LIC shares surge over 3% after it posts a five-fold jump in Q4 net profit

• India’s largest life insurer reported a net profit of ₹13,428 crore in Q4 as against ₹2,372 crore in the same period last year.
  
• For FY23, LIC’s net profit rose by over 9-times to ₹36,397 crore, from ₹4,043 crore in FY22.
  
• The insurer’s board recommended a final dividend of ₹3 per share, which translates to a dividend payout of ₹1,897 crore.
  

Life Insurance Corporation of India (LIC)’s shares surged over 3% in morning trade on Thursday after the state-run insurer reported a five-fold jump in fourth-quarter net profit.

India’s largest life insurer reported a net profit of ₹13,428 crore in Q4 as against ₹2,372 crore in the same period last year. On a sequential basis, too, LIC’s bottom line grew from ₹8,334 crore in Q3, which is a growth of 61%. Its net commissions grew by 5.4% YoY to ₹8,429 crore, while sequential growth stood at 33.4%.

Consolidated net premium income stood at ₹1.32 crore in Q4, down by 8.3% YoY. “The first-year premium fell by 12.33% on-year to ₹12,811 crore, but the renewal premium increased by 6.8% to ₹76,009 crore compared to year-ago period,” LIC said in an exchange filing.

For FY23, LIC’s net profit rose by over 9-times to ₹36,397 crore, from ₹4,043 crore in FY22, while its total premium income increased 11% to ₹4.74 lakh crore in the same period.

In a post-earnings call, the company painted an optimistic outlook for FY24, stating that “VNB (value of new business) margins will grow and improve” in the current financial year.

The insurer’s board recommended a final dividend of ₹3 per share, which translates to a dividend payout of ₹1,897 crore.

LIC’s shares hit an intra-day high of ₹616, rising 3.6%, in morning trade today, before paring some of the gains to trade at ₹605 apiece. The insurer’s shares have surged by over 10% in the last one month. However, the stock is still down by 36% from the issue price of ₹949.

Customer loyalty improves

In the March quarter, LIC reported an increase in customer loyalty – the 13-month persistency ratio rose to 70.16% in the March quarter, rising from 69.24% in the same period last year.

The 13-month persistency ratio is a measure of the number of people who have renewed their insurance policies. A high ratio suggests that the customers are satisfied and have renewed their policies.

The insurer’s solvency ratio also witnessed an improvement in the March quarter, rising to 1.87 from 1.85 in the same period last year. Insolvency ratio refers to the company’s capital compared to the risk it has taken.

Another shot in the arm for LIC is the rebound in the value of its investments in the Adani group – the total value of its holdings in the Adani group stood at ₹44,670 crore, up from ₹30,127 crore at the end of January.

The insurance behemoth said its efforts to increase the share of non-participatory products in the overall mix are “bearing fruits”. Under non-participatory products, the profits are not shared with policyholders and go entirely to the shareholders, increasing their returns and earnings per share.

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