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Healthy improvement in VNB margin

New product launches support growth in the non-par segment

* Life Insurance Corporation (LIC)’s PAT for 9MFY24 was INR269b (3QFY24 at INR94b). PAT for 9MFY24 was not comparable to 9MFY23, as the last year’s PAT included an amount of INR45b (net of tax) pertaining to the accretions on available solvency margin, which was transferred from the non-par fund to the shareholders account.

* Net premium grew 5% YoY to INR1.17t in 3QFY24. Market share in premium dropped to 58.9% in 9MFY24 from 68.4% in 9MFY23.

* VNB (net) grew 46% YoY to INR26.34b in 3QFY24, whereas in 9MFY24 VNB (net) grew 8.4% YoY to INR59.4b. This led to a growth in the VNB margin (net) to 20% in 3QFY24 and 16.6% in 9MFY24. The change in product mix led to an improvement in margins.

* Net margin in the Individual Par segment came in at 10.3% for 9MFY24 vs. 11% in 9MFY23. For the Non-Par segment, net margins improved to 63.8% vs. 63.6% in 9MFY23. In the group segment, net margin declined to 12.3% vs. 14.3% in 9MFY23.

* We have raised our VNB estimates to factor in the increase in VNB margins. We have also raised our EV estimates due to better-than-expected equity market returns. Reiterate BUY with a TP of INR1,270 (based on 0.8x FY26E EV).

APE share of non-par segment improves

* In 3QFY24, LIC’s renewal/single premium rose 4%/10% YoY to INR624b/ INR464b, whereas its first year premium declined 13% YoY to INR84.3b. For 9MFY24, the total individual premium/total group premium came in at INR2.09t/ INR1.13t.

* On the distribution front, the share of agency channels stood at 95.3% in 3QFY24. On a YoY basis, the share of banca channel improved to 4.2% in 3QFY24 from 3.7% in 3QFY23.

* For 9MFY24, the 13th/25th/61st month persistency came in at 78%/ 71.9%/62.4%.

* AUM increased to INR49.7t as of 3QFY24 from INR44.3t in 3QFY23, reporting an increase of 12% YoY and 5% QoQ.

* In 9MFY24, the share of PAR/ULIP/term products on APE basis moderated YoY to 56.4%/2.0%/0.4%. The share of individual savings/annuity/group segment on APE basis increased YoY to 4.0%/2.8%/34.3%.

Highlights from the management commentary

* New product launches introduced in 9MFY24 were: LIC’s Group PostRetirement Medical Benefit, LIC’s Dhan Vriddhi, LIC’s Jeevan Kiran and LIC’s Jeevan Utsav (collected premium of more than INR10b). These products are highly competitive and are gaining traction. LIC believes that the VNB margin is sustainable.

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