LIC IPO buzz perks up insurance stocks, Q4 numbers add momentum

HDFC Life and SBI Life gained over 4% each Thursday, while ICICI Prudential Life rose 3%. Analysts said insurance stocks are currently trading at a discount to their historical valuations with favorable risk-reward ratios.

“We believe multiple factors are fueling the rebound in insurance stocks. Besides the LIC IPO, which is opening for subscription next week, there is a huge opportunity in the sector as companies are trading at favourable valuations after the stocks have seen a fall from their highs, which is gaining investor interest,” said Ajit Mishra, VP-research at Religare Broking. “Also, SBI Life and HDFC Life posted better premium numbers for March 2022 quarter, further adding to the positivity.”

Agencies

HDFC Life shares lost 16% in the last six months compared to a 3.43% fall in the Nifty, while ICICI Prudential Life and ICICI Lombard declined 14% and 9%, respectively.

The private player has reported a better premium number in the March quarter and highlighted that FY23 should be good for the retail protection segment given that the supply-side issues are now over, said analysts.

“The sector is defensive in nature which is the key theme of the market today as the performance of equities is volatile given the global uncertainties,” said Vinod Nair, head of research at Geojit Financial Services. “The life insurance industry is undergoing a phase of expansion nudged by pandemics. Claims are expected to normalise in the future as Covid cases are falling. The much-awaited LIC IPO adds thrust to the sector’s performance by higher foreign portfolio investments and retail attention.”

The life insurance industry’s growth momentum picked up in March 2022 quarter with retail weighted received premium (RWRP) growing by 11.9% year-on-year after two months of slow growth.

Importantly, compared with the pre-Covid base, the private sector RWRP two-year CAGR in FY22 came at 14.5% against a meagre 1.6% for LIC, resulting in the private sector RWRP market share increasing by 5.7% in two years to 62.9% in FY22.