Shares of Life Insurance Corporation of India (LIC) rose by 1% to ₹927 on November 28, following reports of the insurer’s advanced discussions to acquire a 50% stake in Manipal Cigna Health Insurance. This move aligns with LIC’s ongoing strategy to diversify its offerings and enter the fast-growing health insurance market in India.
LIC’s Current Position and Market Sentiments
- Out of the 18 analysts tracking LIC’s stock, 13 recommend a “buy,” 4 suggest a “hold,” and only 1 has issued a “sell” rating.
- Year-to-date, LIC shares have gained over 10%, but the stock has faced pressure recently, declining more than 15% in the last three months.
Financial Performance Highlights
LIC’s decision comes amidst mixed financial performance for the September quarter:
- Net Profit: Declined by nearly 4% YoY to ₹7,621 crore.
- Net Income: Increased by 12% YoY to ₹1.2 lakh crore.
- Annualised Premium Equivalent (APE): Rose 26% YoY to ₹16,465 crore.
- Value of New Business (VNB): Surged 47% YoY to ₹2,941 crore, with VNB margins improving by 257 basis points to 18%, reflecting strong profitability.
Strategic Move: Expanding into Health Insurance
LIC’s reported interest in ManipalCigna Health Insurance aligns with its aim to expand into the health insurance sector. During the Q2 analyst call, LIC MD and CEO Siddhartha Mohanty highlighted that groundwork is underway to finalize a stake in a health insurance company by the end of the fiscal year.
ManipalCigna Health Insurance is a joint venture:
- Manipal Education & Medical Group (Bengaluru): Holds a 51% stake.
- Cigna Corporation (USA): Owns the remaining 49% stake.
LIC’s acquisition of a 50% stake in Manipal Cigna would strengthen its portfolio by leveraging an established health insurance business to sell cashless health insurance policies.
Impact on LIC Shares and the Insurance Market
The news of LIC’s potential entry into health insurance caused a surge in its stock price. Market experts believe this could be a game-changer:
- Health insurance offers a high-growth opportunity in India, driven by increasing awareness and demand for cashless policies.
- LIC’s entry could help it capitalize on the rising demand and gain significant market share.
Composite License for LIC
To sell health insurance, LIC is working towards obtaining a composite license, expected to be approved in the upcoming budget session. This license would allow LIC to manage both life and health insurance businesses seamlessly.
What is Manipal Cigna Health Insurance?
Manipal Cigna Health Insurance is a prominent player in the health insurance market:
- The company provides cashless health insurance services.
- It is not publicly listed, making LIC’s potential acquisition a strategic partnership rather than a market acquisition.
LIC’s acquisition of Manipal Cigna’s stake could enable the insurer to quickly penetrate the health insurance sector without having to build operations from scratch.
Also Read: What is PAN 2.0? Indian Government Aims to Launch a Fully Paperless and Online System
Conclusion
LIC’s move to acquire a significant stake in Manipal Cigna Health Insurance reflects its strategic vision to expand into the health insurance market and diversify its portfolio. This decision could prove transformative for LIC, given the vast growth potential in the health insurance segment.
Stay tuned for more updates as LIC progresses in this venture, which could redefine its role in the Indian insurance market.
