Ahead Of IPO, LIC Net Profit Rises To Rs 234 Crore In December Quarter

New Delhi: Life Insurance Corporation (LIC), ahead of its initial public offering (IPO), on Friday posted a net profit of Rs 234.91 crore in the September – December quarter (Q3FY22).

The surge in net profit is because of the change in surplus distribution model, wherein shareholders will now get a larger share of the surplus than earlier.

The state-run insurer clocked a net profit of Rs 0.91 crore. For the nine months ended FY22 (April – December), net profit of the LIC stood at Rs 1,642.78 crore, in the same period last fiscal year.

According to reports, premiums of the insurance behemoth rose to 0.8 per cent to Rs 97,761 crore in Q3FY22 from Rs 97,008 crore in the year-ago period. In the first 9 months of FY22 (9MFY22), premiums of the insurer, which includes first year premiums, renewal premiums, and single premiums, totaled to Rs 2.84 trillion, up 1.67 per cent year-on-year (YoY).

LIC had a single life fund before Section 24 of the LIC Act was amended by the government to bring its surplus distribution mechanism at par with private life insurers.

Now, the life fund has been segregated into two funds – participating policyholders fund and non-participating policyholders’ fund. The surplus distribution in the participating policyholders’ fund has been modified to 90:10 in a phased manner, wherein 90 per cent will go to policyholders and 10 per cent to shareholders. Also, 100 per cent of the surplus generated out of the non-participating business will be available for distribution to all shareholders.

According to M R Kumar, chairman LIC, the change will help LIC increase its profitability, a metric that will be closely tracked once it gets listed.

The non-performing assets (NPA) ratio of the firm also witnessed sharp improvement, with the NPA ratio at the end of Q3FY22 standing at 6.32 per cent compared to 7.78 per cent in the same period a year-ago.

Meanwhile, the LIC had filed its draft papers for IPO on February 13. The government is aiming to sell close to 5 percent stake in the life insurance major through the IPO. The profit from sales of investments, largely equity assets, were already at 63 percent of the record profits amassed by the life insurer of Rs 46,187 crore for the financial year ended March 2021. 

The central government is eyeing to launch the IPO as soon as stock market volatility, sparked by the Russian-Ukraine war, recedes.