India's largest life insurance company, Life Insurance Corporation (LIC) reported a net profit of Rs 682.9 crore for the quarter ended June (Q1FY23), a sharp rise from a mere Rs 2.6 crore in the corresponding period last year.
But on a sequential basis, the net profit was down from Rs 2,371.5 crore logged in the March quarter. In a call with the press post the release of its earnings, the insurer said that going forward, the volatility in its profit would be low.
More importantly, LIC's profitability metrics too showed a hit for the June quarter on a sequential basis. Its value of new business dropped by more than 80 percent sequentially to Rs 1861 crore from Rs 9920 crore in the March quarter. The VNB margin slipped to 13.6 percent for the June quarter from 15.1 percent in the March quarter.
Chairman M R Kumar said that the life insurer is focusing on increasing the share of non-participatory policies in its product mix that this should aid margins in the coming quarters. Non-participatory policies are where policyholders do not get the share in the profits of the company and are simple and plain life covers. The share of these products was 7.7 percent in the June quarter. Kumar said that LIC will increase this share to 10 percent by the end of the current financial year.
LIC's business growth was healthy with total new business premium showing an increase of 36 percent year-on-year. "The trajectory seems upwards for sure and we are looking at increased business volumes as is evident in our market share in the year to date since January 2022," said the company in its release.
On an annualised premium equivalent basis, LIC's total business was Rs 10270 crore of which the share of individual segment was 62.8 percent. The life insurer sold 59 percent more policies in the June quarter compared with what it sold in the corresponding quarter of the previous year.
Its market share increased to 65.4 percent in the June quarter from 63.25 percent in the previous year. Kumar said that the life insurer would continue to report healthy business growth for the rest of the year but stopped short of giving any numerical projection.
LIC not only managed to increase its market share but more policyholders stuck with the insurer for longer. Persistency ratios improved across tenures. The persistency ratio for the 13th month rose to 75.75 percent compared with 72.49 percent a year ago. For the 49th month, the ratio was 60.82 percent, up from 59.87 percent a year ago.
The life insurance behemoth managed its investments deftly even as sharp rise in bond yields showed a notional hit on its portfolio. Yield on investments for policyholders excluding unrealised gains was 7.74 percent, down from 8.39 percent. Adjusted for unrealised gains or losses, the yield came down to -2 percent, an indication of a large mark-to-market hit.
The management refrained from giving any target for equity or debt investments for the year. During the June quarter, LIC's equity investments increased by Rs 34000 crore on a net basis.
Shares of LIC ended at Rs 682.55 rupees a piece, marginally down from the previous close.