Life Insurance Corp of India’s second-quarter profit halved, it reported on Friday, hurt by a fall in income from insurance premiums and as it transferred a smaller amount to its shareholders’ fund for the period.
LIC, India’s largest insurer, said profit after tax fell to Rs 7,925 crore in the second quarter, from Rs 15,952 crore a year ago. Net premium income dropped 18.7 per cent to Rs 107 crore.
LIC’s value of new business (VNB) – the expected profit from new policies and is a key gauge for growth – fell 10.1 per cent to Rs 3,304 crore in the first half of the financial year.
While LIC did not break out VNB for only the second quarter, it had reported that VNB fell 6.8 per cent in the first quarter. VNB margins were flat at 14.6 per cent for the half year, following a slight increase in the first quarter.
Total group business premiums dropped 30.9 per cent year-over-year in the first half, after a 7.2 per cent decline in the first quarter.
Its smaller peers, such as ICICI Prudential Life Insurance and HDFC Life Insurance, have reported a rise in second-quarter profit on higher premium income.
Also hurting LIC’s bottom line was a roughly 56 per cent drop, to Rs 6,277 crore, in the amount LIC transferred from its non-participating fund to a shareholders fund in the quarter.
The premium LIC collects from ‘non-participating’ policies, which have fixed returns, is parked in a non-participating fund.
Since last year, it has been transferring some of this every quarter to its shareholders’ fund. The accounting effect is a higher profit.
LIC had said the transfers were to shore up its solvency margin.
Its solvency ratio, the measure of an insurer’s ability to meet its long-term debt obligations, improved to 1.90 in the first half from 1.88 a year ago.
While LIC has been making such transfers each quarter, it said that the July-September quarter results are not comparable with the year-ago period due to the transfers, without specifying a reason.