LIC Q4 Results Review: Improved Solvency, Strong Valuation Support, Says Macquarie

Life Insurance Corp. of India saw mixed performance in the fourth quarter of fiscal 2025. But Macquarie maintained an 'outperform' rating for the stock, noting that current valuation provides safety net.

The company's net profit surged by 38% to Rs 19,038.7 crore, surpassing Bloomberg's estimate of Rs 12,395 crore. However, the net premium income saw a decline of 3.2%, amounting to Rs 1.48 lakh crore.

• Net premium income down 3.2% to Rs 1.48 lakh crore versus Rs 1.53 lakh crore.

• Net profit up 38% to Rs 19,038.7 crore versus Rs 13,781.6 crore. (Bloomberg estimate: Rs 12,395 crore).

• Solvency ratio at 2.11% versus 1.98%.

• Annual premium equivalent down 11% to Rs 18,853 crore versus Rs 21,180 crore.

• Value of new business slips 3.18% to Rs 3,534 crore versus Rs 3,650 crore.

• VNB margin down 61 basis points at 18.75% versus 19.36% (QoQ).

• Final dividend of Rs 12 per share declared.

Macquarie's note highlighted the key aspects of LIC's performance. "LIC reported 4Q FY25 value of new business of Rs 3,529 crore, down 3% year-on-year, driven by lower-than-expected APE growth." It further added that the annual premium equivalent growth was muted, primarily due to the implementation of new surrender value regulations.

Despite the challenges, LIC's solvency ratio improved to 2.11% from 1.98%, indicating better financial health. "Value of New Business margins improved 154 basis points year on year, primarily because of increasing non-par mix and lower cost ratios," Macquarie noted.

The brokerage also pointed out that while there is some margin cushion given a high ULIP base, margin trends in the par book remain a key monitorable.

The valuation support for LIC remains strong despite downside risks to VNB estimates. "We continue to see a value proposition in the stock, given the strong valuation support," Macquarie reiterated. The stock trades at 0.7 times trailing Enterprise Value and at a negative Value of New Business multiple, providing a safety net for investors.

"Management was non-committal about giving margin guidance for FY26E," the brokerage noted.