LIC shares: Should you buy, hold or sell this insurance stock post Q3 results?

Shares of Life Insurance Corporation of India Ltd (LIC) are in focus on Monday morning after the life insurer announced a 17 per cent rise in net profit at Rs 11,057 crore for the December quarter. Brokerages said LIC delivered a healthy margin profile for the quarter, despite implementation of the new surrender regulations and with VNB margin at 19.4 per cent led by increased Non-Par mix. However, APE growth continued to struggle, with APE declining 24 per cent for Q3FY25. 

They are positive on LIC post Q3 results and have target prices that suggest up to 33 per cent potential upside ahead. 

To mitigate the impact of the new surrender regulations, the LIC management has redesigned the product and commission structures while revising the minimum ticket size of policies with a view to improve persistency, Emkay Global said.  The management, it said, maintained focus on driving growth in Non-Par products through new product launches. 

"Going forward, it expects the growth to rebound, driven by increase in number of policies sold and in ticket size. To reflect the Q3 performance, we reduce our APE estimates by 6 per cent and increase our VNB margin estimates by ~220-320bps which results in 7-12 per cent increase in our VNB estimates for FY25-27. We retain ADD while revising down Dec-25E target to Rs 1,100 from Rs 1,150, at a 4.3 per cent cut)," the domestic brokerage said.

MOFSL said LIC maintained its industry-leading position and is focusing on ramping up its overall growth through wider product offerings, a shift in the product mix toward non-par, a stronger agency channel, and digitization. 

"LIC has done an alignment of distributor incentives to absorb the impact of surrender charges. With the introduction of a new hedging mechanism, the company is confident of curbing the uncertainties around VNB and expects the product-level margins to remain intact," it said.

The brokearge has cut its net premium, APE and VNB margin estimates by 4 per cent each for FY25, factoring in 3QFY25 performance. With the increase in the share of the non-par segment, it expect VNB margin to improve. For now, it suggested 'Buy' with a target price of Rs 1,085.