LIC's net profit zooms to Rs 1,437 crore in H1FY22 ahead of IPO

The government is expected to mop up around Rs 1 trillion from LIC's IPO

3 min read Last Updated : Jan 26 2022 | 1:07 AM IST

IPO-bound Life Insurance Corporation (LIC) has reported a net profit of Rs 1,437 crore in the first half of FY22 (April-September), compared to just Rs 6.14 crore in the year-ago period. The sharp jump in profit was aided by a 12 per cent rise in income from investments even as net premium earned by the insurer reported a tepid growth.

In FY21, the state-owned insurance giant had reported a net profit of Rs 2,906.77 crore, and in FY20, profits were to the tune of Rs 2,712.7 crore.

Net premiums, premiums earned minus premium ceded to reinsurers, increased by 0.91 per cent to Rs 1.86 trillion in H1 of FY22 compared to Rs 1.84 trillion in the same period last year. Income from investments of the insurer grew by 12 per cent year-on-year (YoY) to Rs 1.49 trillion in H1 of FY22 compared to Rs 1.33 trillion in the year-ago period.

Of the Rs 1.49-trillion investment income, around Rs 1.24 trillion came from interest, dividend and rent while Rs 23,146 crore came from profit on sale of investments. And, Rs 1,752.63 crore came from gain on change in fair value. Meanwhile, the insurer brought its gross non-performing asset (gross NPA) ratio in the debt portfolio down to 6.57 per cent at the end of September quarter (H1 of FY22). At the end of March 2021, gross NPAs stood at 7.78 per cent. Net NPAs at the end of H1 were 0.05 per cent. This is the same as during the end of FY21.

The 13-month persistency ratio, which is the proportion of policyholders who continue to pay their renewal premium, saw a 180-basis points dip at 67.50 per cent in H1. This compares to 69.50 per cent in the year-ago period.

LIC’s yield from investments declined to 7.17 per cent in the reporting period (H1) compared to 7.24 per cent at the end of H1 of FY21. Its share capital has been increased to Rs 6,325 crore in H1 on the eve of the IPO.

LIC is likely to debut on the bourses in March this year and it is expected to file its draft red herring prospectus (DRHP) with market regulator in a few days. The government is expected to mop up around Rs 1 trillion from LIC’s IPO. The proceeds would help the government meet a chunk of its Rs 1.75 trillion divestment target for the current fiscal.

Reports have suggested that a government-appointed actuary has pegged the embedded value of LIC at Rs 4-5 trillion.