LIC's Q4 net profit falls 18% to Rs 2,372 cr, firm declares Rs 1.5 dividend

State-run insurance giant Life Insurance Corporation (LIC) of India has reported a net profit of Rs 2,371.55 for the January-March quarter of the financial year 2021-22, down 18 per cent compared to the net profit of Rs 2,893 crore in the corresponding period of the previous fiscal.

LIC has clarified that the profit figure for the fourth quarter of FY21 pertains to the full year. Hence, net profit reported in Q4FY22 and Q4FY21 is not comparable.

“LIC’s Q4FY21 profit of Rs 2,893 crore pertains to the full year since LIC was conducting actuarial valuation once in a year until that year. Therefore, Q4 last year against this year are not comparable. In FY22, profit after tax (PAT) is Rs 4,043 crore compared to Rs 2,900 crore in FY21, up 39 per cent”, said Raj Kumar, managing director, LIC.

“Next year, that is FY23 onwards, figures could be compared as quarterly data points will be available," he told Business Standard.

In FY22, LIC reported a net profit of Rs 4,043.12 crore from Rs 2,900.56 crore in FY21, up 39.4 per cent on a year-on-year (YoY) basis.

This is the first quarterly results of the insurer after it got listed on the bourses earlier this month. The board of the insurer has also recommended a dividend of Rs 1.50 per equity share with face value of Rs 10 each for the year ended March 31, 2022, subject to the approval of the shareholders in the annual general meeting.

This works out to dividend of Rs 916 crore that the insurance behemoth will pay to the government for FY22. On a consolidated basis, the insurer earned a net profit of Rs 2,409 in the quarter in Q4FY22. On a consolidated basis, net profit of the insurer fell 17 per cent year-on-year (YoY) to Rs 2,409 in the quarter compared to Rs 2,917 crore in the corresponding period of the last fiscal year.

LIC earned net premiums to the tune of Rs 1.43 trillion in Q4, up 18 per cent from Rs 1.21 trillion in the corresponding period a year ago. In FY22, net premium of the insurer stood at Rs 4.27 trillion, an increase of 6.21 per cent from Rs 4.02 trillion in FY21. Income on investments of LIC, which is one of the largest asset managers, is flat at Rs 67,498.15 crore in the fourth quarter and for the full year, it earned Rs 2.92 trillion from its investments.

“The figures of quarter ended March 31, 2022, and the corresponding quarter ended in the previous year, are the balancing figures between audited figures in respect of full financial year and published audited/unaudited year-to-date figures up to the end of the third quarter of the relevant financial year”, LIC said in its notes to accounts.

LIC had a single “life fund” before Section 24 of the LIC Act was amended by the government to bring its surplus distribution mechanism at par with private life insurers. Post the amendment, the life fund has been segregated to two funds — participating policyholders fund and non-participating policyholders’ fund. Consequently, the surplus distribution in the participating policyholders’ fund has been modified to 90:10 in a phased manner, wherein 90 per cent will go to policyholders and 10 per cent to shareholders. Further, 100 per cent of the surplus generated out of the non-participating business will be available for distribution to all shareholders.

According to LIC Chairman MR Kumar, this change will help LIC increase its profitability, a metric that will now be closely tracked post the listing.

“If you look at the surplus distribution or the total surplus generated two years ago (Rs 53,000 crore), 5 per cent was going to the government and the rest to policyholders. That will become 90:10. On the other hand, if we sell more non-par products, it will be 100:0. If we look at 100:0 from that perspective (Rs 53,000 crore), 20 per cent comes from non-par, then that entire part is profit. We have to move towards that. We have non-par products but perhaps the percentage is low. Once we start increasing that base, profits will happen”, he said in an interview with Business Standard this month.

The gross non-performing assets (NPA) ratio of the insurer in its debt portfolio improved by 29 basis points sequentially to 6.03 per cent and net NPAs stood at 0.04 per cent.

The thirteenth month persistency ratio of the insurer dropped to 69.24 per cent in Q4 as against 73.94 per cent in the corresponding period a year ago. But the 61st month persistency ratio improved to 55.62 per cent in the same period as against 54.43 per cent in the year ago period. For the full year, the thirteenth month persistency of LIC stood at 75.59 per cent as against 78.78 per cent in FY21. Similarly, 61st month persistency of the insurer in FY22 stood at 61 per cent as against 58.79 per cent in FY21.

Persistency ratio is the ratio of life insurance policies receiving timely premiums in the year and the number of net active policies. The ratio indicates how many policyholders are paying the due premiums regularly on the policies with the insurer.

LIC reported a solvency ratio of 1.85 against the regulatory requirement of 1.50.

LIC's share price closed 1.89 per cent higher on the BSE ahead of its quarterly result which was announced after the market closing. However, it is still below the issue price which was Rs 949 per share.