Life Insurance Corporation of India's June-quarter earnings put profitability of new business in focus after value of new business jumped 61% and VNB margin expanded sharply from a year earlier. Macquarie highlighted the VNB beat despite modest annualised premium equivalent growth, while Bernstein said the margin outlook remained favourable, supported by product mix, yield-curve movement and the potential for higher non-participating sales.
The brokerage views pointed to improving new-business economics as the key takeaway from the quarter. Overall APE increased 8.2%, while group business APE rose 10.2%. VNB margin climbed to 22.9% from 15.4%, alongside the sharp increase in value of new business. Macquarie also highlighted the narrowing gap with peers.
LIC reported a 23% increase in net profit during the June quarter, while net premium income rose 7%. First premium income increased 22%, and the insurer's solvency ratio improved both sequentially and from a year earlier.
LIC Q1 Highlights (YoY)
- Net profit rose 23% to Rs. 13,492 crore from Rs. 10,987 crore.
- Net premium income increased 7% to Rs. 1.27 lakh crore.
- Other income stood at Rs. 635 crore versus Rs. 130 crore.
- Overall APE increased 8.2% to Rs. 13,692 crore.
- Group business APE rose 10.2% to Rs. 6,160 crore.
- First premium income increased 22% to Rs. 9,217 crore.
- Value of new business jumped 61% to Rs. 3,136 crore.
- VNB margin expanded to 22.9% from 15.4%.
- Solvency ratio stood at 2.42 versus 2.35 in the preceding quarter and 2.17 a year earlier.
- The 13th-month persistency ratio stood at 70.4% versus 70.9%.
- The 61st-month persistency ratio improved to 61.3% from 58.3%.
The improvement in value of new business and VNB margin stood out against relatively modest growth in overall APE. The insurer also reported higher first premium income, while longer-term persistency improved based on the 61st-month ratio.
Here's what brokerages are saying after LIC announced Q1 results:
Macquarie
- Maintained 'Outperform'; Target Price At Rs. 550
- Highlighted a VNB beat despite modest growth in APE.
- Said product mix and yields drove the expansion in VNB margin.
- Flagged the narrowing gap with peers.
Bernstein
- Maintained 'Market-perform'; Target Price At Rs. 500
- Said modest top-line growth was accompanied by a favourable margin outlook.
- Attributed the Q1FY27 margin improvement to product mix and yield-curve movement.
- Expects further margin expansion to be driven by non-participating sales.
- Said the government's offer for sale addresses a key overhang on the stock for now.
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