LIC had in February filed its draft papers with the market regulator for its IPO and got the approval earlier this week. The government intends to sell a 5 per cent stake in LIC. The move could fetch over Rs 60,000 crore to the exchequer.
The first-year premium for the life insurer rose to Rs 8,748.55 crore from Rs 7,957.37 crore in the same quarter last year. Renewal premium came in at Rs 56,822.49 crore, up from Rs 54,986.72 crore in the year-ago quarter.
LIC’s total premium edged 0.78 per cent higher at Rs 97,761.20 compared with Rs 97,008.05 crore.
The net profit of Life Insurance Corporation of India rose to ₹ 234.91 crores in the third quarter of the current financial year from ₹ 0.91 crores recorded in the corresponding period of last year.
For the first nine months of the current financial year, LIC has posted a net profit of ₹ 1,642.78 crores as against a paltry ₹ 7.08 crore net profit recorded during the corresponding period of 2020-21.
The profit from the sales of investments, largely equity assets, was already at 63 per cent of the profits of ₹46,187 crores amassed by LIC for the financial year ended March 2021.
On January 25, LIC had reported a profit after tax of ₹1,437 crores for the first half of the financial year 2021-22 as compared with ₹6.14 crore in the same period a year ago.
The sharp jump in LIC profit is largely due to the change in the surplus distribution model. The LIC Act has been amended to bring its surplus distribution model at par with private life insurers.
Before the amendment, the LIC had a single ‘Life Fund’. Now it has been segregated into two. One is known as participating policyholders’ fund, while the other is called non-participating policyholders’ fund.
The surplus generated under the participating policyholders’ fund will be divided between policyholders and shareholders in a ratio of 90:10, wherein 90 per cent will go to the policyholders and the remaining 10 per cent to the shareholders.+
Analysts Word
Analysts at Motilal Oswal observed that private sector insurers commanded a market share of 63.4% in the individual annualized premium in February while LIC’s share stood at 36.5%.
Analysts at Macquarie Research have pointed out that LIC’s market share in overall premium, as well as new business premium, is more than 60%. In terms of APE, it is much lower at about 50%. “So, it has been losing market share in the individual business due to which APE market share is much lower,” they recently wrote.
The overall premium, as well as new business premium, is influenced by the group premium and single premium businesses. Which form a significant proportion of LIC’s business, where it has closer to an 80%+ market share.
The insurer is the biggest asset manager in the country with an AUM (on a stand-alone basis). Which is more than 3.3 times the total AUM for all life insurers. It depends on individual agents to source new business premiums for individual products – the network comprises approximately 1.35 million agents.
