LIC shares shrug off fall in premium, trade 4% higher on surge in Q1 profit

LIC said a total of 32,16,301 policies were sold in the individual segment during the quarter ended June 2023 as compared to 36,81,764 policies sold during the quarter ended June 2022

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The LIC share price opened 4 percent higher on August 11, after the insurer reported a multi-fold surge in net profit to Rs 9,543 crore for the quarter ended June 2023 from Rs 682 crore last year. Investors shrugged off the fall in premiums and the number of policies sold.

At 9:20am, LIC was quoting at Rs 666.65 on the NSE, higher by 3.9 percent from its previous close. Trading volumes at the time were 1.4 million shares, slightly higher than 20-day average volumes.

While profits grew, India’s largest life insurer saw a 7 percent on-year fall in total annual premium equivalent (APE) at Rs 9,532 crore. Participating policies’ APE fell 10.2 percent while non-par APE grew 21 percent. Meanwhile, group policies fell 6.2 percent.

In participating products, a minimal return is guaranteed and policyholders participate in the profit of the policy.

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The company said a total of 32,16,301 policies were sold in the individual segment during the quarter ended June 30th, 2023 as against 36,81,764 policies sold a year back.

LIC has been aggressively pushing its non-participating products over the past few years as they have higher margins. Non-par made for 10.22 percent of the APE in Q1 Fy24, compared to 7.75 percent in Q1 Fy23. Non-par is a guaranteed product where the pay-outs are fully guaranteed at the start of the policy and policyholders do not participate in the profits of the policy.

The increase in non-par products also led to a change in accounting policy in September 2022 due to which LIC has been reporting multi-fold surge in profits over the last two quarters.

“The Corporation had changed its accounting policy in September 2022 regarding transfer of amount (net of tax) pertaining to the accretion on the available solvency margin from non-participating policyholder’s account to shareholder’s account,” said the company.

Accordingly, LIC transferred total amount of Rs 27,240 crore during FY23, due to which the profit for the quarter ended June 2023 is not comparable with the corresponding figures for the quarter ended June 2022.

Also Read: MC Explains : LIC’s transfer of funds to shareholders’ fund – is it a one-off event?

The persistency ratios on premium basis up to the quarter ended June for the 13th month and 61st month were 78.37 percent and 62.73 percent, respectively, said the company, improving by 52 bps and 30 bps.

Persistency is the measure of policies remaining in force (not lapsed) as a proportion of policies issued in a particular period.

LIC listed on the bourses in May 2022 and is down over 20 percent since listing. LIC’s issue price was Rs 949.