Buy Life Insurance Corporation; target of Rs 830: Motilal Oswal

Motilal Oswal's research report on Life Insurance Corporation

LICI reported a strong traction in 1QFY23 and printed APE of INR102.7b. VNB margin moderated 150bp QoQ to 13.6%, while shareholders’ PAT stood at INR6,829m in 1QFY23 v/s INR29m in 1QFY22. Individual NBP grew 36% YoY to INR109.4b in 1QFY23. The Individual/Group business constituted 63%/37% of APE. Within the Individual business, the share of PAR products remained stable ~92%. In terms of NBP, the share of PAR products was lower at 70%. Annuity or Pension/ULIPs constituted the bulk of residual with a 23%/5% share. Both these segments saw a strong growth in 1QFY23. We expect the momentum to sustain, led by the introduction of new products.

Outlook

We revise our FY23/FY24 VNB margin by ~200bp/~100bp to 14.2%/14.6%, and raise our VNB estimate by 24%/18%. We expect LICI to deliver a 13% CAGR in APE over FY22-24, thus enabling 14% VNB CAGR. However, we expect operating RoEV to remain modest at 12.4%, given its lower margin profile than private peers. We maintain our Buy rating.

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