LIC Eyes Major Stake in ManipalCigna to Expand into Health Insurance Sector

Shares of Life Insurance Corporation of India (LIC) climbed 1 percent to ₹927 on November 28 after reports emerged about the insurer’s potential acquisition of a substantial stake in ManipalCigna Health Insurance.

This marks a significant step in LIC’s strategic diversification into the health insurance sector, with sources suggesting that LIC is eyeing a 50 percent share in the company.

Strategic Partnership in the Making

ManipalCigna Health Insurance is a joint venture involving Manipal Education & Medical Group, holding a 51 percent stake, and US-based Cigna Corporation, which owns the remaining 49 percent.

Since the company is privately held, the acquisition would result in a strategic partnership rather than a traditional market purchase.

LIC’s potential stake in ManipalCigna aligns with its ambitions to expand beyond life insurance. During the Q2 analyst call, LIC’s Managing Director and CEO Siddhartha Mohanty said, “The groundwork is on for finding a suitable health insurance company, and we will finalize a stake within this fiscal year.”

The move is seen as a way to strengthen LIC’s portfolio by capitalizing on India’s rapidly expanding health insurance market.

Financial Performance Sets the Stage

LIC’s entry into health insurance comes on the back of a mixed financial performance in the September quarter. While its net profit declined by 4 percent year-on-year to ₹7,621 crore, the insurer’s net income rose by 12 percent, reaching ₹1.2 lakh crore.

Operationally, LIC’s Annualised Premium Equivalent (APE) grew by 26 percent year-on-year to ₹16,465 crore, and the Value of New Business (VNB) surged by 47 percent to ₹2,941 crore.

The VNB margin improved by 257 basis points, reaching 18 percent, signaling robust profitability in LIC’s core business. Analyst sentiment remains positive, with 13 of 18 analysts recommending a “buy” rating, four advising “hold,” and only one suggesting “sell.” Despite these gains, the stock has seen a decline of over 15 percent in the past three months.

Details of the Proposed Deal

The Economic Times reported that LIC is negotiating to acquire up to 50 percent of ManipalCigna Health Insurance. This acquisition would mark a significant foray into the medical expense coverage market, an area currently underserved in India.

ManipalCigna Health Insurance, a joint venture between the Manipal Group and Cigna Corporation, caters to India’s burgeoning demand for health insurance, which constitutes 37 percent of the ₹3 trillion general insurance industry.

According to sources, both parties have signed a non-disclosure agreement and are in advanced talks.

As part of the deal, both the Manipal Group and Cigna are expected to proportionally reduce their stakes. Valued at approximately ₹4,000 crore, the health insurer’s worth could see LIC’s acquisition cost between ₹1,750 crore and ₹2,000 crore.

This valuation is based on industry benchmarks, including listed standalone health insurers such as Niva Bupa and Star Health.

LIC’s Vision for Growth

During LIC’s earnings call on November 8, Siddhartha Mohanty confirmed the company’s plans to acquire a stake in a standalone health insurance provider within this financial year, though he refrained from sharing specific details.

The acquisition aligns with LIC’s broader goals of diversification and leveraging growth opportunities in the health insurance market.

Publicly listed health insurers provide a framework for assessing ManipalCigna’s valuation. For instance, Niva Bupa Health Insurance, with a market cap of ₹13,740 crore, recorded ₹5,600 crore in gross written premium (GWP) for FY24.

Similarly, Star Health, valued at ₹26,843 crore, posted GWP of ₹15,251 crore. ManipalCigna’s GWP of ₹1,691 crore for the last fiscal year situates its valuation between ₹3,500 crore and ₹4,000 crore.

LIC Responds to Market Buzz

Responding to news of the potential deal, LIC clarified in an exchange filing that it routinely evaluates strategic opportunities across various sectors, including health insurance.

“At this stage, there is no material information/event that requires disclosure under Regulation 30 of the Listing Regulations,” the insurer stated, adding that disclosures will be made as required by law.

Stock Price Movement Defies Market Trends

Despite a decline in benchmark equity indices, LIC’s stock showed resilience on November 28, gaining nearly 4 percent to reach ₹952.50 on the BSE.

The stock eventually settled 2 percent higher at ₹933.50. LIC’s shares have been volatile, hitting a 52-week high of ₹1,221.50 on August 1, 2024, and a 52-week low of ₹666.25 on December 1, 2023. Currently, LIC’s market capitalization stands at ₹5.90 lakh crore.