LIC Q2 Results Review - Robust Improvement In Embedded Value; New Business Margin Flat: Motilal Oswal

Motilal Oswal Report

Life Insurance Corporation of India's profit after tax for H1 FY24 stood at Rs 174 billion, including Rs 138 billion (net of tax) related to accretions on the available solvency margin transferred from non-Par fund to the shareholders account. Profit after tax for Q2 FY24 was Rs 79.3 billion.

Net premium declined 19% YoY to Rs 1.07 trillion in Q2 FY24. The market share in premium dropped to 58.5% in H1 FY24 from 68.25% in H1 FY23.  Value of new business (net) declined 19% YoY to Rs 18.5 billion in Q2, hit by a 20% decline in annual premium equivalent. However, VNB margin (net) remained flat at 15.4% versus 15.2% in Q2 FY23.

LIC's net margin in the Individual Par segment stood at 10.3% in H1 FY24 versus 10.6% in H1 FY23. For the Non-Par segment, it declined to 50% from 68.7% in H1 FY23. In the group segment, net margin rose to 14.6% from 12.9% in H1 FY23.

We cut our VNB estimates to factor in the decline in VNB margins. However, we raise our embedded value estimates owing to better-than-expected equity market returns. We reiterate our 'Buy' rating on the stock with a target price of Rs 850 (0.7 times FY25E EV).

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