Diving into LIC's Financial Landscape 50 Percent Profit Drop and the Road Ahead
Market Dynamics Meet LIC's Vision: A Closer Look at India's Insurance Giant
14 November 2023
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Kunal Tyagi
LIC's Q2FY24 net profit plummeted by 50% to Rs 7,925 crore, attributing the decline to a 19% drop in net premium income, reaching Rs 1.07 lakh crore from Rs 1.32 lakh crore in the previous year.
Despite the profit dip, LIC saw a positive trend in investment income, with Q2FY24 reaching Rs 93,942 crore, up from Rs 84,104 crore in the same period last year. The solvency margin improved slightly from 1.88% to 1.90%, and GNPAs dropped to 2.43% from 5.60% YoY.
LIC's strategic adjustments include diversifying its distribution mix, focusing on Bancassurance and Alternate Channels, and exploring tie-ups with two additional banks. Despite challenges, LIC remains a prominent player in the Indian insurance market, adapting to changing dynamics with a commitment to sustained profitability.
Life Insurance Corporation of India (LIC) has recently reported a significant 50% decline in net profit for the second quarter of the financial year 2024, amounting to Rs 7,925 crore. This sharp drop from the Rs 15,952 crore profit reported in the same period last year is attributed to a 19% decrease in net premium income, falling to Rs 1.07 lakh crore from Rs 1.32 lakh crore in Q2FY23. LIC explained that changes in its accounting policy, implemented in September 2022, affected year-on-year profit comparisons.
The company transferred Rs 13,768 crore (net of tax) for the six months ending September 30, 2023, impacting the comparability of profits with the previous year. Despite the decline in net profit, LIC witnessed a rise in income from investments, reaching Rs 93,942 crore in Q2FY24, up from Rs 84,104 crore in the same period last year. The solvency margin improved slightly from 1.88% to 1.90% in the current quarter, and the gross non-performing assets (GNPAs) ratio dropped to 2.43% from 5.60% in the previous year.
LIC's Chairman, Siddhartha Mohanty, expressed optimism about the growth of group business in the upcoming quarters, even though the total premium income from group business for H1FY24 decreased to Rs 70,977 crore from Rs 1.02 lakh crore in the corresponding period last year.
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Mohanty highlighted that the current value of new business (VNB) margins reflects LIC's initiatives to maintain profitability amid changing market dynamics. The company is working towards profit-oriented consolidation and has diversified its distribution mix, with a focus on Bancassurance and Alternate Channels. LIC is in talks with two more banks for tie-ups, indicating a directional change in recent initiatives.
In the broader context of the Indian insurance market, LIC's challenges are notable, given the substantial growth in premium collection in the non-life insurance sector, which saw a 16.4% increase in FY23. Private players like SBI Life, HDFC Life, and ICICI Prudential Life lead in premium collection. SBI Life collected Rs. 29,587 crore, HDFC Life Rs. 28,876 crore, and ICICI Prudential Life Rs. 16,921 crore in FY23. Despite the current challenges, LIC remains a key player in the Indian insurance landscape, and its strategic adjustments reflect an awareness of market dynamics and a commitment to sustained profitability.
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