State-run insurance company Life Insurance Corporation of India (LIC) reported a massive jump in net income on Friday to Rs 15,952 crore in Q2 from Rs 1,434 crore a year ago. This is on the back of a 27 per cent jump in premium income and massive gains from changes in the firms accounting policy along with investment income.
40 per cent of net income came from investment profits which reached Rs 6,798.61 crore this year. Although this is still down from Rs 6,961.14 crore reported a year ago.
LIC in its exchange filings said that the bottom line is also boosted by gains from changes in the firms accounting policy.
After going public in May, LIC reported a net profit of just Rs 682.9 crore in the June quarter.
Lower commissions to the agents and a sharp decline in employee costs are also being attributed to this massive spike in profit. LIC in its filing said that the agency commissions almost halved to Rs 5,844 crore from Rs 10,896 crore a year ago and its employee cost came in at a much lower Rs 16,474.76 crore from Rs 24,157.5 crore. The insurer did not state any reasons for this decline. LIC’s majority of Business comes from its more than 15 lakh agents.
Net premium income was Rs 1.32 lakh crore from Rs 1.04 lakh crore in the year-ago quarter, while the total income rose to Rs 2.22 lakh crore from Rs 1.87 lakh crore.
The company said that first-year premium income rose to Rs 9,175.89 crore from Rs 8,270.91 crore a year ago and renewal premium rose to Rs 56,514.63 crore from Rs 55,342.62 crore and single premium income rose to Rs 67,021.9 crore from Rs 41,428.7 crore.
The solvency ratio was at 1.88 per cent, similar to the June quarter. The solvency ratio measures an insurer’s cash flow in comparison to the amount it owes as total life cover.
Gross non-performing assets stood at Rs 26,111 crore, down from Rs 26,619 crore a quarter ago, and Rs 28,929 crore a year ago. The gross NPAs declined to 5.60 per cent from 5.84 per cent in the June quarter and 6.57 per cent in the year-ago period.
LIC’s 13th month persistency ratio was also up 70.52 per cent in this quarter from 68.81 per cent a year ago. The 13th month persistency ratio measures a customer’s stickiness with the insurer.