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LIC Q1 Results: Premium Up 20%, VNB Margin Narrows

LIC's overall Q1 premium rose to Rs 98,352 crore, a 20% increase over a year earlier.

<div class="paragraphs"><p>The LIC logo is placed outside the Bombay Stock Exchange. (Source: BQ Prime)</p></div>
The LIC logo is placed outside the Bombay Stock Exchange. (Source: BQ Prime)

Life Insurance Corp.'s standalone profit surged and its premium income rose in the first quarter.

The state-owned insurer’s standalone after-tax profit jumped more than 231 times year-on-year to Rs 682.88 crore in the quarter ended June from Rs 2.94 crore, according to an exchange filing. The surge, however, stems from the change in its distribution policy in September last year in the run-up to its initial public offering.

LIC had a single fund for both participating and non-participating plans, and any surplus was shared with policyholders and shareholders in the 95:5 ratio. Ahead of the IPO, the fund was divided into two and the entire surplus from non-participating plans was given to shareholders along with 5% of the surplus from the participating fund. This contributed to the disproportionate increase in profit.

Sequentially, the bottom line fell 71%.

The company saw its overall premium rise to Rs 98,352 crore, a 20% increase over a year earlier.

LIC Q1 FY23 Highlights (Standalone, YoY)

  • Revenue rose 10% to Rs 1.7 lakh crore.

  • Total individual premium rose 13% to Rs 60,007 crore, while group premium rose 34% to Rs 38,345 crore.

  • In the individual category, new business premium rose 36% to Rs 10,938 crore, while the renewal premium rose around 9% to Rs 49,069 crore.

Other Highlights (YoY)

  • The life insurer also saw a 60% rise in the number of new policies sold.

  • The assets under management were up 8% at Rs 41 lakh crore.

  • The management expense ratio improved to 14.59% from 15.85%.

  • The 13th and 61st month persistency ratios—or customer retention— improved to 63.85% and 47.51% from 61.26% and 44.87%, respectively.

  • Solvency ratio, which measures the extent to which assets cover commitments for future liabilities, rose to 188.5% from 173.3%. It’s above the minimum requirement of 150%.

Value of new business—present value of future profit associated with new business written during the period—stood at Rs 1,861 crore while the VNB margin was 13.6%. Comparable quarterly data for previous year is not available.

The VNB margin, however, is lower than what LIC reported in the last financial year. For fiscal 2022, the VNB was Rs 7,619 crore, while the VNB margin was 15.1%.

The insurer, in the post-earnings call, explained that the fall in VNB margin from 15.1% to 13.6% could be attributed to change in the product mix. The insurance behemoth said while the proportion of group policy sales went up, sales of the group funded product, which has lower margins, rose more. That brought down the overall VNB margin.

The insurer's embedded value stood at Rs 5.41 lakh crore as on March 31, 2022, according to an exchange filing on July 14. The insurer had then said that the enterprise value would be disclosed on a half-yearly basis.

Shares of LIC closed 0.03% lower before the results were announced on Friday even as the benchmark S&P BSE Sensex ended 0.22% higher.

Opinion
LIC's Embedded Value Steady At Rs 5.41 Lakh Crore Despite Market Volatility