LIC Q1 Profit Soars 23% Fueled by Robust Growth in Value of New Business

The financial performance of the Life Insurance Corporation of India (LIC) for the June quarter reveals significant progress, notably a 23% year-on-year increase in standalone net profit, rising to ₹13,492 crore from ₹10,986 crore. This growth was primarily driven by a robust value of new business (VNB), which surged by an impressive 61.3% to ₹3,136 crore, alongside a marked expansion in VNB margin from 15.4% to 22.9%. The strategic emphasis on diversifying LIC’s product offerings, particularly in non-participating savings and protection plans, has proven beneficial in enhancing profitability, suggesting a positive outlook for future financial performance.

Moreover, total premium income saw a steady increase of 6.75%, reaching ₹1.27 lakh crore, underscored by a notable rise in annualized premium equivalent (APE) by 8.2% to ₹13,692 crore. Individual APE rose to ₹7,532 crore, and group APE experienced a commendable growth of 10.2% to ₹6,160 crore. The expansion in individual non-par APE to 32.5%, up from 30.3% a year prior, reinforces the strategic pivot towards guaranteed products amid fluctuating market conditions. This shift, coupled with the administration of the 18% GST exemption on pure protection plans, has contributed to making these offerings more accessible and affordable for consumers.

Despite these gains, the overall expense ratio has seen a slight increase to 10.63% from 10.47%, largely attributable to the withdrawal of GST input tax credits, which has posed challenges to maintaining profit margins. However, the solvency ratio, an essential measure of financial stability, has improved from 2.17 to 2.42, while assets under management have risen by 4.1% to ₹59.39 lakh crore. This enhancement in solvency bolsters investor confidence in LIC’s fiscal resilience and long-term viability.

Looking ahead, LIC anticipates that non-participating products will continue to comprise 30-35% of its individual APE, aligning with ongoing demand for guaranteed offerings amid current economic uncertainties. Furthermore, the recent government stake sale of 6.5% has been positively received, helping to fulfill SEBI requirements for shareholding reduction. With a timeline of approximately five years to further increase public shareholding from 10% to 25%, there appears to be no immediate pressure for additional stake dilution, allowing LIC to maintain a stable operational focus as it navigates the evolving market landscape.

Source: The Economic Times

(Expert Note: This report was prepared by the Wealthova team.)