Valuation Belies Prospects; VNB Levers Under Appreciated; Equity Sensitivity Concerns Overdone: ICICI Securities Initiates Coverage


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Life Insurance Corporation of India is the Indian insurance market leader with 44% share of the total annual premium equivalent market (on a weighted basis) as of FY22.

Robust back-book (assets under management of Rs 41 trillion as of Q1 FY23), high brand value, difficult-to-replicate agency strength of 1.33 million individuals (as of September 2022) are competitive moats.

Increasing non-participating mix (currently ~5% in APE mix as of Q1 FY23) and change in surplus distribution policy are significant growth drivers of value of new business and in turn embedded value.

This, against the strong growth outlook of the Indian life insurance (especially through lens of sum assured), makes LIC a strong investment proposition considering that it is currently trading at 0.73 times FY22 price to EV.

Concerns on equity sensitivity to EV is overdone and the relative ease of increasing VNB margin through change in mix is under-appreciated.

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