LIC’s Q2 Profit Dips Despite Premium Growth Amid Higher Payouts

Despite robust premium growth, the nation's biggest insurer, Life Insurance Corporation of India (LIC), reported a slight drop in second-quarter profit as increased policy payouts put pressure on profits. In the July-September quarter, LIC's net profit decreased 3.7% to ₹7,729 crore from ₹8,030 crore during the same time the previous year. A 17% increase in benefit payouts, totaling ₹97,562 crore, was blamed for the decline in earnings.

The introduction of new insurance products and increased consumer awareness caused the insurer's net premium income to soar 11.5% year over year to ₹1,20,000 crore. The post-pandemic climate, according to analysts, has increased demand for life insurance and supported premium collections in the sector.

One important measure of LIC's financial health, its solvency ratio, increased from 190% to 188% in the previous year, demonstrating a better ability to fulfill long-term commitments. To increase profitability, the insurer has been concentrating more on high-margin non-participating products.

For the half-year that ended in September, the net value of new business (VNB), a crucial indicator of profitability from new policies, increased 37.7%. The VNB margin increased to 16.2% from 14.6% the previous year. This expansion demonstrates LIC's deliberate move toward more profitable product lines.

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The group insurance division of LIC, which mostly serves corporate customers, saw a 25.4% increase in overall premium revenue for the April–September timeframe. Group insurance policies are appealing for employee benefit programs since they usually provide coverage to several people under a single policy.

Market Reaction: As investors expected a range of outcomes, LIC share price  fell 1.6% prior to the earnings presentation. At a time when competitors like ICICI Prudential Life and HDFC Life are experiencing pressure on their margins as a result of rising demand for low-margin, market-linked products, the business is concentrating on growing its range of high-margin products.

To Summarize

Life Insurance Corporation of India (LIC) posted a 3.7% decrease in Q2 profit to ₹7,729 crore due to a 17% rise in benefit payouts. Despite this, LIC saw an 11.5% increase in net premium income to ₹1,20,000 crore, driven by new products and post-pandemic demand. The solvency ratio held strong, while LIC's strategic shift to high-margin, non-participating products led to a 37.7% jump in new business value (VNB) with a VNB margin improvement to 16.2%. The group insurance division also saw robust growth, increasing premium revenue by 25.4%.