Life Insurance Corporation of India, the country’s largest insurance company, reported a standalone net profit of `15,952 crore in Q2FY23 – an 11x rise from its net profit of Rs 1,434 crore in the corresponding quarter of the last fiscal year.
The sharp rise in net profits was aided by the change in the accounting policy of the insurer in which it transferred an amount of Rs 14,271.80 crore from non-participating policyholders’ accounts to shareholders’ accounts. Additionally, it has also had a substantial other income of Rs 6,795 crore.
“In accordance with the Irdai letter dated November 10, 2022 and subsequent approval by the board of directors, the corporation has changed its accounting policy and has transferred an amount of Rs 14,271.80 crore (net of tax) pertaining to the accretion on the available solvency margin from non-par to shareholder’s account due to which the profit for the quarter and half year ended September 30, 2022 has increased to that extent,” the insurance company said.
This transfer of non-participating funds to shareholders’ accounts is a way to shore up investors’ confidence and that could act as an indicator of higher dividend payouts, going forward.
From a business performance perspective, the life insurer’s net premium improved to Rs 1.32 trillion in Q2, up 27% from Rs 1.04 trillion in the year-ago period. The first-year premium, indicative of business growth, was at Rs 9,125 crore, up 11% for the quarter compared with Rs 8,198.30 crore year-on-year (y-o-y). The renewal premium rose 2% to Rs 56,156 crore while single premium soared 62% to Rs 66,901 crore y-o-y.
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The total income in the quarter under review stood at `2.22 trillion as against Rs 1.85 trillion in the year-ago period.
The 13th month persistency ratio, a key parameter that measures the stickiness of policyholders, rose to 70.52% at the end of September, 2022 from 68.81% y-o-y.
The market share of LIC stood at 68.25% in terms of first-year premium or new business premium as on September 30, 2022, up 376 basis points from 64.49% as on September 30, 2021, according to figures provided by the insurance regulator Irdai.
Ahead of the announcement of the result, LIC stock ended 1.17% higher at Rs 628.05 on BSE. Overall, it has been an underperformer at the bourses, down over 24.11% since the initial public offering.
Among major private sector life insurers, SBI Life Insurance has posted a 52.76% y-o-y rise in its net profit to Rs 376.74 crore for the second quarter this fiscal. Its net premium income grew 12.39% y-o-y at Rs 16,477.26 crore.
“LIC is the Indian insurance market leader with 44% share of the total APE (annualised premium equivalent) market (on a weighted basis) as of FY22. Robust back-book (AUM of Rs 41 trillion as of Q1FY23), high brand value, difficult to replicate agency strength of 1.33 million individuals (as of September, 2022) are competitive moats,” ICICI Securities said in a note on Friday.