LIC Eyes 50% Stake in ManipalCigna Health Insurance

Shares of Life Insurance Corporation of India (LIC) rose approximately 3% to ₹952.50 on November 28, following reports that suggested the state-owned insurer is considering acquiring a substantial stake in ManipalCigna Health Insurance. This potential move marks LIC's strategic entry into the fast-expanding health insurance sector, a space it has long shown interest in exploring.

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LIC is reportedly in advanced discussions to purchase up to 50% of ManipalCigna Health Insurance, a joint venture between Bengaluru-based Manipal Education & Medical Group, which owns 51%, and US-based Cigna Corporation, holding the remaining 49%. The deal is estimated to value ManipalCigna at approximately ₹4,000 crore. An ET report indicates that both existing shareholders would proportionally dilute their stakes to accommodate LIC’s entry.

This development aligns with LIC’s hints on a broader diversification strategy. During a recent Q2 analyst call, LIC MD and CEO Siddhartha Mohanty emphasized their focus on health insurance, mentioning, “The groundwork is on for finding a suitable health insurance company, and we will finalize a stake within this fiscal year.” The move is expected to boost LIC’s portfolio by diversifying its offerings and capturing a share of India’s growing health insurance market.

ManipalCigna Health Insurance, though not publicly listed, is a key player in the Indian health insurance sector, and this acquisition could strengthen its operational capabilities. The partnership is anticipated to assist LIC in utilizing its vast distribution network to broaden ManipalCigna's reach and strengthen its own position in the medical insurance market.

The news comes amid mixed financial performance for LIC in the September quarter. While the insurer’s net profit dipped by nearly 4% year-on-year to ₹7,621 crore, its net income grew 12% to ₹1.2 lakh crore. Operational metrics also showed promise, with the Annualized Premium Equivalent (APE) rising 26% year-on-year to ₹16,465 crore, and the Value of New Business (VNB) increasing 47% to ₹2,941 crore. Notably, LIC’s VNB margins improved by 257 basis points to 18%, reflecting robust profitability in its core life insurance business.

The health insurance sector in India presents significant growth opportunities, driven by increasing awareness and demand for medical coverage post-pandemic. LIC’s potential acquisition of a 50% stake in ManipalCigna positions the insurer to tap into this underserved market effectively.

In Conclusion

If the deal materializes, LIC’s foray into health insurance through its partnership with ManipalCigna could mark a pivotal step in the insurer’s diversification journey. By capitalizing on its existing brand strength and market reach, LIC stands to enhance its market position while addressing growing demand in India’s health insurance sector.