LIC Q3 result: Life insurer's net profit surges multi-fold to Rs 6,334 crore

LIC has invested more than $4 billion in the group, which has lost about $66 billion since Hindenburg Research.

Life Insurance Corporation (LIC) of India on February 9 reported a net profit of Rs 6,334.19 crore for the December quarter of the financial year 2022-23 (Q3FY23), a multifold year-on-year increase on the back of strong growth.

The net profit for the corresponding quarter of the previous year was Rs 234.91 crore. However, on a sequential basis, the life insurer's net profit has seen a sharp fall. Its September quarter net profit was Rs 15,952.49 crore.

The life insurance behemoth’s net premium income grew by 14.5 percent to Rs 1.11 lakh crore from Rs 97,620 crore in the same quarter of the previous year. The first-year premium or new business premium grew to Rs 9,724.71 crore from Rs 8,748.55 crore in the December quarter of the previous financial year.

Profitability metrics such as the value of a new business and new business margin were healthy. For the nine months ended December, the value of the new business was Rs 5,478 crore. The company didn't provide a comparable year-ago figure for the same. The new business margin for the period was 14.6 percent.

The expense of management was Rs 13,799 crore for the quarter, a mere 1.6 percent increase year-on-year.

The operating expense ratio for the nine months ending December increased to 15.26 percent as compared to 14.99 percent for the nine months ending December 2021.

Also Read: LIC will soon contact Adani top management to understand the issues, says Chairman Kumar

Growth outlook intact

M R Kumar, chairman of LIC gave an optimistic outlook on the business growth in the coming quarters. When asked whether the Budget's tax proposals will impact growth, Kumar replied in the negative.

In the Union Budget, the government has proposed that proceeds from the insurance policies with premiums in excess of Rs 5 lakh be taxed. Kumar said that LIC sells small and mid-sized policies and large policies' share is less than 1 percent. He added that the company awaits clarification from the government on the tax treatment of such policies.

Further, the government has made it lucrative for Indians to shift to a new tax regime wherein no exemptions would be available.

In essence, the lure of bringing down tax liability through insurance policy purchases would reduce. Kumar said that LIC has stopped pushing insurance as a tax-related product

"We have stopped selling insurance as a tax product. Those days are over. We offer need-based products now," he said in his interaction with the press post the release of the results.

For the nine months ended December, LIC reported a total premium of Rs 37,545 crore on an annualised premium equivalent. Of this, 62.38 percent was from individual businesses and the rest from group businesses.

Kumar said that 30-35 percent of the full-year business typically comes in the last quarter of the year. "The percentage of last quarter has been coming down. It is getting spread out over the year. We stopped selling insurance based on tax three years back. A decade back, 40 percent of the business was March alone," he said.

The fourth quarter of the financial year typically sees strong business growth owing to the investment deadline for tax purposes.

Adani misgivings

Kumar said that the insurer will have a conversation with the Adani Group to assess the situation of the firms. "We will call the top management to understand the issues and future plans for the situation," he said.

Kumar reiterated that LIC's exposure to the Adani Group companies is less than 1 percent of its total asset under management (AUM). LIC's AUM stood at Rs 44.34 lakh crore. Kumar further elaborated that the exposure works out to 4 percent of its total equity investments.

The Adani Group's listed firms have on aggregate lost $66 billion of their value after short-seller Hindenburg Research raised alarm over their corporate governance in a report in January. Shares have since then recovered as the company met scheduled coupon payments on its offshore bonds and prepaid $1.1 billion to release pledged shares.