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usaharmony.com > Blog > Insurance > Life Insurance Corporation of India (LIC) Sees Q2 Profit Dip Amid Rising Benefits, Eyes Health Insurance Expansion
Insurance

Life Insurance Corporation of India (LIC) Sees Q2 Profit Dip Amid Rising Benefits, Eyes Health Insurance Expansion

Jacob Charles
Last updated: 9 November 2024 03:15
Jacob Charles
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New Delhi, India — November 8, 2024 (Reuters) — Life Insurance Corporation of India (LIC), the nation’s largest insurer, reported a 3.8% decline in its second-quarter profit as higher benefits payouts outpaced income gains. However, growth in new business margins provided some cushioning. The profit after tax for LIC decreased to 76.21 billion rupees ($903.6 million) for the quarter ending September 30, down from 79.25 billion rupees the previous year.

Contents
Key Financial HighlightsLIC’s Strategic Focus on High-Margin PoliciesPotential Expansion into Health InsuranceLegislative Push for Composite LicensingMarket ResponseSummary

Key Financial Highlights

  • Net Premium Income Growth: LIC’s net premium income rose 11.6% to 1.20 trillion rupees, aided by increased awareness about insurance and new product launches following the COVID-19 pandemic.
  • Higher Benefits Paid: The insurer’s net benefits payout surged 17% to 975.62 billion rupees, reflecting the rising demand for insurance.
  • Solvency Ratio Increase: LIC’s solvency ratio, which gauges its capacity to meet long-term obligations, climbed to 1.98 from 1.90 last year.

LIC’s Strategic Focus on High-Margin Policies

To bolster profitability, LIC has focused on expanding its share of high-margin non-participating policies. This shift helped LIC report a 37.7% year-over-year increase in its net value of new business (VNB) for the April-September period. VNB margins also rose to 16.2%, up from 14.6% the previous year.

In contrast, rival insurers like ICICI Prudential Life Insurance and HDFC Life Insurance have struggled to maintain margins, facing higher demand for low-margin market-linked policies. LIC, however, has capitalized on the robust growth in its group insurance business, which saw a 25.4% increase in total premiums for the same period.

Potential Expansion into Health Insurance

LIC’s management has revealed ongoing efforts to explore a stake in a standalone health insurance company, signaling a potential expansion into the health insurance segment by the end of the current fiscal year. The decision aligns with recent recommendations by a parliamentary committee, which advised amending the Insurance Act to enable composite licenses. This change would allow life insurers to offer broader health insurance products, including hospitalization and indemnity coverage.

LIC’s CEO, Siddhartha Mohanty, confirmed that groundwork for the potential acquisition is in progress, noting that the final decision will depend on factors like valuation and regulatory approval.

Legislative Push for Composite Licensing

India’s insurance sector could benefit significantly from composite licensing, as noted in a recent parliamentary committee report. This regulatory change could streamline costs, reduce compliance challenges, and enable insurers to provide a unified range of coverage options — potentially encompassing life, health, and savings in a single policy.

Market Response

Despite these growth strategies, LIC shares closed 1.6% lower ahead of the results announcement, reflecting market concerns about profit declines. However, analysts highlight that LIC’s emphasis on high-margin products and possible health sector entry could support future growth.

Summary

While LIC has faced profit pressures due to higher benefit payouts, its strong premium income growth and focus on high-margin products signal resilience. If the insurer successfully enters the health insurance market under a composite licensing model, it could open new revenue avenues, positioning LIC as a diversified insurer equipped to meet evolving market demands.

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By Jacob Charles
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Jacob Charles is a dedicated Senior Reporter at USAHarmony, where he has been making significant contributions for the past year. With a keen focus on the insurance industry, Jacob covers a range of topics that delve into the complexities and nuances of insurance-related issues. His reporting not only informs consumers but also sheds light on corporate practices and regulatory changes that impact individuals and businesses alike. In his role, Jacob investigates and writes about various facets of the insurance world, including health insurance, auto insurance, property insurance, and emerging trends like insurtech innovations. He seeks to illuminate how these topics affect everyday lives, from the intricacies of policy selection to the implications of recent legislation. Jacob’s ability to translate complex insurance jargon into accessible language makes his work valuable to both industry professionals and general readers. His commitment to holding powerful corporations accountable drives his investigative approach. Jacob often highlights stories of consumers facing challenges within the insurance system, bringing attention to issues such as claim denials, fraud, and the importance of consumer rights. His work aims to empower readers with knowledge, helping them navigate the often-complicated world of insurance. Jacob’s background in journalism, coupled with his passion for storytelling, positions him as a knowledgeable and trusted voice in the industry. He leverages data, interviews, and expert opinions to produce comprehensive articles that not only inform but also engage his audience. His contributions to USAHarmony reflect a commitment to quality journalism and a desire to serve the public interest. As part of his responsibilities, Jacob also collaborates with colleagues to ensure that USAHarmony maintains a robust online presence, driving discussions around important insurance topics on social media and other platforms. His dedication to ethical reporting is evident in his commitment to fact-checking and presenting balanced perspectives in his stories. In addition to his reporting duties, Jacob is continuously looking for ways to expand his knowledge of the insurance industry, attending industry conferences and engaging with professionals to stay informed about the latest developments and trends. His proactive approach and passion for the field make him an asset to USAHarmony and a respected figure in insurance journalism.Jacob Charles is a dedicated Senior Reporter at USAHarmony, where he has been making significant contributions for the past year. With a keen focus on the insurance industry, Jacob covers a range of topics that delve into the complexities and nuances of insurance-related issues. His reporting not only informs consumers but also sheds light on corporate practices and regulatory changes that impact individuals and businesses alike. In his role, Jacob investigates and writes about various facets of the insurance world, including health insurance, auto insurance, property insurance, and emerging trends like insurtech innovations. He seeks to illuminate how these topics affect everyday lives, from the intricacies of policy selection to the implications of recent legislation. Jacob’s ability to translate complex insurance jargon into accessible language makes his work valuable to both industry professionals and general readers. His commitment to holding powerful corporations accountable drives his investigative approach. Jacob often highlights stories of consumers facing challenges within the insurance system, bringing attention to issues such as claim denials, fraud, and the importance of consumer rights. His work aims to empower readers with knowledge, helping them navigate the often-complicated world of insurance. Jacob’s background in journalism, coupled with his passion for storytelling, positions him as a knowledgeable and trusted voice in the industry. He leverages data, interviews, and expert opinions to produce comprehensive articles that not only inform but also engage his audience. His contributions to USAHarmony reflect a commitment to quality journalism and a desire to serve the public interest. As part of his responsibilities, Jacob also collaborates with colleagues to ensure that USAHarmony maintains a robust online presence, driving discussions around important insurance topics on social media and other platforms. His dedication to ethical reporting is evident in his commitment to fact-checking and presenting balanced perspectives in his stories. In addition to his reporting duties, Jacob is continuously looking for ways to expand his knowledge of the insurance industry, attending industry conferences and engaging with professionals to stay informed about the latest developments and trends. His proactive approach and passion for the field make him an asset to USAHarmony and a respected figure in insurance journalism.
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