LIC posts robust premium growth despite lower Q2 profit; solvency ratio improves to 198%
With strong premium growth and an improved solvency ratio, LIC appears well-positioned to navigate the challenges of rising benefit payouts, while its emphasis on non-participating policies could support margin expansion in the upcoming quarters.
Life Insurance Corporation of India (LIC), the country’s largest insurer, reported a modest decline in its second-quarter profit despite strong premium growth, as rising policy payouts weighed on earnings.
LIC’s net profit for the July-September quarter dropped by 3.7 per cent to Rs 7,729 crore, compared to Rs 8,030 crore in the same period last year. The dip in profit was attributed to a 17 percent increase in benefit payouts, which amounted to Rs 97,562 crore.
The insurer’s net premium income surged 11.5 per cent year-over-year to Rs 1,20,000 crore, driven by rising consumer awareness and the launch of new insurance products. Analysts noted that the post-pandemic environment has fueled demand for life insurance, bolstering premium collections across the industry.
LIC’s solvency ratio, a key indicator of its financial health, strengthened to 198 per cent from 190 per cent a year ago, indicating improved capability to meet long-term obligations. The insurer has been increasing its focus on high-margin non-participating products to enhance profitability.
The net value of new business (VNB), a critical measure of profitability from new policies, climbed 37.7 percent for the half-year ended September, with the VNB margin rising to 16.2 percent, up from 14.6 percent last year. This growth underscores LIC’s strategic shift towards more lucrative product offerings.
Group insurance sees robust growth
LIC’s group insurance segment, catering primarily to corporate clients, recorded a 25.4 per cent jump in total premium income for the April-September period. Group insurance plans typically offer coverage to multiple individuals under a single policy, making them attractive for employee benefit programs.
Market reaction
Ahead of the earnings announcement, LIC’s stock slipped 1.6 per cent as investors anticipated mixed results. The company’s focus on expanding its high-margin product portfolio comes at a time when rivals like ICICI Prudential Life and HDFC Life have faced pressure on margins due to increased demand for low-margin, market-linked products.
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