On Tuesday, JPMorgan upgraded shares of Life Insurance (NS:LIFI) Corporation (LICI:IN), changing its rating from Underweight to Overweight. The firm also increased the price target to INR1,075.00 from the previous INR790.00. The upgrade follows a robust second-quarter performance by the insurer, with the value of new business (VNB) surging by 47% year-over-year to Rs29.4 billion. This figure surpassed JPMorgan's estimate of Rs21.1 billion.
The substantial growth in VNB was attributed to a 26% year-over-year increase in Annual Premium Equivalent (APE) and a significant margin expansion of 2.6 percentage points year-over-year to 17.9%. Analysts noted the margin improvement was particularly driven by a favorable product mix, with a larger contribution from individual non-participating product APE, which constituted 19% in the second quarter of 2025 compared to 7% in the same quarter the previous year.
Life Insurance Corporation's stock had experienced a 22% decline over the last three months, underperforming the Nifty index, which saw a 2% decrease. JPMorgan's previous Underweight thesis was based on expectations of margin pressure from increased product benefits, but the recent results indicate that this concern has largely been realized. The firm now believes that Life Insurance Corporation's commitment to enhancing its product mix is likely to be sustained and will continue to mitigate the potential negative effects of higher product benefits and lower bond yields.
In light of the strong second-quarter results, JPMorgan has revised its VNB forecasts for the fiscal years 2025 and 2026 upwards by 9% and 11%, respectively. While the outlook is positive, the firm also cautions that weaker margins in the participating segment or a slowdown in the enhancement of the product mix remain key risks to the insurer's performance.
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