LIC Gets 'Overweight' Upgrade, Target Price Hike From JPMorgan On Strong Q2 VNB Growth

JPMorgan has upgraded Life Insurance Corp. of India's rating to 'overweight' from 'underweight', following a strong performance in the second-quarter of financial year 2025.

The brokerage has also raised its price target for the insurer to Rs 1,075 per share from Rs 790, a 36% increase, reflecting confidence in LIC's ability to sustain its growth momentum, driven by a favourable shift in its product mix.

This upgrade comes after LIC reported a 47% year-on-year growth in the Value of New Business, surpassing JPMorgan's expectations.

LIC's VNB for Q2 FY25 reached Rs 2,941 crore, driven by a 26% YoY growth in Annualised Premium Equivalent and a 2.6% YoY margin expansion, bringing the margin to 17.9%.

The margin improvement was primarily attributed to a higher contribution from individual non-participating (non-par) products, which made up 19% of the total APE in the quarter, up from just 7% a year earlier. This shift in product mix has been a key factor in the insurer’s outperformance, especially given the broader industry challenges, including lower bond yields and higher product benefits.

The brokerage had previously maintained an 'underweight' rating on the stock, based on concerns about margin pressure from higher product benefits. However, with the company's robust Q2 results, showing solid progress in diversification of product offerings, LIC's strategy of focusing on higher-ticket products will likely continue to pay off, according to JPMorgan.

The brokerage has revised its VNB growth forecasts upwards, increasing its FY25E and FY26E VNB estimates by 9% and 11%, respectively. With a more positive outlook, JPMorgan sees LIC as undervalued at 0.6 times FY26E book value, compared to 1.8 times-2.4 times for its private-sector peers.

The brokerage is also optimistic about LIC's potential for sustained growth, particularly in the banca channel and alternate distribution channel, which grew by 42% and 53% YoY, respectively, in the second quarter. Though these channels form a small part of LIC's overall sales mix, they represent significant growth opportunities and could contribute to long-term sales momentum.

However, risks remain, particularly if margins in the participating (par) product segment weaken further or if the positive product mix improvement moderates. Despite these risks, JPMorgan’s upgrade to 'overweight' signals a growing confidence in LIC's ability to navigate regulatory changes and market challenges.

• Double Upgrade to 'overweight': JPMorgan raises its rating on LIC, citing strong VNB growth and an improved product mix.

• Price Target Raised to Rs 1,075: The new price target, up 36% from the previous target of Rs 790, reflects LIC's strong earnings outlook.

• 47% YoY VNB Growth: LIC's VNB for Q2 FY25 reached Rs 2,941 crore, significantly beating expectations.

• Margin Expansion: A 2.6% YoY improvement in margins, driven by a shift toward higher-margin non-par products.

• Channel Diversification: Strong growth in bancassurance and alternate distribution channels provides a positive growth outlook.

• Valuation: LIC is trading at 0.6 times FY26E book value, significantly lower than its peers in the private insurance sector.