The Life Insurance Corporation of India (LIC), the country’s largest public-sector insurer, reported a 50% increase in its profit for the third quarter (Q3), primarily driven by a significant augmentation in the transfer of funds to its shareholders’ fund.
During the quarter ending December 31, 2023, LIC unveiled a profit after tax of 94.44 billion rupees ($1.14 billion), a substantial increase from the 63.34 billion rupees recorded in the corresponding period the previous year, Reuters revealed.
This financial uplift was largely due to the transfer of 76.92 billion rupees from its non-participating fund to the shareholders’ fund, a notable rise from the 56.70 billion rupees transferred during the same quarter last year.
LIC’s practice involves allocating premiums from fixed-return, non-participating policies into a specific non-participating fund.
In a strategic move initiated in 2022, the insurer began reallocating a portion of these funds to the shareholders’ fund quarterly, with an objective of fortifying its solvency margin. This metric, crucial for assessing an insurer’s capability to meet its long-term financial commitments, improved to 1.93 this quarter from 1.85 in the prior year, Reuters reported.
As per LIC’s statement, the comparative analysis of quarterly results with those of the previous year is not straightforward due to these fund transfers. Nevertheless, the insurer experienced a 4.6% rise in net premium income.
The value of new business (VNB), an important gauge of the expected profit from new premiums, saw an 8.4% increase year-over-year for the nine-month period ending December 31. The VNB margin also witnessed growth, escalating to 16.6% from 14.6% in the previous year.
Emphasising a strategic shift, LIC has been keen on increasing the ratio of non-participating policies, which typically offer higher margins, within its total policy sales mix.
“Our consistent and focused approach towards diversifying and changing our product mix is now yielding results at a faster pace,” said LIC chairperson Siddhartha Mohanty, as reported by Reuters.
In other news, Department of Investment and Public Asset Management (DIPAM) secretary Tuhin Kant Pandey recently confirmed that LIC’s shareholding in Adani Group falls within the country’s regulatory and risk management standards.
