Buy Life Insurance Corporation of India; target of Rs 1040: ICICI Securities

ICICI Securities research report on Life Insurance Corporation of India

LIC has performed well with 9MFY25 VNB growth of 9.1% and H1FY25 EV growth of 24% YoY. Strategic initiatives have tracked well consistently in terms of pushing its product mix towards non-participating (28% of individual APE in 9MFY25 vs 18% in FY24 and 9% in FY23) and revision in pricing/product strategy to maximise value for all stakeholders with changes like hike in surrender value. There is expansion in non-agency distribution channels (5.3% of individual NBP in 9MFY25 vs 3.9%/4% in FY23/24), focus on agency (total number of agents stands at 1.4mn as of Dec’24, 3.3% YoY growth) and improvement in digital initiatives (DIVE/Jeevan Samarth). We believe product mix-driven possible rise in VNB margin is achievable and underappreciated by the market.

Outlook

Our valuations are based on 0.7x (earlier 0.8x) FY27E EV of INR 9.4trn. We have reduced our multiple to adequately reflect the risk of EV sensitivity to market movement and a lower core RoEV profile (compared to peers) on a high base. We estimate 1%/8%/7% change in weighted APE (0.3% in 10MFY25), VNB margin of ~17-18% (16.8%/17.1% in FY24/9MFY25) and unwinding of ~8.5% (FY24:9%) for FY25/26E/27E. We expect core RoEV at ~10% for FY25E/26E/27E (vs 11.5% in FY24).