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MOSL:MOrning India (5/July/22): 1. Life Insurance Corporation - Initiating Coverage (An insurance goliath crafting its own growth path); 2. India Strategy; 3. The Eagle Eye; 4. HDFC Bank; 5. AU Bank; 6. Mahindr

Life Insurance Corporation: An insurance goliath crafting its own growth path

• Life Insurance Corporation (LIC) has maintained its market leadership position in the life insurance industry underpinned by its strong brand, vast distribution, and superior customer-connect despite the advent of a large number of private players.
• During FY22, LIC accounted for 63%/46% of the total New Business Premium (NBP)/Annualized Premium Equivalent (APE) with a distinct focus on PAR business that formed 70%/92% of individual NBP/APE, respectively, in 9MFY22.
• Unlike private peers, LIC relies on its dominant agency channel (1.3m agents, 54% of industry as of 31st Mar'22) to distribute insurance products; yet it has maintained a strong control on the cost ratios.
• We estimate LIC to deliver ~10% CAGR in NBP during FY22-24E while the Value of New Business (VNB) margin is likely to improve to 13.6% on improving product mix and higher profit retention. We initiate coverage on the stock with a BUY rating and a TP of INR830 based on 0.8x FY24E EV.

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