After lying low in recent years, on Friday GIC Re’s share price has risen by 15 per cent to Rs 304.45 while NIA’s scrip has gone up by 20 per cent to Rs 209. LIC’s share gained 10 per cent and closed at a monthly high of Rs 678 on Friday
Though , Sensex fell 47 points on Friday, all three listed PSU re/insurers- Life Insurance Corporation. GIC Re and New India Assurance(NIA)-have seen sudden surge in their share prices by 10-20 per cent during the day.
In a highly volatile trade, the 30-share BSE Sensex declined 47.77 points or 0.07 per cent to settle at 65,970.04. The Nifty slipped 7.30 points or 0.04 per cent to 19,794.70.
After underperforming in recent years, GIC Re’s shares have risen above 16 per cent to Rs 304.45 while NIA’s scrip has gone up by 20 per cent to Rs 209 and hit the upper circuit.
Shares of LIC, the nation’s biggest life insurer gained 10 per cent and closed at a monthly high of Rs 678 on Friday.
However, share prices of all the listed private sector insurers like ICICI Lombard General Insurance, HDFC Life and SBI Life have declined on Friday.
“Insurance stocks including NIA, LIC, and GIC Re have done well over the last few days due to low float and part rotation out of lending stocks into these stocks, which is available at attractive valuations compared to their private peers,” said Deepak Jasani, head-retail research, HDFC Securities to a business daily.
“Whether, the price rise is a one time spurt or these stocks are getting rerated, is yet to be clear. Some brokers have taken a positive view about the LIC share,” said market analysts.
Brokerage firms such as Motilal Oswal, and BOB Capital, in their report released in November, feel that LIC is currently selling at a significant discount to its issue price.
“In terms of valuation, LIC is one of the cheapest insurance companies (trading close to 1x Price to Embedded Value [P/EV]) as compared to that of 2.0-4.0x P/EV for private life insurance peers.” Said Sunny Agrawal, head of fundamental research desk, SBI Securities.
Cumulative traded volume on BSE and NSE has increased from 7,62,275 to 8,50,732 over the past 3 days. Cumulative turnover during the same period increased from Rs 46.68 crores to Rs 52.23 crores.
The brokerages are under the impression that the company is making the right efforts towards increasing VNB(value of new business) by pushing its product mix towards non-participating and expansion in non-agency distribution channels. While BOB has given a target price of Rs. 767, Motilal Oswal target price is Rs. 850.
Given LIC’s entrenched brand equity, clear market leadership and superior agency force, they believe the company has levers in place to maintain its industry-leading position and ramp up growth in the highly profitable product segments.
LIC has lined up 3-4 product launches in the coming months with a view to achieve double-digit growth in new business premium in the current financial year,LIC Chairman Siddhartha Mohanty had said on Thursday.
“We are projecting double-digit growth over the last year. We are going to achieve that because a recent trend is showing uptick in individual retail business. In order to further reinforce our commitment, we are going to launch some new attractive products,”
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.
He exuded confidence that the new product will create disruption in the market as everybody wants to know how much he or she is paying and the returns one would get after 20-25 years.
Mohanty said 2-3 more policies will be launched during the course of the year to achieve double-digit growth in new business premium.
Meanwhile, after almost three years, AM Best has revised the outlook of state owned GIC Re to positive from stable for the Financial Strength Rating (FSR) and to positive from negative for the Long-Term Issuer Credit Rating (Long-Term ICR) and affirmed the FSR of B++ (Good) and the Long-Term ICR “bbb+” (Good).
With positive Credit Rating outlooks, Ramaswamy Narayanan, chairman and managing director, GIC Re, hoped that the 16th largest global reinsurer will be now in a position to get quality business from the overseas markets.
GIC Re earns over 30 per cent of its global premium from overseas markets.
Consolidated pre-tax profits (prior to the contribution to catastrophe reserves) showed an improvement in FY 2023 to Rs 89 billion (FY 2022: Rs39 billion), having benefitted from the company’s better underwriting and investment results during the year.
NIA, the country’s largest non-life multinational is now more focussing on bottomline and exiting the loss making business impacting its topline growth.
Neerja Kapur, CMD, NIA, said “The company continues to focus on improving the business mix by shedding businesses where premiums are inadequate and may impact its bottom line. The company maintained its market leadership in India with a market share of 16.2 per cent.’’