Motilal Oswal's research report on Life Insurance Corporation
Life Insurance Corporation (LIC) has maintained its market leadership position in the life insurance industry underpinned by its strong brand, vast distribution, and superior customer-connect despite the advent of a large number of private players. During FY22, LIC accounted for 63%/46% of the total New Business Premium (NBP)/Annualized Premium Equivalent (APE) with a distinct focus on PAR business that formed 70%/92% of individual NBP/APE, respectively, in 9MFY22. Unlike private peers, LIC relies on its dominant agency channel (1.3m agents, 54% of industry as of 31st Mar’22) to distribute insurance products; yet it has maintained a strong control on the cost ratios. We estimate LIC to deliver ~10% CAGR in NBP during FY22-24E while the Value of New Business (VNB) margin is likely to improve to 13.6% on improving product mix and higher profit retention.
Outlook
However, we estimate LIC’s operating RoEV to remain modest at ~9.7% on lower margin profile than private peers. LIC’s valuation at 0.7x FY24E EV appears reasonable considering gradual margin recovery and diversification in business mix though high sensitivity to equity market volatility remains an overhang. We initiate coverage on the stock with a BUY rating and a TP of INR830 based on 0.8x FY24E EV.
More Info
At 10:37 hrs Life Insurance Corporation of India was quoting at Rs 708.00, up Rs 15.50, or 2.24 percent.
It has touched an intraday high of Rs 711.75 and an intraday low of Rs 697.15.
It was trading with volumes of 148,024 shares, compared to its thirty day average of 307,096 shares, a decrease of -51.80 percent.
In the previous trading session, the share closed up 2.33 percent or Rs 15.75 at Rs 692.50.
The share touched its 52-week high Rs 949.00 and 52-week low Rs 650.00 on 13 May, 2022 and 20 June, 2022, respectively.
Currently, it is trading 25.4 percent below its 52-week high and 8.92 percent above its 52-week low.
Market capitalisation stands at Rs 447,809.84 crore.
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