LIC Q2 net profit tanks 50% to Rs 7,925 crore

State-owned insurer LIC reported a net profit of Rs 7,925 crore for the September quarter, a decline of 50% compared to Rs 15,952 crore in the year-ago period. The fall in profit was primarily due to a decline in income.

Lower Net Premium Income

The net premium income, which is the difference between the premiums received and the amount paid out as claims and expenses, eased to Rs 1,07,397 crore in the second quarter of the current fiscal, from Rs 1,32,631.72 crore in the year-ago period. This decline in net premium income contributed to the lower net profit for the quarter.

Increase in First-Year Premium

However, the first-year premium for the reporting quarter increased to Rs 9,988 crore, as against Rs 9,125 crore in the year-ago period. This indicates that LIC was able to generate more new business during the quarter, despite the overall decline in net premium income.

Accounting Policy Change

LIC stated that the latest quarterly numbers are not directly comparable with the year-ago quarter as the company had changed its accounting policy in September last year regarding the transfer of the amount net of tax pertaining to the accretion on the available solvency margin from non-participating policyholders' accounts to shareholders' accounts.

Consequently, LIC transferred Rs 27,241 crore net of tax during 2022-23, which included a transfer to the shareholders' account amounting to Rs 14,272 crore net of tax in the second quarter of the current fiscal. This transfer impacted the comparability of the profit for the quarter ended September 30 with the corresponding figures for the September quarter of the previous year.

Decline in Total Income

LIC's total income declined to Rs 2,01,587 crore in the quarter, compared to Rs 2,22,215 crore in the year-ago period. This decrease in total income, coupled with the accounting policy change, contributed to the significant decline in net profit for the quarter.

Growth in Net Income from Investments

On a positive note, the net income from investments during the quarter rose to Rs 93,942 crore in the second quarter of this fiscal, as compared to Rs 84,104 crore in the same period of 2022-23. This growth in investment income helped to mitigate the impact of the decline in net premium income on the overall profitability of the company.

Improved Solvency Margin and Asset Quality

The solvency margin of LIC increased to 1.90% in the September quarter this year, as compared to 1.88% in the same quarter a year ago. This indicates that the company's financial strength and ability to meet its obligations improved during the quarter.

Additionally, the gross non-performing assets ratio eased to 2.43%, from 5.60% in the same period a year ago, reflecting an improvement in the asset quality of the company's loan portfolio.

Strong Half-Yearly Performance

Despite the decline in net profit for the September quarter, LIC reported the highest-ever half-yearly profit after tax at Rs 17,469 crore, compared to Rs 16,635 crore a year ago. This growth in half-yearly profit was driven by an increase in net income from investments and improved operating efficiency.

Outlook and Strategies

LIC's Chairman, Siddhartha Mohanty, expressed confidence in the company's strategies to enhance the share of non-par products in its overall individual business. He highlighted the current value of new business margins as an indicator of the company's initiatives to maintain profitability amidst changing market dynamics.

Mohanty also emphasized the importance of profit-oriented consolidation and diversification of the distribution mix, with an increase in the share of Bancassurance and Alternate Channels. He mentioned that LIC is in talks with two more banks for tie-ups, indicating the company's efforts to expand its distribution network.

LIC's net profit for the September quarter declined significantly by 50% compared to the previous year. This was primarily due to a fall in net premium income and the impact of the accounting policy change. However, the company's strong half-yearly performance, growth in investment income, and improved solvency margin provide some positive indicators.

LIC's focus on implementing strategies to enhance profitability, improve asset quality, and expand its distribution network can help the company navigate the challenging market conditions and position itself for long-term growth and success.