LIC Q3 Results: Profit Rises On Change In Fund Distribution Policy
LIC's Q3 profit surged after a change in its fund distribution policy allows shareholders to receive a higher share in profit.
Life Insurance Corp.'s third-quarter profit surged after a change in its fund distribution policy allows shareholders to receive a higher share in surplus.
The IPO-bound life insurer's after-tax profit stood at Rs 234.9 crore for the quarter ended December 2021, it said in its exchange filing. That compares with Rs 0.9 crore during the same period in the preceding year.
That's because shareholders of India's largest insurer now receive 5% of the surplus from the participating fund, and 100% of the surplus from the non-participating policyholders' fund. In the past, they received 5% of the combined total pool of participating and non-participating funds. IPO-bound LIC changed its policy to bring it line with private peers.
Total premiums earned were up 0.8% over the preceding year at Rs 97,761 crore. The first-year and renewal premiums saw a rise over the quarter ended December 2020, while single premiums—a one-time lumpsum instead of yearly, quarterly or monthly premium payment—fell over December last year.
The new business premium for the quarter stood at Rs 40,939 crore, down 3%. The annualised premium equivalent — calculated to smoothen differences between regular and lump-sum premium — stood at Rs 11,968 crore, which was up 5% against the December 2020 quarter.
The public disclosures of the life insurer have not disclosed the value of new business premium earned and the embedded value as on Dec. 31.
Quarterly Highlights (YoY)
Operating income rose to Rs 261.1 crore as against Rs 1.4 crore.
Profit after tax margin stood at 0.13% against nil.
Expense ratio improved to 14.34% from 16.26%.
Investment yield was 7.15% against 6.97%.
The 13th month persistency ratio by premium — or customer retention — fell over the quarter earlier, while the 61st month persistency ratio improved.
The insurer has been losing market share. As on Dec. 31, 2021, its market share stood at 61.40%, compared to its market share of 68.05% as on December 2020.
9M Highlights (YoY)
Total premiums were up around 1% at Rs 2.84 lakh crore.
The new business premium stood at Rs 1.26 lakh crore down 3%.
APE for the period was Rs 32,444, down around 4%.
Operating income stood at Rs 1,713.2 crore as against Rs 10.9 crore.
Profit after tax stood at Rs 1,671.6 crore against Rs 7.1 crore.
PAT margin was 0.33% against nil in the nine months through December 2020.
Other Analytical Ratios (9M)
Expense and commission ratios to gross premiums have marginally gone up to 14.99% and 5.43% from 14.39% and 5.22%, respectively.
The 13th, 25th, 37th, 49th and 61st month persistency ratios by premium fell over the year earlier.
Solvency ratio — that measures the extent to which assets cover commitments for future liabilities — stood at 177% as of December 2021, higher than 164% a year earlier. It’s well above the minimum solvency requirement of 150%.
Investment yield stood at 7.26% versus 7.23%.
The gross and net non-performing asset ratio for policyholders' fund improved to 6.32% and 0.04% from 7.78% and 0.14%, respectively.
Earnings per share stood at Rs 2.64 and book value per share was Rs 12.73.
