India’s largest insurer, which was listed at a discount two weeks ago and had been slipping ever since, said quarterly profit fell to ₹2,409.39 crore from ₹2,917.33 crore. However, for FY22 as a whole, the insurer reported 40% growth in profit at ₹4,124.7 crore from ₹2,947.13 crore in the previous year.
The board of LIC proposed a dividend of ₹1.50 per share for FY22, subject to shareholders’ approval at its upcoming annual general meeting.
Net premium income in the fourth quarter rose to ₹1.44 trillion from ₹1.22 trillion a year earlier. In FY22, LIC recorded a total net premium income of ₹4.29 trillion. LIC said its asset base grew 12% to ₹41.83 trillion in FY22 from ₹37.46 trillion in FY21.
On the back of strong growth both in first-year premium and renewal premium, LIC’s total income for the March quarter increased to ₹2.12 trillion from ₹1.9 trillion the year earlier. Income in FY22 rose to ₹7.24 trillion from ₹7.03 trillion in the previous year.
LIC, India’s largest institutional investor, recorded marginal growth in net income from investments at ₹2.94 trillion in the year ended 31 March against ₹2.85 trillion in the previous year.
During the year, LIC’s commission payments to agents rose to ₹23,305.79 crore from ₹22,358.16 crore in FY21. However, since its ‘other operating expenses’—primarily, expenses towards its non-insurance subsidiary IDBI Bank —more than halved to ₹8,673.50 crore from the previous year, total expenses fell to ₹62,326 crore for FY22 from ₹70,955 crore in the previous year.
Lower expenses may positively impact LIC’s growth prospects since insurance is a cash-guzzling business.
LIC’s shares rose 1.89% to ₹837.05 on BSE on Monday, in line with the benchmark Sensex index’s 1.90% gain. However, its shares are still 15% below their issue price of ₹949. The earnings were announced after market hours.
LIC said that since the onset of the pandemic, it experienced an increase in death claims, including claims due to the covid-19 pandemic. The additional death strain, and its impact on the policy liabilities and solvency, are being closely monitored and being considered in its reserves, the insurer said.
“In order to meet the solvency requirements of all stakeholders, the corporation has adopted a rational approach for realignment of assets and considered those assets which are easily marketable, have good market value and appreciation over their book value and long term in nature with liquidity and lower risk,” LIC said in a statement.
On 29 April, Mint reported that LIC is sitting on a mark-to-market loss of ₹6,028 crore that must be accounted for in its income statement by the end of this fiscal year.
The losses arising from investments in certain illiquid securities are yet to reflect in the insurer’s profit and loss statement. The insurance regulator has given LIC time till 31 January 2023 to ensure the value of the loss-making investments reflects in its income statement.
LIC had said in its share sale prospectus that out of the ₹11,264.6 crore worth of debt papers of the mispriced insurance policies, papers worth ₹5,350.6 crore are non-performing assets for which full provisioning has been done at an amortized cost, and if this transaction is shown in the balance sheet, the insurer would have to show a loss of ₹6,028.15 crore.
LIC has a vast amount of assets, and analysts said it could comfortably address the ₹6,028 crore loss by selling some of its investments, but warned a potential sale of assets to make good the losses could impact returns to policyholders. Therefore, it has to be done so that policyholders are not adversely affected.
The country’s largest insurance provider sold 21.7 million insurance policies in the year ended 31 March, 3.54% more than the previous fiscal, according to data reviewed by Mint.
The life insurance industry, on the whole, sold 29.15 million policies in FY22, of which 7.4 million were in March, with the lion’s share going to LIC. LIC’s IPO, the biggest ever in India, closed with nearly three times subscription, lapped up by retail and institutional buyers, but foreign investor participation remained muted.
The government sold over 221.3 million shares or a 3.5% stake in the insurer through the initial share sale.