Life Insurance Corporation Of India · risk themes across the available quarters.
Bear-case history
IRDAI's revised surrender value regulations effective October 2024 require higher payouts to lapsing policyholders. Analysts raised concerns about impact on 13th month lapsation (approximately 22% on premium basis) and potential need to restructure commission (clawback discussions) or reduce benefits for persistent policyholders to offset costs. Management deflected by stating multiple solutions possible but no specific action plan disclosed.
VNB margins on par business declined materially due to rising risk-free rates affecting discount rate assumptions. Management attributed most of the VNB margin movement to RFR impact rather than product benefits, acknowledging that par margins are sensitive to interest rate environment.
13th month persistency on premium basis declined marginally (78.37% to 78.23% YoY). Management acknowledged some par products with lower ticket sizes showing persistency pressure, requiring ongoing product review. Micro insurance products are included in persistency calculations unlike some peers.
Suresh Ganapathy (Macquarie) pointed out that non-par margins have compressed from 72% (Q1 FY23) to 39.8% (Q1 FY25)—a 30 percentage point drop over two years—questioning whether growth is coming at the expense of sustainability. Management defended this as strategic trade-off for VNB growth.