scorecardresearchLIC shares jump over 3.5% after Q1FY24 earnings; still down over 30% from

LIC shares jump over 3.5% after Q1FY24 earnings; still down over 30% from issue price

Updated: 11 Aug 2023, 12:37 PM IST
TL;DR.

LIC's assets under management (AUM) increased to 46.11 lakh crore in Q1FY24 as compared to 41.02 lakh crore in the same period last year, registering an increase of 12.41% year on year.

On May 17, 2022, LIC made a rough start on the exchanges as it was listed 8.62% below the issue price of  <span class='webrupee'>₹</span>949. It closed at  <span class='webrupee'>₹</span>875.25 on the same day, which is 7.75% less than the IPO price.

On May 17, 2022, LIC made a rough start on the exchanges as it was listed 8.62% below the issue price of 949. It closed at 875.25 on the same day, which is 7.75% less than the IPO price.

Shares of Life Insurance Corporation (LIC), India's largest life insurer, showed strength during Friday's trading session, bucking the trend of a weaker broader market. The insurance behemoth on Thursday posted a 14-fold surge in its consolidated net profit to 9,544 crore. This strong surge in net profit was due to the transfer of 7,400 crore from non-Par to shareholders’ accounts (related to accretion on available solvency margin), according to analysts.

In terms of market share measured by First Year Premium Income (FYPI) (as per IRDAI), LIC has maintained its leadership in the Indian life insurance business with a market share of 61.42% for the June-ending quarter. Nevertheless, this marks a decline from the 65.42% market share recorded in the same quarter of the previous fiscal year.

The total premium income came in at 98,363 crore in Q1FY24, which comprises of individual new business premium income of 10,462 crore, individual renewal premium income of 52,311 crore, and total group business premium income of 35,590 crore.

The total individual business premium for the June ending quarter increased to 62,773 crore from 60,007 crore for the comparable period of the previous year, registering a growth of 4.61%, the company said in a regulatory filing. 

In the individual segment, a total of 32,16,301 policies were sold in Q1FY24, compared to 36,81,764 policies sold during the same period of last year. 

The assets under management (AUM) increased to 46.11 lakh crore in Q1 FY24 as against 41.02 lakh crore in the corresponding quarter of last year, registering an increase of 12.41% year on year.

The company's gross value of new business (VNB), which measures expected profit from new premiums and is a key gauge for growth, stood at 1,302 crore, a drop of 6.8% YoY, while VNB margins came in at 13.7% as compared to 13.6% in Q1 FY23.

The company's solvency ratio, the measure of an insurer's ability to meet its long-term debt obligations, improved to 1.89 (x) in Q1 FY24, up from 1.88 (x) in Q1 FY23. On the asset quality front, the gross non-performing assets ratio eased to 2.48% from 5.84% in the same period a year ago, according to the company's regulatory filing.

"LIC has the levers in place to maintain its industry-leading position and ramp up growth in the highly profitable product segments (mainly Protection, Non-PAR, and Savings Annuity). However, changing gears for such a vast organization require a superior and well thought out execution," said domestic brokerage firm Motilal Oswal.

The brokerage expects LIC to deliver a 15% CAGR in APE over FY23–25, thus enabling a 27% VNB CAGR. However, it expects operating RoEV to remain modest at 10.9%, given its lower margin profile than private peers and a large EV base.

In response to the company's Q1FY24 performance, the shares began Friday's trading session with a gap-up at 666 apiece and strengthened further to 679, up by 3.80%.

On May 17, 2022, LIC made a rough start on the exchanges as it was listed 8.62% below the issue price of 949. It closed at 875.25 on the same day, which is 7.75% less than the IPO price.

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Stock price chart of Life Insurance Corporation.

In less than a month, the stock dropped to 654 levels and has never traded above the IPO price of 949 to date. Currently, the stock is trading 30.4% below its issue price.

Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of MintGenie.

 

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First Published: 11 Aug 2023, 12:37 PM IST