ICICI Securities Reaffirms BUY Rating on LIC: Target Price Set at ₹1,040 with 37% Upside Potential

ICICI Securities Reaffirms BUY Rating on LIC. ICICI Securities has reaffirmed its BUY rating on Life Insurance Corporation of India (LIC), revising its target price to ₹1,040—a significant 37% upside from its current market value of ₹759. LIC’s continued focus on strategic transformation, including product diversification, expanding distribution networks, and enhancing margins, has led to robust growth in key metrics such as Value of New Business (VNB) and Embedded Value (EV). Despite these improvements, LIC remains undervalued, presenting a promising opportunity for long-term investors.

ICICI Securities Reaffirms BUY Rating on LIC

Company Bio: Life Insurance Corporation of India (LIC)

• Established in 1956, LIC is India’s largest life insurance provider.
• Holds a significant market share in the Indian insurance industry.
• Known for its extensive agent network and deep market penetration.

Market Overview: LIC’s Position in India’s Insurance Sector

• LIC continues to lead India’s life insurance sector with strong market dominance.
• Recent strategic initiatives have helped diversify its product portfolio and distribution channels.
• The company remains focused on improving margins and increasing market share.

Current Financial Performance and Projections

Key Financial Metrics

Financial Metric	FY24	FY25E	FY26E	FY27E
APE (₹ billion)	570	575	621	665
Embedded Value (₹ billion)	7,274	7,952	8,644	9,393
VNB (₹ billion)	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

• Revised target price of ₹1,040 based on 0.7x FY27E EV of ₹9.4 trillion.
• Despite solid growth, LIC remains undervalued compared to peers.
• Potential for further upside through VNB margin expansion and improved investment returns.

Key Factors Affecting LIC’s Profit Growth

Product Mix Driving Margin Expansion

• Shift Towards Non-Participating Products:
  • Non-par policies share increased to 28% in 9MFY25 (up from 18% in FY24 and 9% in FY23).
• New Product Launches:
  • Launched six new non-par products in FY24, including Dhan Vriddhi, Jeevan Kiran, and Amritbaal.
  • Modified existing offerings such as Cancer Cover and Jeevan Akshay-VII.

Digital Expansion and Distribution Channels

• Non-agency channels now contribute 5.3% of new business premiums in 9MFY25, up from 3.9% in FY23.
• Launched the ANANDA digital agent platform, issuing 1.2 million policies digitally.

Financial Data: Performance Trends and Future Outlook

Key Drivers of Growth:

1. Strengthening Distribution Network
   • Agent strength reached 1.4 million by December 2024 (3.3% YoY growth).
   • Alternate channels increased from 2.9% in FY22 to 5.3% in 9MFY25.
2. Digital Transformation Initiatives
   • ANANDA integrated with WhatsApp for enhanced agent engagement.
   • Digital innovation through DIVE and Jeevan Samarth initiatives.
3. Regulatory Compliance and Product Adjustments
   • Introduction of 38 new products following IRDAI regulations.
   • Revised commission structure to align with regulatory changes.

Potential Risks:

• Macroeconomic Uncertainty: Market volatility could impact LIC’s embedded value.
• Regulatory Risks: Changes in surrender charges and commission structures could affect profitability.
• Customer Retention: Persistency ratio fell slightly to 66.5% in 9MFY25 from 67.2% in 9MFY24.

Conclusion: Why LIC Presents a Strong Long-Term Investment Opportunity

With its solid market positioning, growing distribution network, and focus on digital transformation, LIC continues to offer a strong long-term investment case. Despite current undervaluation, steady growth in margins, product diversification, and regulatory compliance improvements suggest a favorable risk-reward balance for investors. If you’re looking for a promising investment opportunity, consider exploring LIC’s potential today.

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