“The margin expansion, driven by the shifting of product mix by its unparalleled agency force, should boost VNB (value of new business) growth, even as overall medium-term APE (annual premium equivalent) growth will likely be lower than private peers,” said Kotak’s analysts in a client note. “The large unrealized equity gains (59% of FY2022 EV) should also support LIC’s EV (Enterprise Value) and make it leveraged to capital market movements.”
Shares of the country’s largest insurer listed at ₹872 in May 2022, about 8% below its IPO price of ₹949 a share. The stock slid to a low of ₹588 on October 21, 2022.
Kotak said LIC’s valuations are lower than its private sector peers.
trades at 0.7 times estimated FY24 Enterprise Value as against 1.6-2.8 times of private insurers.
“Current multiples likely ignore LIC’s strong agency franchise that is capable of modulating product profile to high-margin products to deliver superior VNB growth in the medium term,” said Kotak’s analysts.
