*LIFE INSURANCE CORPORATION | INITIATING COVERAGE: *An insurance goliath crafting its own growth path | Initiate with BUY | TP INR830*
✅ *An insurance trailblazer - growing on its own terms*: LIC has maintained its Numero Uno positioning in the market despite existence of private players for decades. Product mix is currently dominated by low-margin PAR products however it aims to ramp up the mix of non-par business.
✅ *Annuity – a key growth driver; Protection pricing becoming competitive*: LIC enjoys 77% market share in the Annuity segment due to its strong positioning in the group business. With private players implementing tariff hikes, competitiveness of LIC has improved in protection business.
✅ *Strong and productive agency channel; Banca gaining focus*: LIC has a robust agency channel with agent count of 1.3m and derives a miniscule 3% of individual NBP via the banca channel which the corporation is looking to ramp up significantly over next five years.
✅ *VNB margin modest on high PAR mix*: Focus on improving the mix of Non-PAR coupled with higher profit retention for shareholders in PAR business will improve margins. We estimate VNB margins to improve to 13.6% by FY24E.
✅ *Operating RoEV to sustain at ~10%; Initiate with BUY on reasonable valuations*: We estimate LIC to deliver ~10% CAGR in NBP during FY22-24E however operating RoEV will remain modest at ~10% on lower margin profile. Valuation at 0.7x FY24E EV appears reasonable considering gradual margin recovery and diversification in business mix though high sensitivity to market volatility remains an overhang. We initiate coverage with a BUY rating and a TP of INR830.