LIC India Share Price Target at Rs 1,040: ICICI Securities
ICICI Securities has reaffirmed its BUY rating on Life Insurance Corporation of India (LIC), with a revised target price of Rs 1,040, reflecting a 37% upside potential from the current market price of Rs 759. LIC continues to execute its strategic transformation effectively, focusing on product diversification, expanding distribution channels, and enhancing margins. The company has demonstrated robust Value of New Business (VNB) growth of 9.1% and Embedded Value (EV) growth of 24% YoY in H1FY25.
Despite the structural improvements, LIC’s valuation remains significantly discounted at ~0.5x P/EV for FY27E, which is seen as unjustified given its market positioning. The key risks involve regulatory changes, economic conditions, and fluctuations in equity markets and interest rates. However, with steady improvements in VNB margins, digital initiatives, and agency strength, the risk-reward scenario appears favorable for long-term investors.
Product Mix Driving Margin Expansion
Shift Towards Non-Participating Products: LIC has steadily increased the share of non-participating products, which are high-margin segments. The individual APE from non-par policies surged to 28% in 9MFY25, compared to 18% in FY24 and 9% in FY23.
New Product Launches Strengthening Portfolio: LIC has introduced six new non-par products in FY24, including Dhan Vriddhi, Jeevan Kiran, Jeevan Utsav, Jeevan Dhara, Index Plus, and Amritbaal. Additionally, it modified existing offerings like Cancer Cover, Jeevan Akshay-VII, and Jeevan Shanti.
Digital & Distribution Expansion: LIC has enhanced its non-agency distribution channels, which now contribute 5.3% of individual new business premium (NBP) in 9MFY25, up from 3.9% in FY23.
Financial Performance and Market Positioning
| Financial Metric | FY24 | FY25E | FY26E | FY27E |
|---|---|---|---|---|
| APE (Rs bn) | 570 | 575 | 621 | 665 |
| Embedded Value (Rs bn) | 7,274 | 7,952 | 8,644 | 9,393 |
| VNB (Rs bn) | 96 | 98 | 109 | 120 |
| VNB Margin (%) | 16.8% | 17.1% | 17.6% | 18.1% |
| Core RoEV (%) | 11.5% | 10.3% | 9.7% | 9.7% |
| P/EV (x) | 0.7 | 0.6 | 0.6 | 0.5 |
Valuation and Target Price
ICICI Securities has revised its target price to Rs 1,040 (from Rs 1,193) based on 0.7x FY27E EV of Rs 9.4 trillion.
LIC remains deeply undervalued compared to peers despite stable growth in margins and new business contributions.
Further VNB margin expansion and improved investment yields could provide additional upside potential.
Key Drivers of LIC’s Growth
1. Strengthening Distribution Network
LIC's agency strength reached 1.4 million agents in December 2024, marking a 3.3% YoY increase.
The Banca and alternate channel mix rose from 2.9% in FY22 to 5.3% in 9MFY25, indicating successful diversification beyond traditional channels.
The digital agent activation initiative (ANANDA) led to 1.2 million policies being issued digitally in 9MFY25.
2. Digital Transformation and Operational Efficiencies
LIC has ramped up its digital presence, with Atma Nirbhar Agent App (ANANDA) now integrated with WhatsApp, improving agent engagement.
DIVE (Digital Innovation & Value Enhancement) and Jeevan Samarth initiatives aim to enhance customer experience and operational efficiency.
3. Regulatory Compliance & Product Adjustments
Following regulatory changes in surrender value norms, LIC introduced 38 new products in compliance with IRDAI regulations.
The revised commission structure under higher surrender charges could result in short-term volume impact but is expected to stabilize over time.
Potential Risks and Concerns
Macroeconomic Uncertainty: Market volatility and equity fluctuations could impact LIC’s embedded value (EV), which is projected to decline by 7.2% with a 10% drop in equity markets.
Regulatory Risks: Any stringent regulations on surrender charges and commission structures could affect profitability.
Persistency Challenges: LIC’s 13th-month persistency ratio dipped slightly to 66.5% in 9MFY25 (vs 67.2% in 9MFY24), indicating the need for further customer retention efforts.
