India’s Largest Insurer Trading Below Issue Price, 35 per cent Off 52-Week High – Buying Opportunity?

Despite 140 per cent profit growth in three years, the stock remains under pressure.

Life Insurance Corporation (LIC) is India’s largest life insurer, holding a 66.2 per cent market share in new business premium. It offers participating and non-participating insurance products, including unit-linked, savings, term, health, and annuity plans. Globally, LIC ranks as the 4th largest insurer based on life, accident, and health reserves (S&P Global Market Intelligence).

The stock of LIC is currently trading at Rs 796, which is below its listing price of Rs 872. The company has a market capitalization of Rs 5,03,470 crore and a stock P/E of 11.1, compared to the industry P/E of 48.1. LIC has a ROCE of 73 per cent and an ROE of 63.4 per cent, with a compound profit growth of 140 per cent over the last three years. The stock is also trading 35 per cent below its 52-week high of Rs 1,222.

Consolidate Financials:

For 9M-FY25, total income grew 22.5 per cent YoY to Rs 3,44,327.57 crore, while expenses surged over 5.5x to Rs 52,943.82 crore due to higher contributions to the policyholders’ account. Despite this, profit before tax rose 7.3 per cent YoY to Rs 2,91,383.76 crore, and profit after tax increased 8.2 per cent YoY to Rs 2,91,334.18 crore, reflecting strong operational performance.

Segment Performance:

Annualized Premium Equivalent (APE) – 9M-FY25 vs 9M-FY24

• Total APE grew 6.11 per cent YoY to Rs 37,975 crore, driven by strong Non-Par product growth.

Individual APE: Rs 24,612 crore (+4.72 per cent YoY)

• Par Products: Rs 17,799 crore (-11.90 per cent YoY) – Declining trend.
• Non-Par Products: Rs 6,813 crore (+106.52 per cent YoY), with major growth in ULIP and individual savings of 210 per cent and 118 per cent respectively.
  
  Group APE: Rs 13,363 crore (+8.76 per cent YoY)

Observations:

• Non-Par products are growing rapidly, led by a 210.79 per cent increase in ULIP.
• Par products are declining (-11.90 per cent YoY), indicating a shift in focus.
• Overall APE growth of 6.11 per cent is primarily driven by Non-Par products.

Value of New Business (VNB) – 9M-FY25 vs 9M-FY24

• Total Net VNB: Rs 6,477 crore (+9.07 per cent YoY)
• Total VNB Margin: 17.1 per cent (vs 16.6 per cent)

Segment-wise Performance

• Individual Business: Rs 4,942 crore (+18.3 per cent YoY), Margin: 20.1 per cent (vs 17.8 per cent)
• Group Business: Rs 1,535 crore (-12.8 per cent YoY), Margin: 11.5 per cent (vs 14.3 per cent)
• Par Business: Rs 1,925 crore (-7.1 per cent YoY), Margin: 10.8 per cent (vs 10.3 per cent)
• Non-Par Business: Rs 3,017 crore (+43.2 per cent YoY), Margin: 44.3 per cent (vs 63.8 per cent)

Key VNB Observations

• Individual VNB and margins are rising, reflecting strong profitability.
• Group and Par business have declined in both VNB and margins.
• Non-Par VNB surged 43.2 per cent YoY, though margins declined from 63.8 per cent to 44.3 per cent.
• Overall VNB and margin growth reflect a successful shift towards Non-Par products.

Additional Insights

• Non-Par share in Individual APE increased to 58.59 per cent (vs 27.68 per cent YoY).
• Company is actively shifting focus towards Non-Par products for higher profitability.
• Agency channel dominates distribution, contributing 94.68 per cent of new business.

Future Outlook:

LIC’s strategy to diversify its product mix by increasing the share of Non-Par products within the individual business. To achieve this, LIC plans to launch new products to fill gaps in its portfolio, ensuring competitiveness and alignment with customer needs.

LIC continues to leverage its dominant agency network, which accounts for 47.40 per cent of the life insurance industry’s agents. To enhance efficiency, the company has introduced digital initiatives such as the ANANDA app for digital business processing, online document submission, digital payments, and WhatsApp services.

On the investment front, LIC aims to maximize investment yields while balancing risk, indicating a focus on improving overall profitability.

Disclaimer: The article is for informational purposes only and not investment advice.