2 PSU insurance stocks zoom 14%. What's the good news?

Synopsis

Shares of General Insurance Corporation of India jumped 13.9% to a fresh 52-week high of Rs 466 while those of New India Assurance Company rallied 14.3% to a new high of Rs 311.85 on BSE.

2 PSU insurance stocks zoom 14%. What's the good news?ETMarkets.com

Shares of two PSU insurance companies – General Insurance Corporation of India and New India Assurance – rallied 14% each on Thursday to fresh peaks amid reports that the government may infuse capital into three state-owned insurers.

Shares of General Insurance Corporation of India jumped 13.9% to a fresh 52-week high of Rs 466 while those of New India Assurance Company rallied 14.3% to a new high of Rs 311.85 on BSE.

According to reports, the finance ministry may infuse capital into three public sector insurance companies — United India Insurance, National Insurance and Oriental Insurance — to improve their solvency ratio after analysing their Q3 and Q4 results of FY24.

Also read: Modi ki guarantee on PSU stocks! 22 multibaggers, Rs 24 lakh crore profit after PM speech

The government had last year provided Rs 5,000 crore capital to the three insurers. Kolkata-based National Insurance was given the highest, Rs 3,700 crore, followed by Delhi-based Oriental Insurance (Rs 1,200 crore) and Chennai-based United India Insurance (Rs 100 crore).

Of the four state-run general insurance companies, only New India Assurance Company is listed on the stock exchanges, the remaining three are wholly owned by the government. The government has already announced its intention to privatise one general insurance company.

To facilitate privatisation, Parliament has already approved amendments to the General Insurance Business (Nationalisation) Act (GIBNA). Finance Minister Nirmala Sitharaman in the Budget 2021-22 announced a big-ticket privatisation agenda, which included two public sector banks and one general insurance company.

In the meantime, shares of Life Insurance Corporation of India (LIC) also jumped over 6% to a fresh all-time high of Rs 1,120.65 on BSE. It was also for the first time that the stock crossed the Rs 7 lakh crore market capitalisation mark. LIC will announce its December quarter results later in the day.

January month data shows that the life insurance industry clocked 15.1% Retail APE growth for Jan-24, backed by robust 20% growth in the Private sector and LIC growing at 6.6%.

“Retail APE growth in the Private sector, while LIC is likely to deliver a muted show with low single-digit growth. With favourable valuations persisting, Life Insurance stocks continue to offer an appealing risk-reward balance,” Emkay Global said.

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William Murphy

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