LIC shares surge 8% on strong guidance and VNB margin growth
Mumbai:
Life Insurance Corporation
shares soared almost 8% on Wednesday- the highest single-day gain since December 2023-after the state-run insurer's strong guidance sparked fresh
investor interest
.
"The improvement in value of new business (VNB) margins was a surprise for the street and the management confidence in growth led to the uptick in
LIC shares
today," said Saurabh Patwa, head of research at Quest Investment Advisors. Value of New Business captures the present value of profits expected from new insurance policies written.
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The net premium income declined but the
VNB margins
expanded, due to the regulatory changes in the last six months, said Sneha Poddar, vice-president - equity research,
Motilal Oswal Financial Services
.
The stock closed at ₹940 on Wednesday. The benchmark Nifty dropped 0.3%.
"LIC has not participated in the rally in
insurance stocks
, compared with its peers which indicates that there can be good momentum in the near term," said Poddar. "However, since it's a PSU stock, the momentum is not expected to be on the same level as the private players."
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In the last year, LIC's shares fell 7.4% while benchmark Nifty gained 8.2% in the same period. Patwa said LIC shares are trading at 0.6 times Price to Embedded Value (EV) - a valuation measure for insurance companies - which makes the valuations attractive.
Poddar said the regulatory changes have settled down and the company has come up with revised products, that could lead to recovery in premium growth.
"The initiatives taken by the insurer post listing are beginning to bear fruits, but volume growth, adverse regulations and interest rate volatility would be key to watch," said Patwa.
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