LIC Q1 Results: Multi-fold surge in net profit to Rs 9,543 crore

LIC reported a multifold increase in net profit to Rs 9,543 crore for the fiscal quarter ending June 2023, up from Rs 682 crore the previous year. Investors were unaffected by the drop in premiums and the number of policies sold.

While profits increased, India's largest life insurer's total annual premium equivalent (APE) fell 7% year on year to Rs 9,532 crore. APE for participating insurance policies declined by 10.2%, whereas non-par APE increased by 21%. In the meantime, group policies declined by 6.2%.

A minimum return is guaranteed for participating products, and policyholders participate in the policy's profit.

According to the company, 32,16,301 policies were sold in the individual category for the quarter ending June 30th, 2023, compared to 36,81,764 policies sold the previous year.

Because non-participating products have higher margins of profit, LIC has aggressively promoted them in recent years. Non-par made 10.22% of APE in Q1 FY24, up from 7.75% in Q1 FY23. Non-par is a guaranteed product in which the pay-outs are entirely guaranteed at the start of the policy and policyholders do not participate in the policy's profits.

The rise in non-par products also resulted in a change in accounting policies in September 2022, as a result of which LIC has reported a multi-fold increase in profits over the previous two quarters.

"The Corporation had changed its accounting policy in September 2022 regarding transfer of amount (net of tax) pertaining to the accretion on the available solvency margin from non-participating policyholder’s account to shareholder’s account," said the company.

As a result of LIC transferring a total of Rs 27,240 crore during FY23, the profit for the quarter ended June 2023 is not comparable to the equivalent results for the quarter ended June 2022.

The persistency ratios on a premium basis up to the quarter ended June for the 13th month and 61st month were 78.37% and 62.73%, respectively, said the company, improving by 52 bps and 30 bps.

Persistency is the measure of policies remaining in force (not lapsed) as a proportion of policies issued in a particular period.

LIC listed on the exchanges in May 2022 and has dropped by more than 20% since then. The issue price of LIC was Rs 949.

Source: Media Reports