Life Insurance Corp. is focused on growing the margins of its new business by increasing the contribution of non-participating product categories in the product mix, according to its Chairperson Siddhartha Mohanty.
The current share of non-par products is 8.89% for fiscal 2023, compared to 7% in FY22. The company, in a conversation with BQ Prime, had in the previous quarter guided for a full year non-par share of 11%.
It witnessed a marginal dip—from 9% non-par share in the first nine months of 2023 fiscal—due to fall in customer demand, Mohanty said. "However, the focus remains on growing the non-par business."
The company managed to increase its VNB margins to 16.2% for the full year, while it had reported 14.6% in the nine months ended December.
Key Highlights of the Post-Earnings Call
The company's market share in individual businesses is 40%, while it is 76% for group businesses.
Continued to be a market leader in both individual and group categories.
Profits after tax increased due to a Rs 27,241 crore accretion on a non-par solvency margin.
Embedded value grew by 7.5% to Rs 5.8 lakh crore, despite adverse conditions on the MTM side.
The company would like to grow its absolute EV.
LIC is training new agents to sell non-par products, while the older ones continue to sell par products.
Within non-par, too, the company is focusing on high-margin products.
It expects the VNB margins to further improve due to this, a few digital initiatives, and direct selling.
It launched three new non-par products: LIC Bima Ratna, LIC Jeevan Amar, and LIC Jeevan Azad.
Some improvement was seen in the annuity and non-par products.
Management expects these products to grow well, with the productivity of the agents increasing.
With high competition in the annuity markets, LIC has increased the rates, and the management expects the volumes to pickup.
Profitability on the group side improved in FY23 and is expected to continue being a significant contributor.
Robust growth in APE and VNB in group business has led to margin expansions.
Margins in the group business are sustainable and could improve further.
The death claims were 34% lower than last year, while management expenses increased by 100 basis points.
The number of LIC agents was around 13 lakh. The number of policies sold through agencies fell 4%, but agencies contributed to 96% of the total policies sold by the life insurer.
Bancassurance grew 26% by premium.
The company said that the annualised premium equivalent saw a dip in Q4, due to some setbacks in the group business.
The budget 2023 announcement taxing payouts on high-ticket policies — non-par policies with premium contributions exceeding Rs 5 lakh — for purchases after April 1, except in cases of death, contributed to just 0.04% of the total policies sold by the insurer, Mohanty said.
Also, the premiums earned from these policies were around 3.5% of total premiums. "There should not be any significant impact on the margins," he said.
However, he said that the company did focus on selling the regular premium business in March to benefit from the pre-booking of non-par policies before April. Accordingly, LIC's product, Jeevan Shanti, did well, Mohanty said.
Shares of LIC were trading 1.55% higher at 1:25 p.m. on Thursday, a day after Q4 results were announced, as compared to a 0.39% decline in the S&P BSE Sensex.
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