Life Insurance Corporation of India, the country's largest insurer, said its standalone net profit for the three months to September rose 20.1% from a year earlier to 12,076 crore rupees, helped by a 16.2% increase in net premium income to about 1.47 trillion rupees.

The state-controlled insurer reported the unaudited results on Thursday, Nov. 5. For investors in Asia, LIC matters well beyond the insurance sector. With assets under management of 59.60 trillion rupees at the end of September, according to Business Standard, it is one of India's largest holders of government bonds and listed equities, so changes in its yields, product mix and capital position feed into the country's bond and stock markets.

LIC profit and premium growth

Profit before tax rose to 12,125.82 crore rupees from 10,146.97 crore rupees a year earlier, the Free Press Journal reported, citing the company's filing. On a sequential basis, net profit fell 10.5% from 13,492.03 crore rupees in the June quarter, while net premium income rose 15.5% from the previous three months.

Net investment income from policyholders' funds rose about 2.5% to roughly 1.15 trillion rupees. The yield on policyholders' investments, excluding unrealized gains, slipped to 9.04% from 9.33% a year earlier, though it improved from 8.28% in the June quarter, Business Standard reported.

Group business carried much of the growth. For the six months to September, group premium rose 19.6% to 1,13,594 crore rupees, against a 14.9% increase in individual new business premium to 32,725 crore rupees, according to the Free Press Journal. Total premium income for the half rose 11.6% to 2,74,269 crore rupees. The number of individual policies sold fell 2.25% to 70.97 lakh (7.097 million).

Annualized premium equivalent, a measure of new sales that gives regular premiums full weight and single premiums a tenth, rose 3.8% in the quarter to 17,004 crore rupees from 16,382 crore rupees, Business Standard said. Individual annualized premium for the half was nearly flat, up 0.31% at 17,224 crore rupees.

LIC's share of first-year premium income in the industry eased to 58.77% in the first half from 59.41% a year earlier, according to data from the Insurance Regulatory and Development Authority of India (IRDAI) cited by Business Standard.

Margins, costs and capital

The better news for shareholders was in profitability of new business. Value of new business, the estimated present value of future profits from policies sold in the period, rose 17.14% in the September quarter to 3,710 crore rupees, and the margin widened to 21.82% from 19.33%, Business Standard reported. For the half year, value of new business rose 34% to 6,846 crore rupees and the net margin reached 22.3%, up from 17.6%, the Free Press Journal said.

Non-participating products, which tend to carry higher margins, made up 34.03% of first-half annualized premium, down from 36.31% a year earlier, with participating policies accounting for the rest.

Costs fell. Expenses declined 1.13% to 15,061.5 crore rupees in the quarter, while net commission outgo rose 4.9% to 6,055.76 crore rupees. The expenses of management ratio dropped to 10.26% from 12.05%, according to Business Standard.

The insurer's solvency ratio rose to 235% at the end of September from 213% a year earlier. Persistency, which tracks how many customers keep paying premiums, was 67.67% at the 13th month and 55.50% at the 61st month.

Products, bancassurance and accounting

Managing Director and Chief Executive R. Doraiswamy said a pure-term life product launched in September had drawn a strong response, according to Business Standard. He said unit-linked plans could recover if market sentiment improves, but that the company's near-term focus remains savings and protection products.

Doraiswamy also said LIC expects IDBI Bank to remain a distribution partner despite the planned sale of a controlling stake in the lender, citing open-architecture bancassurance. India has cleared Fairfax's purchase of an IDBI Bank stake. He added that LIC is "very optimistic about the positive impact of the proposed regulatory changes" announced by IRDAI.

LIC will move to Indian Accounting Standards from April 1, 2027, after receiving regulatory approval for a one-year deferment, the Free Press Journal reported. The board also appointed Naga Nalini Kalluri as chief compliance officer with effect from Nov. 6.

The switch to Ind AS, India's version of international reporting rules, will change how LIC presents its accounts. Until then, investors are likely to keep focusing on value of new business and the solvency ratio, two measures that both moved in LIC's favor in the September quarter.

The next test comes with LIC's results for the December quarter, due early next year, which will show whether the margin gains hold as group business, a lower-margin line, keeps outpacing individual sales.