The net profits of Life Insurance Corporation (LIC), a state-owned company, in July-September increased 31.92 per cent year-on-year (Y-o-Y) to ₹10,053.4 crore, supported by growth in its core business and investment income and a decline in expenses.
Net premium income in the quarter was up 5.5 per cent Y-o-Y to ₹1.3 trillion as against ₹1.2 trillion in Q2 FY25.
Net income from investment was up nearly 3 per cent Y-o-Y to ₹1.12 trillion.
During the post-earnings media call, LIC’s management said it showed an 11 per cent Y-o-Y growth rate of investment in equity. In the debt market the company has shown an increase of 15 per cent Y-o-Y from last year.
Additionally, the insurance giant has written bond forward-rate agreements (FRAs) of ₹12,000 crore from March to September this year.
Annualised premium equivalent (APE) slipped 0.5 per cent Y-o-Y to ₹16,382 crore from ₹16,465 crore in the year-ago period.
Muted growth was due to modification in products after surrender value norms, a high base effect, and changes in the goods and services tax (GST) rate structure.
When GST on premium was abolished, prospective customers withheld policy purchases during the last eight days of the quarter. The Centre announced rationalisation in GST rates on September 22.
LIC has passed on the entire GST benefit to customers while protecting the benefits of its agents. The insurer expects the changes in GST rates to boost sales and top line growth, while also aiding in optimising expenses.
R Doraiswamy, managing director and chief executive officer, said: “We are not considering passing on this GST liability to agents. We hope the exemption of the life insurance business from GST results in a substantial increase in the business volumes and top line growth as well as our continuous effort to optimise our expenses. We will be able to take care of pressure on the margins and continue to be focusing on the margin growth as well as the profitability.”
“We look at robust growth in the second half of the current year, which is being witnessed in the first month of the year. We are seeing good traction in the second half of the current year.”
The corporation had estimated the GST to affect less than 0.5 per cent of its embedded value while it is working on the impact on its value of new business (VNB) margin.
VNB premium saw strong 7.7 per cent Y-o-Y growth to ₹3,167 crore.
The VNB margin, the measure of profitability of life-insurance companies, of LIC rose to 19.33 per cent in the quarter from 17.86 per cent in the same quarter a year ago.
The expenses of the company in the quarter were down 6.5 per cent Y-o-Y to ₹15,234.4 crore from ₹16,291.8 crore.
Net commission slipped 11.7 per cent Y-o-Y to ₹5,772.15 crore.
Assets under management (AUM) for the year stood at ₹57.23 trillion at the end of September 30, up 3.31 per cent from ₹55.39 trillion a year ago.
The yield on investment in policyholders’ funds, excluding unrealised gains, was 6.45 per cent for the second quarter.
It was 7.33 per cent in the year-ago period and 6.14 per cent in the preceding quarter.
LIC’s persistency ratio in Q2 for the 13th month and 61st month was 68.19 per cent and 55.12 per cent, respectively. In the preceding quarter, on a premium basis for the 13th month and 61st month it was 70.90 per cent and 58.31 per cent, respectively.
The expense of management ratio of the company stood at 12.03 per cent as compared to 13.57 per cent in Q2 FY25.
The solvency ratio of the company was at 213 per cent as against 198 per cent last year.
In terms of market share by first-year premium income, LIC continues to be the leader in the country’s life insurance business with a share of 59.41 per cent in April-September as compared to 61.07 per cent in the same period last financial year.
On the acquisition of a health insurance company, Doraiswamy said: “One, we are looking forward to what kind of changes will be introduced in the insurance bill. So that is one aspect we will be considering. And we also have to make a calculated move as to what the right time and the right company are.”
