported a multi-fold jump in net income at ₹15,952 crore for the second quarter ended September 2022 as against ₹1,434 crore a year-ago. In Q1 FY23, the State-owned life insurer had posted a profit after tax of ₹683 crore.
The net profit jumped mainly on account of a surge in its other income, which stood at ₹6,795 crore, much higher than ₹46 crore in the year-ago period. This was because other income for Q2 included interest amounting to ₹6,626 crore received during the quarter towards refund of income tax for the earlier financial years, the insurer said in the notes to accounts.
According to analysts, LIC is a good long-term bet, as it has started to reduce its fresh profit-linked insurance plans, majority of profits will reflect in shareholders’ P&L account rather than policyholders’. This will boost the bottomline going forward, they added.
ICICI Securities initiated the stock with a Buy rating post result with a target price of ₹621. “Increasing non-participating mix (currently about 5 per cent in APE mix as of Q1-FY23) and change in surplus distribution policy are significant growth drivers of value of new business (VNB) and in turn embedded value (EV),” I-Sec said, adding that “This, against the strong growth outlook of the Indian life insurance (especially through lens of sum assured), makes LIC a strong investment proposition considering that it is currently trading at 0.73x FY22 price to EV.”
Concerns on equity sensitivity to EV is overdone and the relative ease of increasing VNB margin through change in mix is under-appreciated, it further said.
LIC reported healthy growth in NBP by 34.9 per cent y-o-y and by 14.2 per cent m-o-m in September 2022, said Axis Securities. This healthy growth was aided by growth in the group single premium (47.5 per cent y-o-y growth) and group non-single premium (197 per cent y-o-y growth) segments.
APE stood at ₹5,246 crore, registering a growth of 22.5/8.8 per cent y-o-y/m-o-m.
Owing to overall strong performance in NBP/APE growth momentum, LIC gained market share in Sep ’22 by 898/427bps y-o-y in terms of NBP/APE.