LIC shares in focus after 14-fold jump in Q1 profit

Shares of Life Insurance Corporation of India Ltd (LIC) will be in focus on Friday morning after the life insurer clocked a near fourteen-fold surge in June quarter profit, as it moved money to a shareholders' fund to shore up its bottom-line. LIC reported a profit of Rs 9,544 crore for the first quarter compared with Rs 683 crore in the same quarter last year. The profit print comprised of an amount of Rs 7,491.53 crore (net of tax) pertaining to the accretion on the available solvency margin, transferred from Non Par fund to shareholders account.

LIC said its value of new business (VNB) stood at Rs 1,302 crore compared with Rs 1,397 crore YoY. The VNB margin for the quarter came in at 13.7 per cent against 13.6 per cent YoY. On an annualised premium equivalent (APE) basis, the total premium stood at Rs 9,532 crore. Of this, 62.42 per cent (Rs 5,950 crore) was accounted for by the individual business and 37.58 per cent (Rs 3,582 crore) by the Group business.

"Within the Individual business, the share of Par products on APE basis was 89.78 per cent (Rs 5,342 crore) and balance 10.22 per cent (Rs 608 crore) was due to Non-Par products. The non-par APE has increased from Rs 500 crore for the June 2022 quarter to Rs 608 crore for June 2023 quarter, registering a growth of 21.6 per cent. Therefore our non-par share of Individual APE, which was 7.75 per cent for June 2022 quarter has grown to 10.22 per cent for June 2023 quarter," LIC said.

LIC shares have risen 3.26 per cent in the last one month but are still down 9.48 per cent year-to-date.

Chairperson Siddhartha Mohanty said his company achieved increase in Non-Par product mix as a percentage of the overall individual business during the June quarter. He said LIC's efforts to improve persistency across cohorts are beginning to show results. Our overall expense ratio has become better and margins are stable on year-on-year basis, he added.

"Simultaneously, we continue to work on strategies for diversifying the channel mix. We believe that we are on track to grow our business in a manner which creates superior value for all our stakeholders," Mohanty said.

The state-owned insurer has been transferring money from its non-participating fund to the shareholders' fund to boost its profitability. Reuters reported last year that the insurer was planning to transfer Rs 1.8 lakh crore from policyholders' funds into a fund earmarked to pay dividends or issue bonus shares.

Its solvency ratio, the measure of an insurer's ability to meet its long-term debt obligations, improved marginally to 1.89 compared with 1.88 last year.

The company's annualised premium equivalent for non-participating products, where the insurer does not share profits or surplus with the policy holder, rose 21.6. LIC, largely reliant on an army of sales agents, said policy sales dropped 12.6 per cent in the quarter.

The life insurer raised the minimum ticket size of policies and focused more on margin oriented non-participating products, LIC Chairperson Siddhartha Mohanty said on a media call.

Net income from investments during the quarter rose to Rs 90,309 crore as compared to Rs 69,571 crore in the April-June period of 2022-23. On the asset quality front, gross non-performing assets ratio eased to 2.48% from 5.84% in the same period a year ago.

The total income increased to Rs 1,88,749 crore for the June quarter as against Rs 1,68,881 crore in the year-ago period, LIC said in a regulatory filing.

However, the first-year premium for the reporting quarter came down to Rs 6,811 crore as against Rs 7,429 crore in the year-ago period, it said.

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