Life Insurance Corporation of India (LIC) announced a robust financial performance for the third quarter of the fiscal year, with net profit surging by 17% on Thursday. The state-owned insurer attributed this growth to increased premium collections, fueled by heightened retail demand for insurance products following government tax cuts.
Strong Financial Metrics Highlight Growth Trajectory
For the three months ended December 31, LIC's net profit climbed to ₹12,958 crore (approximately $1.43 billion), up from ₹11,056 crore in the same period a year earlier. This significant rise underscores the company's resilience and strategic positioning in the competitive insurance market.
Premium Income Shows Impressive Gains
The insurer's net premium income witnessed a substantial increase of 17.5%, reaching ₹1.26 trillion. Breaking down the premium segments, one-time premiums soared by 30.5%, while first-year premiums experienced an even more remarkable jump of 46%. These figures reflect a growing appetite for insurance products among Indian consumers.
Government Tax Policy Boosts Demand
Indian insurers, including LIC, reported higher demand for products in the third quarter. This surge can be largely attributed to the government's decision to eliminate the 18% tax on individual life insurance products, making policies more affordable and accessible to a broader segment of the population.
Key Performance Indicators Signal Robust Health
Annualised premium equivalent (APE) sales, a crucial metric that represents the annualised total value of all single and recurring premium policies, rose by an impressive 50.5% to ₹14,973 crore for the quarter, according to Reuters' calculations. This indicates strong underlying business momentum.
Value of New Business and Margins Expand
LIC's value of new business (VNB), which measures the expected profit from new policies, increased by 65% to ₹3,177 crore for the quarter, as per Reuters' calculations. The insurer has been strategically focusing on increasing its share of high-margin policies to cushion its margins. Over the last few quarters, an increase in ticket sizes across multiple products has helped shore up the company's profitability.
VNB margins from new business expanded to 18.8% for the nine months ended December, up from 17.6% as of September-end and 17.1% a year earlier. This margin expansion highlights LIC's effective management and product mix optimization.
Solvency Ratio Strengthens
The solvency ratio, a key measure of an insurer's ability to meet its long-term financial obligations, rose to 2.19 during the quarter. This marks an improvement from 2.02 a year earlier and 2.13 in the prior quarter, indicating enhanced financial stability and risk management capabilities.
Extensive Agency Network Drives Sales
LIC continues to benefit from strong sales through its extensive agency network across the country. This widespread presence allows the insurer to tap into diverse markets and cater to the evolving needs of customers nationwide, further solidifying its market leadership.
The positive quarterly results position LIC favorably in the Indian insurance sector, with ongoing efforts to enhance profitability and customer reach expected to drive future growth.
