LIC's Market Share In Value Of New Business To Improve, Margins To Expand, Says B&K Securities

Life Insurance Corp.'s market share in terms of value of new business (VNB) will improve despite decline in Annual Premium Equivalent-based market, according to B&K Securities. The firm initiated a 'buy' rating on LIC with target price of Rs 940, a nearly 20% upside to the last closing price.

Going forward, we expect the VNB margin to move to the aspirational region of 20%, with levers in hand like product mix and improvement in persistency, the brokerage said in a note.

LIC holds 35% market share on total APE basis, out of which share in individual business' market is around 30% and that of group is around 54% on an APE basis.

"Market share trends have moderated over the last few years. However, changes in product mix has helped LIC improve and maintain market share in VNB terms," the note said.

APE is a measure of new business activity that normalizes policy premiums into the equivalent of regular annual payments, especially useful when comparing sales containing both single and regular premium policies. 

On the other hand, VNB is a metric measuring the present value of expected future profits from new policies sold during a specific period. 

The state-owned life insurer remains well-positioned to demonstrate stable growth print and margin expansion, aided by its best-in-class distribution machinery, product introductions and improving persistency levels, the note said.

B&K Securities said further value can emerge in the medium-term due to LIC's potential foray into health insurance space through acquisition.