LIC's NPAs in debt portfolio reduce, persistency ratio improves in FY21

Ahead of its initial public offering, state-owned Life Insurance Corporation (LIC) has seen a reduction in non-performing assets (NPAs) in the debt portfolio and has improved its persistency ratio, both in the 13th month as well as in the 61st month.

In FY21, gross NPAs of LIC reduced by 39 basis points (bps) to 7.78 per cent from 8.17 per cent a year ago. On the other hand, the net NPAs of the insurer reduced by 74 bps to 0.05 per cent in FY21, indicating that the insurer has provided heavily to reduce its net NPAs to clean up its balance sheet.

The 13th month persistency ratio, which is the proportion of policyholders who continue to pay their renewal premium, in terms of the number of policies has increased to 67 per cent in FY21 compared to 61 per cent in FY20. In annualised premiums terms, the ratio increased to 79 per cent from 72 per cent earlier. Similarly, the 61st-month persistency improved to 48 per cent in FY21 from 44 per cent in FY20 in number of policy terms, and in annualised premium terms, the ratio increased to 59 per cent from 54 per cent.

The total revenue of the insurer increased by 10.7 per cent to Rs 6.82 trillion in FY21 from Rs 6.16 trillion in FY20. Net premiums of the insurer in FY21 were to the tune of Rs 4.03 trillion, up 6.33 per cent from Rs 3.79 trillion in FY20. While first-year premiums fell by 41.4 per cent, renewal premiums rose 8.82 per cent and single premiums were up 25 per cent.

LIC’s profit after tax (PAT) went up by 6.9 per cent to Rs 2,906.77 crore in FY21 and the PAT to total income ratio remained the same at 0.004. LIC’s investment yield for FY21 was 7.42 per cent while it was 7.54 per cent in FY20. Its gross earnings from interest, dividends, and rent in FY21 was a whopping Rs 2.34 trillion, up 8.33 per cent from Rs 2.16 trillion.