Lic’s profit drops 17% in the fourth quarter, assets swell
India’s biggest insurer, which was listed at a discount two weeks ago and has been falling ever since, said its quarterly profit fell to ₹2,409.39 crore ₹2,917.33 crores. However, for the whole of FY22, the insurer recorded a 40% growth in profit to ₹4,124.7 crores of ₹2,947.13 crores the previous year.
LIC’s Board of Directors has proposed a dividend of ₹1.50 per share for FY22, subject to shareholder approval at its next annual general meeting.
Net sales in the fourth quarter reached ₹1.44 trillion ₹1.22 trillion a year earlier. In FY22, LIC recorded total net premium income of ₹4.29 trillion. LIC said its asset base grew by 12% to ₹41.83 trillion in FY22 from ₹37.46 trillion in FY21.
Driven by strong growth in both first-year and renewal premiums, LIC’s total revenue for the March quarter grew to ₹2.12 trillion ₹1.9 trillion the previous year. FY22 revenue increased to ₹7.24 trillion ₹7.03 trillion the previous year.
LIC, India’s largest institutional investor, saw marginal net investment income growth at ₹2.94 trillion in the year ended March 31 vs. ₹2.85 trillion the previous year.
During the year, commissions paid by LIC to agents reached ₹23,305.79 crore ₹22,358.16 crore in FY21. However, as its “other operating expenses”—primarily expenditures on its non-insurance subsidiary IDBI Bank—have more than halved to ₹8,673.50 crore from the previous year, total expenditure fell to ₹62,326 crores for FY22 from ₹70,955 crores the previous year.
Lower expenses may have a positive impact on LIC’s growth prospects since insurance is a cash-intensive business.
LIC shares rose 1.89% to reach ₹837.05 on BSE on Monday, in line with the benchmark Sensex’s 1.90% gain. However, its shares are still 15% below their issue price of ₹949. Earnings were announced after market hours.
LIC said that since the start of the pandemic, it has seen an increase in death claims, including claims due to the covid-19 pandemic. The additional death expense and its impact on policy liabilities and solvency are being closely monitored and factored into its reserves, the insurer said.
“In order to meet the solvency requirements of all stakeholders, the company has taken a rational approach to asset realignment and considered assets that are readily marketable, have good market value and appreciate relative to their book value. and long-term in nature with lower liquidity and risk,” LIC said in a statement.
On April 29, Mint announced that LIC was sitting on a loss in market value of ₹6,028 crore which is to be recognized in its income statement by the end of this financial year.
Losses resulting from investments in certain illiquid securities are not yet reflected in the insurer’s income statement. The insurance regulator has given LIC until January 31, 2023 to ensure that the value of loss-making investments is reflected in its income statement.
LIC had indicated in its prospectus for the sale of shares that on ₹11,264.6 crores of mispriced insurance policy debt securities, papers worth ₹5,350.6 crore are non-performing assets for which full provisioning has been made at amortized cost, and if this transaction is recorded on the balance sheet, the insurer should show a loss of ₹6,028.15 crore.
LIC has a large amount of assets, and analysts said it could easily meet the ₹6,028 crore loss by selling some of his investments, but warned that a potential sale of assets to offset losses could impact policyholder returns. Therefore, it must be done in such a way that policyholders are not harmed.
The nation’s largest insurer sold 21.7 million insurance policies in the fiscal year ended March 31, up 3.54% from the previous year, according to data reviewed by Mint.
The life insurance industry as a whole sold 29.15 million policies in FY22, including 7.4 million in March, with the lion’s share going to LIC. LIC’s IPO, India’s largest ever, closed with almost three times the subscription, overtaken by retail and institutional buyers, but participation from overseas investors remained subdued.
The government sold more than 221.3 million shares or a 3.5% stake in the insurer through the initial sale of shares.