Motilal Oswal Financial Services has reiterated a Buy rating on Life Insurance Corporation of India, raising its target price to Rs 480 from a previous level — implying 24% upside from the current market price of Rs 388. In an August 6 results update titled "Strong performance; 730bp YoY expansion in VNB margin," the brokerage said the state-run insurer's first-quarter print showed a decisive shift toward higher-margin products, with value of new business margin expanding sharply and shareholder profit climbing well ahead of premium growth.

Q1FY27: Premium Growth Steady, Profitability Accelerates

LIC reported net premium income of Rs 1.3 trillion in the first quarter of fiscal 2027, up 7% year-on-year. Within that, renewal premium rose a modest 3% to Rs 618 billion, single premium grew 9% to Rs 564 billion, and first-year premium was the standout, jumping 22% year-on-year to Rs 92 billion. New business annualised premium equivalent increased 8% year-on-year to Rs 137 billion, with individual APE up 7% to Rs 75.3 billion and group APE up 10% to Rs 61.6 billion.

The more significant move was on profitability: absolute value of new business grew 61% year-on-year to Rs 31 billion, driving a 730-basis-point expansion in VNB margin to 22.9%. Shareholder profit after tax rose 23% year-on-year to Rs 135 billion. Management indicated it expects margin expansion to continue over the next few quarters, with LIC on track to reach a mid-20% VNB margin — closer to the broader industry average — though some uncertainty remains tied to interest rate movements.

VNB Margin: The Five-Quarter Climb

While the margin dipped sequentially from the seasonally strong fourth quarter's 25.7%, it still marks a substantial year-on-year improvement, and the brokerage attributes the underlying trajectory to three forces: a shift toward non-par products, favourable actuarial assumptions, and improving persistency — partly offset by higher operating expenses.

Distribution, Persistency And Balance Sheet Strength

1. The agency channel contributed 93.1% of individual new business premium, up from 92.3% a year earlier, with agency-driven premium growing 15% year-on-year. LIC maintains roughly 1.45 million agents — the largest force in the industry — of which 53% have more than five years' tenure.
2. The broker channel posted standout growth of 27% year-on-year, while bancassurance contribution declined to 3.4% of individual new business premium from 4.2%, and the direct channel shrank 13%.
3. Persistency improved across most cohorts, with 61-month persistency — a measure of how many policyholders keep paying premiums five years in — rising 300 basis points year-on-year to 61.3%. Thirteen-month persistency stood at 70.4% and 37-month persistency at 62.6%.
4. The solvency ratio strengthened to 242% from 217% a year earlier, well above regulatory minimums, giving the insurer a comfortable capital cushion; management indicated this could moderate to roughly 2.32 times after the upcoming dividend payout.

Stock Levels To Watch

The stock has underperformed over the trailing year, down 13% on a relative basis against broader markets, and currently trades closer to its 52-week low of Rs 361 than its high of Rs 468 — a gap the brokerage's raised target implies could narrow meaningfully as margin gains flow through to reported profitability.

Estimates And Valuation

The brokerage has raised its VNB margin estimates for fiscal 2027 and 2028 following the strong first-quarter print and the rising contribution of non-par business, and now projects operating return on embedded value in the range of 11.5-12%. The revised Rs 480 target is premised on valuing the insurer at 0.6 times projected fiscal 2028 embedded value — a modest multiple that the brokerage suggests leaves room for re-rating as margin trends prove durable.

Promoter (Government of India) holding stood at 96.5% as of December 2025, unchanged from the prior two reporting periods, leaving a free float of just 3.5% split across domestic institutions, foreign institutions and other shareholders.