Why LIC Share Price is Rising

Following a subdued performance post-listing, LIC shares experienced a notable upswing in November 2023, with gains of 12.8%.

This marks the most significant monthly increase for the stock since its debut in May 2022.

This has come as a relief rally to investors, as since day 1, it has experienced a consistent fall, plummeting as much as 44%.

Experiencing a turnaround since November, the state-owned insurance behemoth Life Insurance Corporation of India (LIC) has been on a rally, reaching its 52-week high today.

Here's what is fueling the rally in India's largest insurance company.

#1 Subsidiary Capital Infusion

State-owned Life Insurance Corporation of India, on 11 December 2023, announced the infusion of share capital of Rs 250 million (m) into its subsidiary, LIC Mutual Fund Asset Management.

By injecting additional capital, LIC aims to enhance the operations and capabilities of its subsidiary, potentially leading to increased assets under management (AUM).

With LIC Mutual Fund ranking 23rd among fund houses in terms of AUM, the capital infusion can contribute to improving its market position and competitiveness.

Higher AUM, resulting from the capital infusion, can lead to increased fees and profits for LIC Mutual Fund Asset Management.

This, in turn, positively impacts LIC's overall financial performance, as the state-owned company is a majority stakeholder in the subsidiary.

At present, LIC holds a 49% stake in the asset manager. LIC Housing Finance and GIC Housing Finance are the other stakeholders, with 35.3% and 15.7% stakes in the company, respectively.

LIC MF ranks 23rd among fund houses in terms of assets under management (AUM). In the September 2023 quarter, the fund house's average AUM was Rs 24.3 bn.

#2 Fintech Expansion

The surge in LIC's share can be attributed to its strategic move towards business expansion through the launch of a fintech unit.

The insurer has rolled out a total digital transformation project, DIVE (Digital Innovation and Value Enhancement), and tapped a consultant to lead the initiative.

The initial planning will be to transform the customer acquisition process, which involves three methods: through agents, bancassurance, and direct sales.

Other domains, including claims settlement, loans, and other offerings, will also be affected by the change and made easily accessible.

The changes will be accelerated through the launch of its own fintech arm. However, specific details for the same were not disclosed.

#3 Global Reserve Achievement

According to a media report, LIC ranks fourth among insurers in the world, based on its life and accident & health reserves in 2022.

According to the report, LIC's reserves stood at US$ 503.7 billion (bn).

The other leading insurers are Germany's Allianz SE (US$ 750.2 bn), China Life Insurance Company (US$ 616.9 bn), and Nippon Life Insurance Company (US$ 536.8 bn), which are the top three insurance companies in the world.

The reserves of LIC and Nippon Life Insurance Company reflect the reserves of the financial year 2023 (April 2022 to March 2023).

The announcement highlights the financial strength and position of LIC on the global stage among main insurance players, thus fueling the rally in the stock.

What Next?

The insurer plans to launch at least 3 to 4 new products before the end of this financial year and aims to propel double-digit growth in new business premiums.

This product would have the potential to disrupt the market by addressing consumer inquiries regarding their payments and anticipated returns over extended periods.

These products would include additional features such as a loan facility and premature withdrawal, anticipating broad appeal to policyholders and shareholders.

It also plans to expand its market share in India.

Further, LIC is adopting new technology to improve its operations and customer service.

How LIC shares have Performed Recently

LIC shares have zoomed by more than 32% in past month. Over the past week, the company's shares are trading higher by 8%.

On a YTD basis, LIC share price is up 13%.

LIC touched its 52-week high of Rs 180.7 on 13 December 2023 while it touched a 52-week low of Rs 530.1 on 29 March 2023.

About LIC

Life Insurance Corporation of India (LIC) is an Indian statutory insurance and investment corporation headquartered in the city of Mumbai, India. It is under the ownership of Government of India.

The company was established on 1 September 1956, when the Parliament of India passed the Life Insurance of India Act that nationalized the insurance industry in India.

Over 245 insurance companies and provident societies were merged to create the state-owned Life Insurance Corporation of India.

Today LIC functions with 2048 fully computerised branch offices, 113 divisional offices, 8 zonal offices, 1381 satellite offices and a corporate office.

It's wide area network covers 113 divisional offices and connects all the branches through a metro area network.

LIC has also tied up with some banks and service providers to offer on-line premium collection facility in selected cities.

For more details, see theLife Insurance Corporation company fact sheet and quarterly results.

You can also compare LIC with its peers.

LIC vs HDFC Life Insurance

LIC vs ICICI Prudential Life Insurance

LIC vs SBI Life Insurance

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