LIC jumps 3% ahead of Q3 results as PSU insurers zoom up to 14%

Shares of state-run insurers Life Insurance Corporation of India (LIC), General Insurance Corporation (GIC-Re), and the New India Assurance Company (NIACL) jumped up to 14 percent in morning deals on February 8.

Shares of India’s largest public sector insurer Life Insurance Corporation (LIC) jumped over 3 percent to hit a fresh record high of Rs 1,100 on the NSE ahead of its Q3 earnings report due later in the day.

Emkay Global expects LIC to report a 12.2 percent on-year rise in profit at Rs 7,108.70 crore for the December quarter. The life insurer’s board would also consider paying an interim dividend for FY24.

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Shares of General Insurance Corporation (GIC-Re) also jumped 12 percent to hit a 52-week high of Rs 460.90 on the NSE after the company announced financial performance for the nine months ended December 31, 2023. Its gross premium came in at Rs 28,458.1 crore.

The company’s profit after tax for the nine months was recorded at Rs 3,854.82 crore, compared to a PAT of Rs 3,748.66 crore a year ago.

Shares of New India Assurance Company (NIACL) jumped over 14 percent to hit a fresh record high of Rs 311.90. The stock has seen a sharp rally, rising nearly 25 percent in just the last five sessions. The stock has zoomed 181 percent in the past year, delivering multibagger returns. In comparison, benchmark Nifty 50 has risen 22 percent during this period.

Sharp moves in PSU insurer stocks

Another potential factor behind the sharp rally in PSU insurers could be their low public float. Across the board, these companies exhibit notably low public float percentages. For instance, the government holds an 85 stake in New India Assurance, while 9 percent is held by LIC and 1 percent by GIC-Re, which leaves just about 5 percent of public float.

Similarly for GIC-Re-Re, an 85.8 percent stake is held by the government, LIC holds an 8.7 percent stake leaving around 5 percent public float. For LIC, the government holds a 96.5 stake which leaves just 3.5 percent public float. Often, stocks with such low public float show large moves on low volumes.

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It is worth mentioning that the finance ministry may infuse capital into three public sector insurance companies — United India Insurance Company Ltd, National Insurance Company Ltd and Oriental Insurance Company Ltd.

The infusion will be to improve their solvency ratio after analysing their Q3 and Q4 results of FY24, the Department of Financial Services (DFS) secretary Vivek Joshi said in an interview with Moneycontrol recently.

The solvency ratio of these three public insurers is still low. “We seek exemption from IRDAI for all three. That is an issue. We will see how they perform in Q3, Q4. There was no provision for capital infusion into them in the interim budget. If they perform well, the government may think of putting some capital in them,” Joshi said.

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