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New product launches to drive future

Founded and majority owned by the Government of India, Life Insurance Corporation of India Ltd (LIC) is the country’s leading statutory insurance and investment corporation, with assets under management (AUM) of over Rs. 4,700,000cr and investments in more than 270 listed companies.

• In Q2FY24, LIC’s gross premium income fell 18.7% YoY to Rs. 107,947cr, mainly due to lower single premium.

• In H1FY24, value of new business (VNB) fell 10.1% YoY, however the VNB margin remained stable at 14.6%.

• Market leadership, new product launches to support the non-par business strategy, a wide distribution network, and digitalisation bode well for the company’s future growth. Hence, we reiterate our BUY rating on the stock with a revised target price of Rs. 823, based on 0.65x FY25E embedded value (EV) per share.

LIC records lower premium on muted growth in group products

In Q2FY24, gross premium income fell 18.7% YoY to Rs. 107,947cr, mainly due to a 43.4% YoY drop in single premium to Rs. 37,955cr. First-year premium grew 9.3% YoY to Rs. 10,032cr, while renewal premium rose 6.1% YoY to Rs. 59,961cr. In H1FY24, annualised premium equivalent (APE) fell 10.3% YoY to Rs. 22,627cr, dented by a 24.5% YoY decline in the group business to Rs. 7,989cr and a 2.0% YoY decline in individual par products to Rs. 13,063cr. Individual non-par products grew 19.8% YoY to Rs. 1,575cr. In APE terms, the non-par business share increased 180bps YoY to 10.8%. The group business being cyclical in nature, the company expects resumption of steady growth in the coming quarters.

Robust growth in EV

In H1FY24, VNB decreased 10.1% YoY to Rs. 3,304cr. VNB margin was stable at 14.6%, as the positive impact of the increasing share of the non-par business (+230bps YoY) and the favourable change in assumptions (+190bps YoY) was nullified by the negative impact of competitive product pricing. Over 5.3 lakh policies were signed via the agentassisted Ananda app, as compared to 3.1 lakh policies in H1FY23. EV grew 21.7% YoY to Rs. 661,605cr, aided by higher equity market returns. AUM grew 10.5% YoY to Rs. 4,743,389cr. The gross non-performing assets ratio improved 317bps YoY to 2.43%

Key highlights

• During H1FY24, the company launched three new non-PAR products: Jeevan Kiran, Dhan Vriddhi, and group post-retirement medical benefit plan.

• In terms of premium, the 13th/61st month persistency ratio was 71.19%/55.17% in Q2FY24 (vs 70.52%/55.83% in Q2FY23). The solvency ratio was a strong 190% in H1FY24, well above the regulatory requirement of 150%.

• By H1FY24-end, LIC had 13.46 lakh agents. The market share by agent workforce stood at 49%. The agency force sold 96% of the policies in H1FY24.

Outlook and valuation

The company continues to diversify its product mix with a focus on enhancing the nonpar share of products. Life insurance density and penetration age continues to be lower in India vis-à-vis other developing economies. With gradual rise in domestic household savings, the share of life insurance in incremental household financial saving is expected to increase steadily. LIC, as the market leader and a trusted name among the populace, is best positioned to benefit in the long-term. With an optimistic outlook, we reiterate our BUY rating on the stock with a revised target price of Rs. 823, based on 0.65x FY25E EV per share.

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