Life Insurance Corporation (LIC) shares experienced a significant surge of almost 8% on Wednesday, marking their largest single-day gain since December 2023. This substantial increase was primarily driven by the state-run insurer’s strong guidance, which sparked fresh investor interest and renewed confidence in the company.
Analysts attribute the surge to improved Value of New Business (VNB) margins and the management’s optimistic growth outlook. VNB captures the present value of profits expected from new insurance policies written. Despite LIC’s past underperformance compared to its peers, attractive valuations and recent regulatory adjustments suggest potential near-term momentum for the company.
Saurabh Patwa, head of research at Quest Investment Advisors, noted that the improvement in VNB margins was a surprise for the market, and the management’s confidence in growth led to the uptick in LIC shares. The net premium income declined, but VNB margins expanded due to regulatory changes in the last six months, according to Sneha Poddar, vice-president of equity research at Motilal Oswal Financial Services.
LIC’s shares closed at ₹940 on Wednesday, while the benchmark Nifty dropped 0.3%. Poddar highlighted that LIC has not participated in the rally in insurance stocks compared to its peers, indicating potential good momentum in the near term. However, she also noted that as a PSU stock, the momentum might not be on the same level as private players.
Over the last year, LIC’s shares fell 7.4%, while the benchmark Nifty gained 8.2% during the same period. Patwa pointed out that LIC shares are trading at 0.6 times Price to Embedded Value (EV), making the valuations attractive.
Poddar added that the regulatory changes have settled down, and the company has introduced revised products, which could lead to a recovery in premium growth. Patwa emphasized that the initiatives taken by the insurer post-listing are beginning to bear fruit, but volume growth, adverse regulations, and interest rate volatility would be key factors to watch.
